Higher payouts for lawyers and increased work comp rates will lead to at least $1B in unfunded liability, experts say

By W.J. Kennedy | Oct 12, 2016

TALLAHASSEE - The Florida legislature has no plans to schedule a special legislative session to address a sharp increase in workers’ compensation rates recently approved for businesses statewide, legislative sources say.

TALLAHASSEE - The Florida legislature has no plans to schedule a special legislative session to address a sharp increase in workers’ compensation rates recently approved for businesses statewide, legislative sources say.

Moreover, Florida business leaders say the timing of legislative action is unclear even after lawmakers return to Tallahassee in March for the start of the new session.

“We’re going to have to brief new members on the issue,” said one business leader who asked not to be identified. “Then a decision will have to be made on how much of the workers’ compensation law we will need to open up.”

Two Supreme Court rulings this past spring were the principal factors behind the rate increase. One resulted in higher fees for claimants attorneys and another reversed the termination of benefits after 104 weeks for some workers who were totally disabled. In light of the decisions, the Office of Insurance Regulation (OIR) approved a 14.5 percent increase on Sept. 27.


Meanwhile, pressure for a legislative response will increase as the year progresses and small businesses receive bills with the higher rates.

“Many of the larger businesses are self-insured and know this is coming,” said William Large, president, Florida Justice Reform Institute. “But many of the small businesses won’t find out until they receive a bill in the mail. It will be a shocking development for those not aware of what’s been going on.”

About 20 percent of small businesses will receive the bills just after the beginning of the new year. By the time the legislature gets moving on proposals in April approximately 40 percent of those businesses will have received the new, higher bills.

In April, the Supreme Court ruled in Castellanos v. Next Door Co. that a fee schedule for claimant attorneys was unconstitutional. Business officials called the Castellanos case a “test” case meant to challenge the fee schedule enacted by the legislature in 2003.

The legislature refashioned the schedule in 2009 after a 2008 law suit, Murray v. Mariner Health, in which the Supreme Court referred to the schedule as “ambiguous.”

Then, in early June, in Bradley Westphal. V. City of St. Petersburg, the Court ruled 5-2 that cutting off disability benefits after 104 weeks to a worker who is totally disabled and incapable of working - but who has not yet reached maximum medical improvement - is unconstitutional.

The increase approved by the OIR is less than one recommended by an independent workers’ compensation review agency, the National Council on Compensation Insurance (NCCI). In early July, NCCI recommended a rate increase of 19.6 percent. The lower, approved rate, and the anticipated increase in lawsuits stemming from the higher fees, will create at least a $1 billion in unfunded liability in the system, business leaders say.

“NCCI tells us that the increase in lawsuits by trial lawyers will cost Florida businesses potentially $1 billion or more in unfunded liability,” Florida Chamber of Commerce president and CEO, Mark Wilson, told the OIR. “That’s a lucrative deal for personal injury trial lawyers but a raw deal for injured workers who won’t gain a dime.”

A study, “Economic Report: Effects of Castellanos and Other Recent Court Decisions on Florida Workers Compensation Costs, Employment and Wages,” commissioned by the Justice Reform Institute places the number much higher: “…the combined impact of these decisions on the system costs will be much greater, +35.4%, than the NCCI proposed first year rate increase.”

Whatever the final number is to the business community, Florida could see a flattening of job creation after 61 months of steady growth – and then a reverse.

“We’re going to see it as early as later this year and early next year,” predicted Edie Ousley, vice president of public affairs for the Florida Chamber.

The good news for the business community is that political observers predict that the makeup of the legislature will remain largely pro-business after the November election.

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Organizations in this Story

Florida Chamber of Commerce Florida Justice Reform Institute

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