WC Reform Is Just The Start
Now that Florida's legislature has okayed a workers compensation insurance reform measure that Governor Jeb Bush is expected to sign into law, the state's insurance carriers and buyers can breathe a sigh of relief.
The Florida bill is supposed to bring skyrocketing expenses in the workers' comp system back to Earth and cut insurance premiums by 12 percent. That is huge news for a state paying out $1.27 for every $1 in premiums, according to figures provided by the American Insurance Association.
A big change will come in the definition of permanent total disability. Rather than use the Social Security disability test, Florida would adopt a more restrictive standard. A representative for the Alliance of American Insurers explained that the new hurdle for injured employees to clear would be whether they are able to do “any sedentary work within a 50-mile radius of their residence.”
The bill will also jettison a counterproductive practice–banning lawyers from charging by the hour for workers' comp cases, which only acts as an incentive to prolong claims disputes. (There is an exception for medical-only cases, in which an attorney can charge $150 an hour for up to 10 hours.)
The institutional reforms passed in Florida will undoubtedly help ease cost pressures in a system that's out of control. However, they alone will not solve the problem of soaring workers' comp costs. This means that both buyers and sellers still have a lot of work to do to contain expenses.
For example, medical care costs in general and prescription drug costs in particular are rising in the double-digits annually. Insurers and self-insured employers need to keep a close eye on these bills to make sure that all medical care is necessary and properly priced.
There is also a good deal of fraud to fight–not only by individual employees (who always seem to get the blame and arouse the industry's suspicions), but also by employers who seek to lower their premiums by under-reporting the amount of people they have on staff or the type of work they are doing.
Effective back-to-work programs are also vital to get those who are truly injured on the job (and off workers' comp) as quickly as possible.
Last but not least, there is no substitute for aggressive loss control and safety programs to stop work-related accidents from happening in the first place.
Insurers and employers need to put at least as much time, energy and money into these cost-control efforts as they did to get the reform bill passed.
Correction: Mistaken Identity
In the May 26 edition of National Underwriter, the op-ed piece headlined, “Another Perspective: Agents Benefit From Branding Together,” ran the wrong head shot for the author. Cloyce Anders is the president of the Independent Insurance Agents & Brokers of America. NU apologizes for this unfortunate case of mistaken identity.
Reproduced from National Underwriter Edition, June 9, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.
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