July 5, 2016

Tallahassee, Fla. – Last Friday, July 1, 2016, the National Council on Compensation Insurance (NCCI) submitted a 19.6 percent rate increase request to the Florida Office of insurance Regulation (OIR). NCCI amended its prior request for a 17.1 percent rate increase after the Florida Supreme Court invalidated a 104-week limit on temporary total disability benefits in the case of Westphal v. City of St. Petersburg. The proposed effective date of the increase to existing and new policies is October 1, 2016. However, the OIR will schedule a public rate hearing to consider the requested increase and issue its final ruling on the rates thereafter. To review the entire NCCI release, see below.

Statement by Tom Feeney:

The workers’ compensation system in Florida has been stable for the past 13 years which has significantly bolstered our state’s recent economic growth. However, AIF and our member companies are gravely concerned that the Florida Supreme Court’s unraveling of the system that necessitates these drastic rate increases will curtail that success and soon hamper our future job growth and business retention.  AIF and our Workers’ Compensation Coalition will continue leading the private sector’s efforts to educate our elected officials and explore legislative and policy solutions that can restore balance, affordability and reasonableness to our workers’ compensation system in a manner that strengthens our economic position. For more information, be sure to register for our next Workers’ Comp Town Hall on July 13, 2016, at 10 a.m. in Jacksonville.  For more details visit www.helpingfloridawork.com or aif.com

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Full NCCI Statement Below:

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NCCI Amends Pending Florida Workers Compensation Rate Filing To +19.6% Proposed Effective October 1, 2016

Overview of Court Decisions

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.

On June 9, 2016, the Florida Supreme Court issued its opinion in the case of Bradley Westphal vs. City of St. Petersburg, etc, et al, No. SC13-1930 (“Westphal”) declaring the 104-week limitation on temporary total disability benefits established in Section 440.15(2)(a), Florida Statutes, unconstitutional. The anticipated impact of the decision is a combined 260-week limitation on temporary disability benefits (temporary total disability and/or temporary partial disability).

NCCI Proposes Rate Increase

On May 27, 2016, NCCI submitted its filing to the Office of Insurance Regulation (OIR).  It included components for two law changes - the first-year impact for Castellanos of +15% and an impact of +1.8% in response to SB 1402 which ratified updates to the Florida Workers’ Compensation Health Care Provider Reimbursement Manual.

On June 30, 2016, NCCI amended the above-mentioned filing to include a third component as a result of the Westphal decision. NCCI estimates that the impact of Westphal will be an increase in overall Florida workers compensation system costs of +2.2%. At the direction of the OIR, NCCI amended the effective date of the filing to October 1, 2016.

The estimates for the Castellanos and Westphal decisions do 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 and Westphal court decisions. [1]

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.

The combined impact of the three components is +19.6% or $714M (+19.6% x $3.645B). NCCI proposes that the increased rates will apply to new and renewal policies that are effective on or after October 1, 2016. Additionally, NCCI proposes that the increased rates will apply to all policies in effect on October 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 [2] ranging from 0.84 to 1.14. If the rate filing is approved as filed increasing rates by 19.6%, Florida at 1.18 would rank as the highest state in the Southeast.

The OIR is expected to schedule a public hearing to be held in August. NCCI will not comment further on the pending rate filing prior to the public hearing.

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