Fla. OIR Tells NCCI To Reduce Comp Rate Request

The National Council on Compensation Insurance said it is deciding whether to appeal the Florida insurance commissioner's decision today denying an 8.9 percent rate increase request for workers' compensation insurance.

Florida's Office of Insurance Regulation asked NCCI to reduce the increase request by 2.5 points to 6.4 percent.

NCCI sought the hike after the Oct. 23, 2008 court decision, Emma Murray vs. Mariner Health and ACE USA, tossing out restrictions on fees for attorneys representing injured workers. NCCI estimated the ruling would expand system costs.

The Florida Supreme Court decision found that workers' comp reform legislation related to attorney fee changes passed on Oct. 1, 2003 was contradictory.

NCCI said the ruling eliminated the statutory schedule for claimant attorney fees and returned Florida to prereform law on claimant attorney fees, namely hourly fees.

On Nov. 14, 2008, NCCI proposed an increase of 8.9 percent for the Jan. 1, 2009 rate level. NCCI said it estimated that the full impact of the Murray ruling would be an increase in overall Florida workers' compensation system costs of 18.6 percent.

The organization said it anticipated that it would take two years for the full impact to be realized, and therefore proposed a first-year increase of half of the full impact, or 8.9 percent in overall system costs.

Insurance Commissioner Kevin McCarty in rejecting the request cited disagreements with the data and methodology the NCCI used to calculate the projected effect of the court's ruling.

NCCI had proposed an effective date of March 1, 2009 applicable to new, renewal and outstanding policies.

The state's Office of Insurance Regulation today issued an order denying the rate increase and requested NCCI make an amended filing for an overall workers' compensation rate-level increase of 6.4 percent applicable only to new and renewal policies effective April 1, 2009 (not applicable to outstanding policies).

The OIR's order requested that NCCI amend its filing by Feb. 2. NCCI said it has the option to appeal and "is currently in the process of reviewing the order and making a decision on how to respond."

OIR said that over two years, the 6.4 percent increase recommended by Commissioner McCarty could amount to a 13.1 percent increase, unless changes to the system are made to minimize the impact of attorney involvement.

In October 2008, Commissioner McCarty approved an 18.6 percent reduction in rates, effective Jan. 1 2009. It was the sixth consecutive drop in workers' comp rates since the Florida Legislature passed the reforms in 2003.

OIR said with the change, the cumulative overall statewide average rate decrease since 2003 is more than 60 percent. The NCCI originally had requested a 14.1 percent decrease in its filing of Aug. 27, 2008. The further reduction in rates had the potential to save Florida employers more than $610 million.

When filed and approved, OIR said, Monday's recommended 6.4 percent increase in rates would add about $172 million in insurance costs for Florida employers. But in combination with the 18.6 percent decrease that took effect Jan. 1, the net effect still is a savings of $438 million.

"It's very early to know for sure what the full impact of the Supreme Court's decision on workers' compensation rates will be," said Commissioner McCarty in a statement. "But if history holds true, we will see these rates start to go up as more attorneys get involved, likely extending the litigation process with workers' compensation cases."

He added that he is "cautiously optimistic that business leaders and the plaintiff attorneys will get together and propose an amendment to our law that will help to ensure that workers' compensation insurance remains affordable for our employers, while also protecting injured workers by ensuring their access to courts, medical care and other necessary benefits."

He noted that prior to the legislative reforms, Florida consistently ranked No. 1 or No. 2 in the country for the highest workers' compensation rates. Post-reform, however, Florida dropped out of the top 10 rankings.