Florida Fails to Pass Workers’ Compensation Reform

Florida businesses shouldn’t expect relief for workers’ compensation rates, this year at least. The Florida Legislature failed to pass legislation this session addressing 2016 decisions by the Florida Supreme Court that sent the state’s workers’ comp system into disarray and led to a rate increase of 14.5 percent.

After much back and forth between the House and Senate over their respective bills, it came down to attorney fees, which the industry says are to blame for the majority of the rate increase.

Lawmakers sought to reform the state’s workers’ comp system through two bills – House Bill 7085 and Senate Bill 1582 – in response to decisions by the Florida Supreme Court that found aspects of the Florida Workers’ Comp Act unconstitutional.

Debate over the Senate and House bill went on throughout the final legislative day on Friday, May 5, with the House, in an attempt to lure the Senate to its side, passing an amendment capping attorney fees at $180 an hour on approval by a judge of compensation claims. The Senate version of the bill capped attorney fees at $250 an hour versus the House’s previous $150 an hour cap. The Senate voted on the final day not to lower the cap in its bill to $200 an hour, but the House still tried later to compromise with the $180 cap.

Another key difference in the Senate version was a provision moving Florida to a loss-cost system. Rep. Danny Burgess, who sponsored the House bill, told House members “the jury’s still out” on whether a loss cost system leads to a premium reduction, based on data from states that had switched to this model.

Burgess said he hoped the Senate would agree to the attorney fee compromise so lawmakers could get “something across the finish line.”

“The bill, as it stands today is on the end of the rope,” Burgess told House members in the final hours. “[We are] trying to provide substantial reform to address rising rates from recent court decisions…We have to solve this problem before us. Every small business in the state of Florida is watching us now.”

The Florida Supreme Court’s decisions that caused the upheaval came in two cases – Castellanos v. Next Door Company and Westphal v. City of St. Petersburg. The biggest cost driver behind the 14.5 percent rate increase, according to the National Council on Compensation Insurance (NCCI), was Castellanos. That decision found the state’s mandatory attorneys’ fee schedule for workers’ compensation cases eliminated the right of a claimant to get a reasonable attorney’s fee — a “critical feature” of the workers’ compensation law.

The impact of the Castellanos decision equaled 10.1 percent of the 14.5 rate increase, while Westphal accounted for 2.2 percent.

Burgess said the House version could offer up to a 5 percent reduction in rates and the Senate’s version would offer only about a 1 percent reduction.

The insurance industry supported the House version, agreeing that attorney fees are the main cost driver behind rate increases. The Property Casualty Insurers Association of America (PCI) said the bill would have addressed “decisions by the Florida Supreme Court rulings that could cause workers compensation rates to increase by 14.5 percent in the state, costing Florida job creators more than $1.5 billion.”

But ultimately, the two branches couldn’t reach an agreement before time ran out for lawmakers.

Florida businesses now have the rate increase to contend with and the possibility of additional rate increases next year. An actuary from NCCI told the Florida House at a hearing that it is reasonable to expect that there would be continued pressure on rates without legislative reform.

The Florida Chamber of Commerce called lawmakers’ failure to enact reform a “failed fix to Florida’s broken workers’ comp system” and said it was a missed opportunity by lawmakers to make Florida more competitive.