Work Comp Rates in Florida are set for a dramatic increase December 1st.
The average workers’ compensation rate in the state of Florida is set to go up by 14.5% on average beginning December 1st, 2016. The reason for this dramatic increase in premium is caused by three things. The Florida Supreme Court rulings Castellanos vs. Next Door Company and Westphal vs. City of St. Petersburg, along with a new printing of the Florida Workers’ Compensation HCPR Manual.
Previously in the year the National Council on Compensation Insurance (NCCI) recommended a modest decrease in premium for the state of Florida. Before these decisions by the Florida Supreme Court, business owners in Florida enjoyed rates that were fairly reasonable compared to the rest of the country. According to a study done by the Oregon Department of Consumer and Business Services, in 2016 Florida enjoyed rates that were the 33 least expensive rate for workers comp premium in the United States. Once the approved increase takes place the rates on work comp premium in the state of Florida will be about the 20 most expensive state in the country according to the same study.
Castellanos vs. Next Door Company
In the Spring of 2016, Marvin Castellanos was an injured employee who had sued Next Door Company. Part of the decision in his case ruled that a previous court ruling from 2009 was invalid. The previous ruling was ruled invalid for limiting the ability of the injured worker to get a reasonable amount for attorney’s fees. In short this ruling meant judges no longer have to stick to a previous mandatory fee schedule. Now the judges are able to simply use the fee schedule as a starting point or guideline. For this reason, the amount judges award to injured employees is expected to increase significantly. Insurance companies will now be taking on a much larger amount of risk and they will have to charge more in premium in order to remain competitive in this market. The amount of the increase directly related to this case is 10.1 percent on average statewide.
Westphal vs. City of St. Petersburg
The next court case that caused an increase in premium was Westphal vs. City of St. Petersburg. This case ruled that a 104-week statutory limitation on temporary total disability benefits is unconstitutional. The court ruled this portion of the law unconstitutional because it denied injured workers proper access to the courts. The Florida Supreme Court extended this period to a 260-week limitation. This time period is more similar to most other states throughout the country, but it also means insurance companies will now have to provide partial salary benefits to injured workers for an additional 156 weeks. This is a potential cost that could be severe to the insurance agencies covering this risk. As a result, the Florida Office of Insurance Regulation (OIR) approved an average increase of 2.2 percent statewide.
The final 1.8 percent of the approved increase on premium for workers’ compensation is related to updates within the Florida Workers’ Compensation HCPR Manual. This increase was approved as part of Senate Bill 1402.
What can businesses do to lighten this impact?
The impact of this increase will be severe to many business owners throughout the state of Florida. Needless to say, many business owners will experience sticker shock when they go to renew their existing policies. Similar to when other states, like New York, saw an increase in workers comp rates earlier this year many business owners are going to be scrambling to look for better rates on premium. There are a few things businesses can do to limit the impact to the bottom line. To start with they can shop around their policy if they have not done so in a few years. The best way to do this is to partner with an independent agent who has established relationships with many different insurance carriers. Far too many insurance agencies partner with only one or a select few insurance carriers. This severely limits their ability to negotiate better rates and deeper discounts on your behalf. For example, most independent agents are able to quote your policy with 10 or more carriers where a traditional agency may only search quote your business with 2 or 3. Because of this competition they are able to search for more comprehensive coverage and the most competitive price on premium.
Another major cost saving measure many businesses can take advantage of is a flexible payment option like Pay as You Go Workers’ Compensation. Pay as You Go Workers’ Compensation can get a policy in place for your business with much less up front cost. Most traditional policies require 25 percent of the premium paid up front. This is just to establish coverage. With the Pay as You Go option, most small businesses can get coverage in place for only a few hundred dollars. This option allows the business to pay their premium each month based on each month’s payroll. Pay as You Go is a very good option for cash strapped or seasonal businesses.