Florida’s workers’ comp trust fund coffers overflowing with cash

It’s almost unheard of for a state to try to stave off positive cash flow, but for its overstuffed workers’ compensation trust fund, that’s what Florida is doing.

With more than three times the amount of money in the state Workers’ Compensation Administration Trust fund than is needed to cover its annual operating expenses, Florida is slashing the assessments charged against insurers’ premiums. The fund currently has $297 million, while its average annual operating cost is $91 million.

Chief Financial Officer Alex Sink said next year’s lower assessment could result in nearly $20 million in savings that insurers could be pass on to Florida employers. The rate will drop to 0.25 percent next year from 0.50 percent. It was 2.56 percent five years ago.

Whether employers will see that $20 million is left to the marketplace to decide.

“We’re talking about a trickle-down effect,” said Nina Banister, a spokesperson for the Florida Department of Financial Services. “All we can do is estimate the amount of savings that insurers can pass along to employers. Nothing is mandated.”

The state fund pays for the operation of the Department of Financial Services’ Division of Workers’ Compensation and other programs including antifraud activities, medical services, vocational rehabilitation and child labor regulation.

The state enacted reform legislation in 2003 that appear to be working. Payments per claim for lost wages, known as indemnity benefits, fell nearly 11 percent in 2004 and while there was little change in this measure in 2003, double-digit growth had occurred in the three previous years, according to theWorkers’ Compensation Research Institute.

“Five years ago Florida had one of the highest workers’ comp rates in the nation,” said Banister. “Since the reforms of 2003, 28 new carriers have come into the state.”

With more insurance companies writing policies, there is more premium in the system to be taxed to go into the workers’ compensation trust fund. Insurers are assessed on premiums that are written or renewed.

Stricter enforcement initiatives have also contributed to the increase in premiums in the system. The average penalty levied against employers who do not comply with workers’ compensation requirements has risen from $7,500 to $26,000, stimulating greater compliance among employers, according to the DFS.

Gary Landry, vice president of the Florida Insurance Council, said the decrease for 2008 further shows that the reforms that have been put in place are working. “It’s meeting the needs of our injured workers. It’s another reason why our economy has been so robust over the past several years,” he said.