Florida Welcomes Era of Workers’ Compensation Market Stability

Florida’s workers’ compensation system has reached a rare state of rate stability, according to insurers and officials.

The agency, the National Council on Compensation Insurance, filed for a one percent increase for 2014 in August, which if approved by regulators would be the fourth rate increase in as many years. The filing was the subject of a recent public hearing.

NCCI State Government Relations Executive Lori Lovgren said that the proposed increase signals a new phase in the workers’ compensation market. Since a 2003 rewrite of the state’s law, there have been seven years of rate decreases. Now for the foreseeable future, employers could see only minor changes in rates based on loss experience and claims frequency, Lovgren said.

“We’re facing something almost unique in Florida, which is really a period of stability,” said Lovgren at a public hearing on the filing. “A lot of states experience this, but Florida doesn’t often.”

NCCI defines a stable market as one where rates do not increase or decrease more than five percent annually.

Insurance Commissioner Kevin McCarty said that although NCCI’s proposal for a one percent increase signals improvement in the market, it nevertheless could cost employers $20 million in additional premiums next year.

As a result, said McCarty, there needs to be a continual focus on how the system can be improved.

“Although we cannot expect savings the magnitude of 56 percent following the 2003 reforms, there are positive changes we can do to reduce cost drivers in our system,” said McCarty.

Specifically, McCarty addressed the need to lower inpatient and outpatient hospital costs and reimbursements to ambulatory surgical centers. If those reimbursements were lowered to 120 percent of Medicare for hospital costs and 140 percent to 120 of Medicare for ambulatory surgical centers services, it could result in a 10 percent reduction in facility costs.

McCarty praised state lawmakers for enacting legislation earlier this year to reduce the reimbursement rate for physician-dispensed pharmaceutical drugs. The new law, which capped the rate physicians can be reimbursed, is expected to save employers $20 million.

McCarty said even more can be done. Some of the ideas discussed were limiting the amount of drugs physicians may provide patents to a three-day supply. Others envision the creation of a drug formulary or lowering the dispensing fees even further.

NCCI projects that the 10 percent reduction in facility costs could potentially lower overall workers’ compensation rates by three percent. A 10 percent reduction in drug costs could also yield a further one percent in savings.

The rate filing indicates that Florida’s economy continues its recovery following the nationwide 2008 recession. For the first time since then, private insurers are projected to write more than $2 billion in premiums.

McCarty said despite the last several years of rate increases, Florida remains competitive with other states.

According to the biannual Oregon Workers’ Compensation Premium Rate Ranking Report, Florida ranked 23 out of 51 states in terms of workers’ compensation rates. By comparison, Georgia and North Carolina ranked 27 and 25, respectively.

However, McCarty said, the rate increases have erased one economic edge that Florida enjoyed in the years immediately following the 2003 reforms when rates were dramatically reduced and Florida ranked 40th when compared to other states.

“I should mention that our recent advantage over other states in attracting employers based on lower workers’ compensation rates has largely disappeared,” said McCarty.

Florida Insurance Consumer Advocate Robin Westcott raised few objections to the proposed rate increase. She did note, however, that regulators should keep in mind that in addition to the rate increases of the past several years, investment income has improved insurance companies’ bottom lines.

“While one percent is modest and appropriate in a stable marketplace, we still have to balance that against what is good for businesses and consumers,” said Westcott.