Businesses Could Get Break On Workers' Comp Insurance

For Florida businesses struggling during the COVID-19 pandemic, here’s a bit of good news: Workers’ compensation insurance costs could go down in 2021.

State insurance regulators have received a rate filing that would reduce premiums next year in the workers’ compensation system by an average of 5.7 percent, which would be the fourth straight year of premium decreases, according to information released Tuesday.

The National Council on Compensation Insurance, which makes annual rate filings for the industry, pointed to “unprecedented results” in the workers’ compensation insurance system nationally. Florida’s average rates dropped 7.5 percent this year, after reductions of 13.8 percent in 2019 and 9.5 percent in 2018.

“For decades, with few annual exceptions, frequency (of claims) has continued on a clear downward path driven by technology, safer workplaces, improved risk management, and a long-term shift from manufacturing to service sectors,” the organization, known as NCCI, said in a summary of the filing. “NCCI has no expectation that this trend will change course. For the last several years, severity trends (of claims) have remained fairly moderate, tracking very closely with wage inflation. For these reasons, NCCI’s analysis has indicated decreases across most of its jurisdictions in recent years.”

The state Office of Insurance Regulation will review the filing before issuing an order setting the rates, which would take effect Jan. 1. In setting the 2020 rates, for example, the office approved a 7.5 percent decrease after NCCI initially proposed a 5.4 percent average reduction.

“As always, OIR will review the filing to ensure the proposed changes are not excessive, inadequate or unfairly discriminatory and evaluate its potential effects on the insurance marketplace and employers, who are required by law to carry this insurance on their employees,” the Office of Insurance Regulation said Tuesday as it released information about the filing.

In its summary, NCCI said the filing does not take into account potential effects of the COVID-19 pandemic on the workers’ compensation system. The News Service of Florida reported last week that a state report showed nearly 12,000 workers’ compensation claims related to COVID-19 had been filed as of July 31 --- with more than 43 percent of what are known as “indemnity” claims rejected by insurers.

NCCI said the potential impact of COVID-19 on the workers’ compensation system “is in the very beginning stages of being understood; therefore, the data underlying this filing does not include claims from COVID-19. Due to the lack of this COVID-19- related ratemaking data and the current level of uncertainty, NCCI has not yet assessed the potential impact on future rate levels.”

But the organization said COVID-19 could end up having offsetting effects on the system. For example, the system could see an increase in claims that warrant compensation for people in “frontline COVID-19-related occupations.” But NCCI said other claims could be reduced because more people are working remotely.

Business groups in Tallahassee have urged the Legislature in recent years to make changes to the workers’ compensation system after a Florida Supreme Court ruling that invalidated a law that placed strict limits on fees that could be paid to attorneys for injured workers. Workers’ compensation is designed to be a self-executing system that provides health benefits and lost wages to injured workers while protecting employers from civil lawsuits. But disputes about workers’ benefits can often lead to legal fights, which is when attorney fees come into play.

The business groups have argued that the 2016 Supreme Court ruling, in a case known as Castellanos v. Next Door Company, will drive up costs in the system because of attorney fees.

NCCI said in the summary of the rate filing that costs related to attorney fees have increased, but they have been offset by other favorable trends in the industry.

“The combination of two counteracting impacts has contributed to the current state of the Florida WC system,” the NCCI summary said. “To date, the especially favorable WC industry results observed across the country have more than offset the observed cost increases associated with the Castellanos decision.”

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