Florida Workers’ Compensation Ruling Could Cost $65 Million, Says NCCI

A Florida court’s ruling that the state’s 104-week limit on injured workers’ temporary benefits is unconstitutional could increase costs by $65 million, says the workers’ compensation industry’s rating organization.

The National Council on Compensation Insurance released its analysis of a Florida First District Court of Appeals judge’s ruling in a case [Bradley Westphal v. City of St. Petersburg, No. 1D12-3563, February 2013] that has triggered industry concern.

The case arose from a claim filed by St. Petersburg firefighter and paramedic Bradford Westphal, who exhausted the state limit of 104 weeks of temporary benefits and yet was denied further benefits since his physicians could not determine his long-range medical prospects. As a result, he was left without benefits despite being medically advised not to work and with no assurances about the future of his claim.

Judge Bradford Thomas ruled the statutory coverage scheme that left Westphal without coverage violated his constitutional right to access the court and “receive justice without denial or delay.”

His ruling automatically increased temporary benefits from 104 weeks to its former level of 260 weeks, per a 1994 law.

The First District Court of Appeals has approved a motion to have the entire 15-member court rehear the case, which may ultimately find its way to the Florida Supreme Court.

But until then, the industry is left to assess the potential impact of Thomas’ ruling.

NCCI projects that the case could increase the state’s workers’ compensation costs by $65 million or 2.8 percent. That analysis is based only on claims arising after Thomas’ ruling.

NCCI noted, however, there could be a “significant unfunded liability” as the ruling is applied to injured workers currently receiving temporary benefits.

NCCI projects the Westphal case will impact Florida’s workers’ compensation system in a number of ways depending on medical cost and the increased cost of indemnity benefits.

Also, the extension of temporary benefits could influence injured workers’ behavior in ways that would increase costs, according to the organization.

For example, NCCI said, workers would have less of an incentive to return to work, which could lead insurers to offer higher settlements just to avoid paying 260 weeks of temporary benefits.

Concerning permanent disability claims, NCCI said there is uncertainty as to the impact of Westphal. On one hand the expansion of temporary benefits would delay the determination whether a worker’s injury is permanent giving them more time to heal and possibly return to work. Then again, it could have the opposite effect.

“If the Westphal decision causes a delay in determining a claimant’s permanent impairment due to extending the duration of temporary benefits, it may increase the potential for complications to arise or a claimant’s condition to deteriorate, which may result in more permanent disability claims,” NCCI said in its analysis.

NCCI reported that Florida’s temporary disability benefits account for 49.5 percent of all indemnity benefits, which make up 31.5 percent of all the state’s workers’ compensation costs.

NCCI estimates that injured workers currently receiving at least 98 weeks of temporary benefits would see a 70 percent increase in the duration of their claims. Factoring in the possible changes in injured workers’ behavior, NCCI projected that temporary benefit costs would increase by 1.2 percent or $30 million.

The increase in temporary benefits could also be felt in cases where an injured worker is not eligible for permanent benefits, but still has some degree of a permanent injury. So-called permanent impairment benefits include a “healing period,” during which temporary benefits are paid.

Using the same factors it applied to temporary benefits concerning increased length of claims and changes in injured workers’ behavior, NCCI estimated the “healing period” costs would increase by $25 million.

NCCI found that since the Westphal case only addresses indemnity benefits there is no direct impact on medical costs. However, if injured workers act to extend their temporary benefits, this could lead to an increase in indirect costs of $10 million.

Although there are only about three weeks left to go in Florida’s legislative session, neither lawmakers nor the industry has stepped forward with a possible legislative solution that would negate the Thomas ruling.

Industry representatives have said there is no easy fix because the ruling addresses a constitutional inequity. Even if the industry agreed to increase the number of weeks injured workers could receive temporary benefits, there is a question whether that would satisfy the court.

“The rationale used in the Westphal decision concluding that the temporary total disability duration cap was unconstitutional could be used to find the 260 week temporary maximum unconstitutional as well,” noted NCCI