Florida Workers’ Compensation Roundup–October 2014
Oct 7, 2014
By Katie Scott Webb, Esq.
Shareholder
Colodny Fass& Webb, P.A.
Following is a summary of recent activities in Florida relating to workers’ compensation insurance:
National Council on Compensation Insurance Annual Workers’ Compensation Rate Filing
On August 22, 2014, the National Council on Compensation Insurance (“NCCI”) filed its annual workers’ compensation rates with the Florida Office of Insurance Regulation (“OIR”). The filing equated to an overall statewide rate decrease of 2.5 percent that would take effect on January 1, 2015, if approved.
One month later on September 22, the NCCI amended the filing to an overall average rate decrease of 3.3 percent based on an announcement by the Florida Division of Workers’ Compensation (“DWC”) on the adoption of a revised hospital reimbursement manual Rule.
The following chart shows the change in the NCCI’s amended rate filing components from their original August 22 version:
|
Components |
Rate Impact |
|
Change in Experience |
-3.0% |
|
Change in Trend |
-2.3% |
|
Change in Benefits |
-0.8% |
|
Change in Loss Adjustment Expense |
-0.7% |
|
Change in Profit & Contingency |
+2.9% |
|
Change in Tax & Assessments |
-0.1% |
|
Change in Production Cost and General Expense |
+0.7% |
|
Overall Rate Level Change |
-3.3% |
A public hearing on the NCCI rate filing is scheduled for Tuesday, October 14, 2014.
Florida Workers’ Compensation Manual for Hospitals
A September 22, 2014 Notice of Change was the latest development in rulemaking for Rule 69L-7.501, F.A.C., entitled “Florida Workers’ Compensation Reimbursement Manual for Hospitals” (“Manual”), which has been preceded by significant administrative litigation activity. Pursuant to written comments received from the Florida Joint Administrative Procedures Committee in a letter dated March 5, 2014, following revisions were recommended for the Manual, along with an effective date of January 1, 2015:
- The statement, “A SERC (statement of regulatory costs) has been prepared by the Agency,” was included under the “Summary of Statement of Regulatory Costs and Legislative Ratification,” section of the above-cited notice. That statement should have stated that “A SERC has not been prepared by the Agency” (emphasis added). However, an economic analysis was conducted and the additional changes to the proposed rule and Manual reflect the terms of a settlement agreement in a related Rule challenge.
- The proposed 2014 Edition of the Manual includes a fee schedule reimbursement methodology for hospital outpatient services based on Current Procedural Terminology (“CPT”) line level charge data held by the DWC, which is then adjusted based on a modification factor specified for defined geographic areas in Florida. The aforementioned settlement agreement requires the DWC to increase the threshold number of bills used to determine the “Base Rate” of the applicable CPT procedure codes from no less than 20 bills, to no less than 40 bills. Certain “Base Rates” listed under Appendices “B” and “C” of the proposed 2014 Manual have been changed to reflect a recalculation of values based on the increase in the number of bills, as discussed above.
NCCI Large Risk Alternative Rating Option Filing
Enacted in June 2014, CS/HB 785 relating to Workers’ Compensation by State Representative Ben Albritton became effective on July 1, 2014.
In addition to limiting workers’ compensation reimbursements for medical foods, the primary purpose of CS/HB 785 is to permit a retrospective rating plan to contain a provision for the negotiation of a workers’ compensation premium between an employer and insurer if the employer has exposure in more than one state, as well as an estimated annual standard workers’ compensation premium in Florida of $100,000 and an estimated annual nationwide standard workers’ compensation premium of at least $750,000.
Additionally, under CS/HB 785, only insurers with $500 million in surplus may negotiate premiums with eligible employers. The retrospective rating plans are exempt from the provisions of subsection (1) of s. 627.072, F.S., which specifies the factors in determining workers’ compensation rates. The rating plans and the forms are required to be filed by the NCCI and approved by the OIR.
