Senate Banking & Insurance Committee Meeting

On Tuesday, December 13, the Senate Banking & Insurance Committee held an introductory meeting and a public hearing on the issue of workers compensation. Chaired by Senator Anitere Flores (R-Miami, the Keys) Senators heard testimony from all the stakeholders, including representatives from the trial bar, the workers’ union, the Florida Chamber, Associated Industries of Florida, the insurance carriers and the construction industry. Speaking on behalf of the Florida Home Builders Association and the National Utility Contractors Association of Florida (NUCA FL), lobbyist Kari Hebrank addressed the Committee relaying that reforming the workers compensation system to drive down costs was a top legislative priority and that the importance to the construction industry could not be understated given that the industry was just beginning to recover from the economic tsunami that crippled the building and development community. Hebrank also testified that the financial impact of the 14.5% increase was cumulative for small, family-owned businesses dealing with rising workers compensation rates and increased health care premiums for employees. Moreover, Hebrank reiterated the importance to employers of getting injured workers back to work swiftly as the industry faces a critical workforce shortage (another legislative priority). Lastly, Hebrank told the Senators NUCA of Florida stands ready as a partner in finding a workable solution to reign in escalating workers compensation costs.

View the Senate Banking & Insurance hearing.

NUCA FL & UCA of S. FL meet with Rep. Stark, Rep. Berman, Sen. Diaz de la Portilla and candidate John Couriel

Don’t blame rain for sewage discharge

From the Tampa Bay Times:

The recent sewage discharge into Tampa Bay was a result of the excessive rainfall, but only indirectly. The primary and more compelling reason is a sanitary sewer system that is in disrepair. A properly functioning sanitary sewer system will not be adversely affected by rainfall. (Stormwater sewer systems operate separately.) The fact that rainfall increases the volumes at water treatment plants indicates that the system is allowing infiltration. Infiltration is groundwater or rainfall seeping into the sanitary sewer system. This is a problem that can be fixed by having sanitary sewer lines and manholes repaired or replaced. If the existing system is repaired and/or replaced, it would allow the existing water treatment plants to just treat sewage as they were designed, and not treat rainwater.

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NCCI Proposes Florida Workers Compensation Rate Increase

Effective August 1, 2016

Overview of Castellanos Decision

On April 28, 2016, the Florida Supreme Court issued an opinion in the case of Castellanos vs. Next Door Company, et al., No. SC13-2082 (“Castellanos”) declaring Section 440.34, Florida Statutes, unconstitutional. The anticipated impact of the decision is the elimination of the statutory caps on claimant attorney fees and a return to hourly fees.

NCCI Proposes Rate Increase

NCCI estimates that the first year impact of Castellanos will be an increase in overall Florida workers compensation system costs of 15%. This estimate does not include the following:

  • Impacts related to the First District Court of Appeal decision dated April 20, 2016 known as Miles v. City of Edgewater Police Department (“Miles”) declaring unconstitutional certain restrictions on claimant paid attorney fees. After Miles, claimant attorney fees can be earned regardless of whether benefits are secured. Depending on the scenario, the source of claimant attorney fees could be the claimant, the employer/carrier, or both. Claimant attorneys may now have the potential to earn greater compensation than that which would result from the Castellanos decision on its own, putting additional upward pressure on system costs in Florida. NCCI is unable to separately determine the Miles impact.
  • The entire unfunded liability created in the state due to the retroactive nature of the Castellanos court decision.
  • Unanticipated cost impacts not otherwise reflected in this filing that may emerge over time such as additional stakeholder behavioral changes or interactions that may result in changes to workers compensation benefits or practices in Florida.

On May 27, 2016, NCCI submitted its filing to the Office of Insurance Regulation (OIR). It includes components for two law changes:

  • First year impact for Castellanos of 15%
  • Impact of 1.8% in response to SB 1402 which ratified updates to the Florida Workers’ Compensation Health Care Provider Reimbursement Manual

The combined impact of the two components is 17.1% or $623M (17.1 x $3.645B). NCCI proposes that the increased rates will apply to new and renewal policies that are effective on or after August 1, 2016. Additionally, NCCI proposes that the increased rates will apply to all policies in effect on August 1, 2016 on a pro-rata basis through the remainder of the term of these policies. Currently, Florida has a voluntary pure loss cost of 0.99 that is comparable to other states in the Southeast[1] ranging from 0.94 to 1.14. If the rate filing is approved as filed increasing rates by 17.1%, Florida at 1.16 would rank as the highest state in the Southeast.

Retroactive Impact of Castellanos Decision is Not Part of Proposed Rate Increase

This Castellanos component of this filing only addresses the expected increase in Florida workers compensation system costs for accidents occurring on or after August 1, 2016. However, the decision in Castellanos is also expected to increase overall system costs in the state for accidents occurring prior to August 1, 2016 that remain open or are re-opened. Because workers compensation ratemaking is prospective only, insurers are not afforded the opportunity to recoup premium to cover such unforeseen increases in system costs. Therefore, it is expected that a significant unfunded liability will be created due to the retroactive impact of this court decision. NCCI is currently in the process of estimating the unfunded liability and will provide further information at a later date.

[1] Using Florida’s payroll distribution. Southeast includes FL, AL, GA, NC, SC, TN, MS, LA.