March 23, 2004
Associated Industries has just been advised that an amendment is being prepared tonight (Tuesday, March 23) to amend the workers' compensation JUA bill tomorrow (Wednesday, March 24th) in the Senate Banking & Insurance Committee, in a way that will make workers' compensation even more costly for Florida employers.
According to the information we just received, the amendment will require insurance carriers to pay the deficit in Subplan D of the JUA, which is the subplan that the Legislature set up to write business below actual cost. The problem here for employers is that insurance carriers don't pay the cost, employers pay the cost through the rates which take into account all cost paid by the carrier.
With this amendment these costs will have to be run through the 'income statement' of the carrier. This means the amount the employer will be paying in increased premiums, will include the amount paid to the state to fund the workers' compensation division, the amount paid in federal income taxes, and the amount paid to state for taxes, fees and assessments, etc. In other words the employers, under this amendment, would end up paying approximately $1.40 in increased premium every time there was the need to raise $1.00 to fund the JUA deficit.
If the Legislature wants to tax Florida employers to fund the deficit in Subplan D then it should be done by having the carriers put a below the line assessment on their bills to the employers and not do it in such a way that it has to go through the income statement. This would save employers 40 cents on every dollar of assessment, rather than paying $1.40 to fund each dollar of assessment the employer would only be required to pay $1.00 by paying a below the line assessment.
History tells us that this approach can turn into a disaster, and create a crisis in workers' compensation. In the 1980's the major insurance carriers left Florida in terms of writing worker's compensation insurance because of the cost assessed to them from the old assigned risk pool (preceded the JUA, which corrected problems in the pool). Carriers ended up paying 23 cents to the pool for every dollar they wrote in premium and the rate adjustments did not keep up with the costs which caused the carriers to stop writing business in Florida. This resulted in the assigned risk pool being the largest workers' compensation writer in Florida with over 98,000 policies. It was an absolute disaster and caused premiums to skyrocket and capacity to all but disappear with regard to major carrier coverage. Is the Senate really trying to return to this exact crisis of the past ? We know the trial lawyers are trying to lead them in that direction, but, is the Senate really going to follow the trial lawyers down that slippery slope ? This amendment returns the JUA to the very posture that created the "crisis" in the 1980's.
There were 98,000 policies in assigned risk in the 1980's and only 4,200 in the JUA today. The quickest way to start growth in the JUA and increase employer premiums, is to start a program to assess carriers in such a way as the proposed Senate amendment being discussed in Banking & Insurance on Tuesday, March 24 proposes. With all due respect to the Senators, the trial lawyers are trying to snooker them again !
The new workers' compensation law passed by the Legislature last year is an excellent piece of work which they can be proud of. It reduced rates by 14% on the first day the law became effective, and the new law did not even become effective until October 1, 2003 and hasn't even had time to really start working. The Legislature needs to stop the attacks on this new law, which come solely from the trial lawyers who are mad because they lost their hourly fees and will stop at nothing to screw up the new law and Florida employers.
If this amendment were to become law, we can rest assured that we will see a definite shrinking in workers' compensation capacity at the very time when we are now seeing carriers reenter the market due to the new law that passed last year. Furthermore, it would cause an unintended result that we are sure no Senator wants to see happen, which is less capacity and higher rates for employers.
We are asking the Senate to call a halt to the assault on the good work product of the Legislature last year and let the new workers' compensation law have time to work.