The NCCI also submitted a filing to the OIR on June 6, 2014 to implement the changes made by CS/HB 785, including the establishment of rules and forms for the use of the Large Risk Alternative Rating Option (“LRARO”) in Florida. The filing would have allowed the LRARO option to be available either on a single-line or multi-line policy. However, the OIR disapproved the filing on July 16, 2014, explaining that the new statutory language is limited to the negotiation of workers’ compensation premium.
Since then, after feedback from carriers, the NCCI plans to resubmit the LRARO filing, which it has redrafted in advance of further dialogue with the OIR.
Legal Activity
The following workers’ compensation-related cases are pending before the Florida Supreme Court (“Court”):
Westphal v. City of St. Petersburg Risk Management–Addressing a question certified in the case from the First District Court of Appeal, the Court is being asked to consider whether a worker who is totally disabled as a result of a workplace accident, but still improving from a medical standpoint at the time temporary total disability benefits expire, is deemed to be at maximum medical improvement by operation of law, and therefore eligible to assert a claim for permanent and total disability benefits. Oral arguments were held on June 5, 2014.
Morales v. Zenith Insurance Company–The Court is considering three questions certified by the Eleventh Circuit stemming from a workers’ compensation-related wrongful death lawsuit that ultimately evolved into a bad faith claim:
- Does the (deceased worker’s) estate have standing to bring its breach of contract claim under the employer liability policy?
- If so, does the employer liability provision excluding obligations imposed by Florida workers’ compensation law operate to exclude coverage of the claim?
- If the estate’s claim is not barred, does a release in the worker’s compensation settlement prohibit collection?
Oral arguments were held on April 10, 2014.
Castellanos v. Next Door Company/Amerisure Insurance--The Court is contemplating whether the award of attorneys’ fees based upon the schedule provided by Florida workers’ compensation law is constitutionally adequate. Oral arguments have been scheduled for November 5, 2014.
Other Legal Activity
Florida Workers’ Advocates, Workers’ Injury Law & Advocacy Group, Elsa Padgett v. State of Florida-–On August 13, 2014, a Miami Circuit Court concluded that Florida’s workers’ compensation law is unconstitutional, holding that s. 440.11, F.S.–the exclusive remedy provision of Florida’s Workers’ Compensation Act–is invalid because it violates the Due Process Clause of the 14th Amendment of the U.S. Constitution and the Access to Courts provision of Article 1, s. 21 of the Florida Constitution.
Florida’s workers’ compensation law was amended in 1968 to make workers’ compensation the sole and exclusive remedy when an employee is injured in the workplace. Under current law, injured Florida workers do not have the option to sue their employers, but must seek benefits under the state’s workers’ compensation system. The Court explained in its opinion that the subsequent changes to Florida’s workers’ compensation law had diminished the benefits available to injured workers to such a degree that the system denied injured workers access to courts and therefore is no longer constitutional.
Florida Attorney General Pam Bondi filed a motion for rehearing, which was immediately denied. Ms. Bondi has filed a notice of appeal with the Third District Court of Appeal.
Special Disability Trust Fund Notice of Liability
The DWC released its annual report on the estimation of liabilities of Florida’s Special Disability Trust Fund (“SDTF”). Authored by Milliman, Inc., the statutory report is an actuarial analysis of the SDTF’s estimated liabilities.
In 2014, s. 440.49, F.S. was amended to change the way the SDTF’s assessment rate is calculated. As of July 1 of each year, the assessment rate is based on the net premiums written by carriers and self-insurers, the amount of premiums calculated by the Florida Department of Financial Services for self-insured employers, the anticipated disbursements and expenses, and the expected SDTF balance. Additionally, the revised law lowered the assessment rate cap from 4.52 percent to 2.5 percent.
The report found the SDTF’s estimated unfunded liability to be $654 million as of June 30, 2014, with total reserves of $1.087 billion.
Should you have any questions or comments, please contact Colodny Fass& Webb.
Click here to follow Colodny Fass& Webb on Twitter (@CFTLAWcom)
To unsubscribe from this newsletter, please send an e-mail to Brooke Ellis at bellis@cftlaw.com.