By Brett Vigodsky
November 6th, 2012 8:00am
The National Council on Compensation Insurance announced recently that they are seeking a 6.1% increase in Florida Workers’ Compensation rates across the entire state on behalf of insurers.
If the NCCI filing is approved, the new rates would take effect January 1, 2013, and would mark the third consecutive increase since 2011. The rate increase in 2011 was a 7.8% increase in rates and another increase of 8.9% was approved earlier this year.
The state’s rates have actually trended down in the past decade. Since 2003, the year that lawmakers revised the state’s workers’ compensation laws, businesses’ have seen roughly a 56% decrease in rates, which in turn continued to produce savings. However, the industry states that any savings produced by the 2003 workers’ compensation reform have been completely exhausted.
If the proposed rates are approved, five major classifications would see rate increases. All manufacturing classes would see an increase on average of approximately 4.8%. Contracting classes would see a 7.4% increase. Office and clerical classes would see a rate increase of 4.3%. An increase of 6.7% would be seen by goods and service classes, and miscellaneous classes would increase by 5.6%.
The NCCI went on to note that there were three factors affecting the state’s recent loss experience. After nine years of decreases in claims frequency rates, there has been an increase in the claims frequency rate by 4.5% in 2009 and 2010.
The average indemnity cost per case that is in excess of wage growth has remained relatively flat since 2006. However, the average medical cost per case in excess of wage growth has increased since 2006.
Average loss cost since 2003 has gone from $2.62 per $100.00 of payroll to a low of $1.00 per $100.00 of payroll. If approved, the average loss cost would be $1.14 per $100.00 of payroll, which would bring Florida in line with other Southeast states.
Located within the documents from NCCI, the justification behind their proposed 6.1% rate increase is due to the 6.8% increase in the experience and trend portion of the filing. They go on and state that, “it has been necessary to adjust the very optimistic outlook, or trend, underlying rates to reflect that significant ongoing experience improvements are no longer occurring and are no longer expected.”
In an effort to reduce some workers’ compensation costs, several proposals from the OIR would be submitted to state lawmakers next year.
The first proposal would decrease payments made to physicians who repackage drugs and redistribute them from their office. This year attention was gained after NCCI reported that the cost of repackaged drugs translated into an increase of 2.5% increase in this year’s rates, which would result in an additional cost of $62 million to employers.
Earlier this year, State lawmakers considered lowering reimbursements on physician-dispensed drugs so that they would be paid the same amount as pharmacies, which receive three times the drug manufacturer’s wholesale price with an additional $4.18 dispensing fee. After careful consideration, the proposal failed in the face of strong opposition from drug makers.
Additional OIR proposals would address the reimbursement rates for hospital inpatient treatment and the amount paid for outpatient and ambulatory surgical center treatment.
In conclusion, the OIR has stated, “A careful review and thorough analysis of this rate filing will be performed to evaluate its potential effects on Florida’s workers’ compensation insurance marketplace and employers”.
The insurance industry’s reasoning in proposing this rate increase is that it claims the savings produced by the 2003 workers’ compensation reforms have been exhausted.
Attorney Brett Vigodsky has been with the Levin Papantonio law firm for 12 years and he specializes in workers’ compensation claims as well as Social Security Disability.
More information on workers’ compensation laws.