TALLAHASSEE, Fla. – With the effects of two closely watched legal decisions still playing out, Florida businesses could see a double-digit reduction in workers’ compensation insurance rates in 2019.
The National Council on Compensation Insurance, which proposes rates each year for workers’ compensation insurers, made a filing Monday with Florida regulators that calls for a 13.4 percent rate decrease starting in January.
The Florida Office of Insurance Regulation will review the details of the proposal and decide whether to approve the cut or request changes. But if approved, the reduction would follow a 9.5 percent decrease that took effect this year.
Bill Herrle, executive director of the National Federation of Independent Business in Florida, called Monday’s proposed rate cut “great news.”
“Lower workers’ comp rates equals a direct reduction in small business owners’ expenses, which means big things for growth,” Herrle said in a prepared statement. “Small business owners are reporting record high levels of optimism, according to NFIB’s Small Business Optimism Index, and news like lower workers’ comp rates fuels their confidence.”
In an overview of the filing, the National Council on Compensation Insurance, or NCCI, said the proposed rate decrease is in line with trends in other states.
“Consistent improvement in loss experience is the primary driver underlying the filing. More specifically, the long-term decline in claim frequency has continued to more than offset moderate increases in claim severity,” the overview said. “This has resulted in continued downward pressure on the overall average rate level need and is consistent with trends across most NCCI states.”
Workers’ compensation rates have long been a controversial issue in Florida. The debate was rooted, in part, in a 2003 overhaul of the workers' compensation system by then-Gov. Jeb Bush and the Republican-controlled Legislature. Florida businesses at the time faced some of the highest insurance rates in the country. The overhaul, which included strict limits on attorneys' fees and other changes, ultimately led to a 60 percent drop in insurance rates.
But groups such as plaintiffs’ attorneys and labor unions argued the 2003 changes unfairly reduced benefits for injured workers and effectively took away legal rights.
The Florida Supreme Court in 2016 issued two key rulings, including in a case known as Castellanos v. Next Door Company where justices said the limits on attorneys’ fees were unconstitutional. The other case, known as Westphal v. City of St. Petersburg, sided with an injured firefighter in a dispute over benefits.
Business groups argued that the Castellanos decision would dramatically increase litigation and drive up costs and urged lawmakers to take up the issue. While lawmakers have not made changes sought by the business groups, insurance regulators in 2016 approved a 14.5 percent rate hike that was heavily based on the Castellanos decision.
But in the filing Monday, NCCI said the full effects of the Supreme Court decisions could take years to play out. The filing is based on what are known as “policy years’ 2015 and 2016, and about half of the data used in the filing relates to policies that became effective after the Supreme Court decisions.
“NCCI believes the Castellanos and Westphal decisions are now exerting upward pressure on system costs, and they will continue to influence Florida workers compensation insurance rates,” the overview said. “Policy year 2017 will be the first full policy year post-Castellanos; however, the full effects of that decision will not materialize for several years to come.”