Florida Weighs 2.5% Workers’ Comp Rate Decrease

Florida workers’ compensation writers have recommended a 2.5 percent rate decrease for 2015.

The Office of Insurance Regulation has received the filing by the National Council on Compensation Insurance (NCCI), which if approved, would mark the first decrease in four years.

NCCI said fewer claims and a fewer losses are responsible for the proposed rate decrease.

The statewide average rate change is based on changes to five industry groups: manufacturing, contracting, office and clerical, goods and services, and miscellaneous. The new rates would become effective Jan. 1, 2015.

The OIR said on Aug. 22 that it will review the filing to ensure the proposed changes are fair and adequate. Regulators will also evaluate its potential effects on the insurance marketplace and employers.

The OIR said it anticipates conducting a public hearing on the rate filing in October 2014. A rate order will likely follow within three weeks.

NCCI’s Florida rate filing includes the following observations:

• Rates are stable; the proposed change remains within +/-5 percent for the second year in a row; “normal” year-to-year changes are generally within this range;
• Loss experience in the two most recently available policy years (2011 and 2012) shows overall improvement for the first time since the 1/1/2010 rate change;
• Claim frequency declined in policy year 2012 (-5.2 percent) for the first time since policy year 2008; Florida saw its first increase in claim frequency in 10 years starting in policy year 2009; the claim frequency increases in policy years 2009, 2010 and 2011 may have been recession-related;
• Indemnity and medical loss ratios have declined, driven in part by a decrease in claim frequency; and,
• Interest rates have remained near historic lows for several years, which has prompted NCCI to request a higher profit and contingency provision of 4.5 percent in order for insurers to earn an adequate rate of return.

Competitive Market

The OIR said Florida’s market remains one of the most competitive in the nation thanks in large part to the 2003 legislative reforms. Since then, Florida’s rates have dropped from first- or second-highest in the nation to 29th. Workers’ compensation rates are 56 percent lower than they were in 2003. And the market continues to expand, with four of the top 10 writers based in Florida, according to the state.

NCCI said that currently Florida’s workers’ compensation costs remain stable overall and commensurate with other southeastern states.

However, NCCI also cautioned that rates could increase — perhaps dramatically — depending on the decisions issued in several pending legal cases, including Padgett v. State of Florida in which a judge ruled that the state’s workers’ compensation law is unconstitutional because it no longer provides adequate benefits to injured workers giving up their right to sue. The ruling is expected to be appealed and in the interim there should be no change in how the workers’ compensation system operates.

NCCI said it is monitoring several other court cases also and will issue estimated cost impacts and, if necessary, submit rate filing amendments.