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Home | From Bob's Cluttered Desk | Is Loss Cost Really THE Solution for Florida Workers’ Comp Ills?

Is Loss Cost Really THE Solution for Florida Workers’ Comp Ills?

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An article published last week in workcompcentral details one of the prevailing solutions being considered by the Senate Banking and Insurance Committee for the current Florida’s workers’ compensation crisis. If formalized, presented and passed, it would change the premium rate setting policy from an administered system to that generally known as “loss cost”; insurers in the state would be able to determine how much they wanted to charge for workers’ comp coverage.

Now, as a free market kind of guy, I generally do not have opposition to the concept of competitive pricing in the marketplace. That said, the administered rating system does not seem to have hurt the state, which is currently ranking in the mid-third range of the 2016 Oregon Workers’ Compensation Premium Rate Ranking Summary. It doesn’t help that one of the proponents of the shift cited the Florida Homeowners Insurance market as a place where loss cost practices have worked “really well”. Anybody who owns a home in Florida that is within 1,000 miles of the coastline knows what securing homeowners coverage can be like in this state. All of the big, stable players took their toys and went home years ago, not wanting to “risk the risk” of a ginormous hurricane emptying their coffers. Thus, most of us are insured through the Risk Management Division of Billy Bubba’s Bait and Tackle Shop; knowing, of course, that Billy Bubba has heavily reinsured through some guy in Bermuda who works and lives out of a garage. But of course, I digress…..

My main question on this effort would be (if anyone was listening that is), with the current cost and benefit crisis the state is facing, is this really the biggest issue to be tackling?

Let me put it this way. If Florida workers’ comp were a house, it would be on fire. Smoke would be billowing from every crack and opening, and flames would be shooting out several windows. Residents on the second and third floors would be leaning out crying for someone to rescue them. Our legislature, in the form of the fire department, would very quickly roll up in their shiny new fire engine. They would hop off the truck, and quickly set to work rolling out the hoses, connecting to fire hydrants, and starting the pumps. They would then proceed to dump tons of water – on the unattached garage adjacent to the burning house. That is the equivalence, in my mind, of this rate discussion compared to the underlying issues the state actually faces.

Now, this certainly may not be the only “solution” our legislators are planning to consider; it may just be the one that happened to make a particular news cycle. Still, it seems an odd choice to be focusing on, unless, as one observer noted, it was an effort on the part of some parties to deflect blame for the issues at hand.

My own State Senator, Greg Steube, is one of the three attorneys on the panel that is promoting the concept. I’ve only met the Senator once, when he was running for the position this past fall and he spoke to my local Sertoma Club. I voted for him, and as a proud card carrying NRA member agree with most of his positions, but it was apparent from a quote he made that he is missing a critical component in this argument. He said:

“It seems like we have a rate-making process that is not competitive, and the only argument I heard in the committee from individuals in the business community against making it competitive would be you’d have out-of-state companies coming in and competing with in-state companies and low-balling to gain market share. Wouldn’t that lower the costs to the business community? That almost validates the argument for rate-making.”

There is a second group being served by workers’ compensation, and they are not reflected in Senator Steube’s statement. The problem in comp, when dealing with companies “low-balling to gain market share”, is that you are also far more likely to get companies that will scrimp and short-change the injured workers’ they are supposed to care for in order to protect that very tight profit margin. If we go down this path, the regulatory punishments for those that fail to meet the standards need to be severe.

It is early in the game, and the legislative process doesn’t really start moving until after the start of the new year. There will be much activity over the coming months, and there will be many concepts and ideas proposed. We hope that our state leaders are willing to be imaginative and daring in their thinking. Personally, I believe Florida is primed with the potential to make history by scrapping the old system and building a new one designed for the 21st century.

A new, recovery focused program built around an Advocacy Based Claims model will achieve both the cost controls business seek, and the outcomes injured workers need. It is time for a dramatic shift in policy and approach. There is no question in my mind that some state is going to do it in the future. Whether Florida is first or fiftieth in adopting a “Workers’ Recovery” approach is entirely up to our folks in Tallahassee.

One thing is certain: If we simply continue to patch and re-inflate the current system we have in place, we will be back at the reform table again within 5 to 7 years. Guaranteed. The lack of competitive pricing is not the current driver of our ills, and our leadership should demonstrate the strength and courage needed to forge a new and better path.

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About "From Bob's Cluttered Desk"

Robert Wilson is President & CEO of, and "From Bob's Cluttered Desk" comes his (often incoherent) thoughts, ramblings, observations and rants - often on workers' comp or employment issues, but occasionally not.

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Subscribe to comments feed Comments (2 posted)

Mark Zientz 12/19/2016 09:45:44
Bob, You are sorta, kinda, almost on the right track. The claims attitutde has to change. Repeal of the 'presumtions' favoring injured workers in 1991 ("it is presumed that a claim comes within the chapter"), and the eneactment of 440.015 making employers and claimants have the same burdens of proof, took the wind out of the sails of injured workers and pushed them more and more into the arms of waiting lawyers. INstead of looking for ways to make an injury compensable, the prevailing process is to deny all claims that are borderline (and some that are clearly compensable). Premiums went down 60% after 2003. Now a 'slight' uptick of 14% has everyone crying 'crisis'. Where the F--k is the crisis? In 1917 the SCOTUS said that employers have to pay the cost of a broken machine the same as the cost of a broken body (NYCRR v. White) but employers now pay only 21% of the cost of an on the job injury (OSHA report 2015) and they still cry 'crisis'. WC costs , just like the cost of repairing or replacing a machine is a business cost passed on to consumers. With rates the same for each occupation, employers deal with customers on a level playing field, except for self- insurers who couldn't give a crap about rates.
Florida has no state safety regulations. Preventing accidents is the best way of lowering costs, to zero. OSHA inpectors say they would need 240 years to inspect each Florida workplace one time (BLS-2011). Government, usually self insured but without reserves, has no safety oversight at all.
Veterans with disability would have a mucvh easier route to good jobs in the private sector if Florida still had a special disability trust fund. Florida also needs an uninsured employer trust fund since oversight is almost on existent.
So, eliminate self insurance, give the claimant the win, all things being equal, establish a guide for adjusters that they are to look for ways to accept a claim before denying it. One example is the truly draconain provision defining 'accident' not to include exposures to mold, fungus, asbestos, silica dust, chemicals etc. The injured employee has to prove the impossible to be covered for an exposure. That is no different in policy than having to prove negligence! Have a competitive market, and take all attorney fees, paid to claimants or to defense out of the rate base. Also take out of the rate base all penalties and interest paid for late payments of benefits. Last, get rid of the statutory exemption from the bad faith claims handling in the insurance code for WC insurers. Let's see what happens when one of the carriers has to pay a $250,000.00 attorney fee for denying a $600.00 thermogram (State Farm v. Palma- PIP).
Bob Wilson 12/19/2016 15:49:50
Mark, thanks for your input. I think some of the feeling of "crisis" stems from perceived instabilities in the marketplace, in addition to the now unfunded mandate stretching several years back. Insurers whose profit was capped in those years, now having to go back and pay for legal fees that they cannot pass on to anyone will be harder to convince to stick around. Florida is well versed in losing insurance options in other lines. We shouldn't make an effort to repeat that here. Insurers hate the unknown and the unpredictable, and Florida lately has been the poster child for those two categories.

I might also suggest that 14.5% (if it stands - more uncertainty) might just be the first round.

To your comment on claim culture, I completely agree. I think changing the language we use will impact that, which is why I have been pushing the "Workers' Recovery" concept. Change the name, and you will change the culture.
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