Workers' Comp Reform

Florida Business Groups Push for Comp Reform

With meaningful reform stalled and premiums rising, employers want their concerns to be heard.
By: | May 26, 2017

Employers are expected to pressure Florida lawmakers to agree on workers’ compensation reform next year.

The Florida Supreme Court ruled unconstitutional significant components of the state’s workers’ compensation statutes in 2016, triggering a rate spike for employers. Attempts at reform — House Bill 7085 and Senate Bill 1582 — sputtered out in May, after lengthy debates.

While next year’s legislative session starts Jan. 8, business groups believe the pressure will start in late summer or early fall, when the National Council on Compensation Insurance is expected to recommend significant rate increases — likely double-digit rate increases for two years in a row, said Carolyn Johnson, director of business, economic development and innovation policy at the Florida Chamber of Commerce.

“That should force the Legislature’s hand to act — at least that’s our hope,” she said.

This year’s rate increase of 14.5 percent followed two significant rulings. Castellanos vs. Next Door Company invalidated current caps on attorneys’ fees in workers’ comp claims, said Johnson.

The current system in Florida requires that the employer and carrier pay for an employee’s attorneys’ fees in workers’ comp claims.

In Westphal vs. the City of St. Petersburg, the court invalidated the length of time an injured worker could receive temporary total disability and temporary partial disability under current law, removing the cap on benefits workers could potentially receive, Johnson said.

Carolyn Johnson, director of business, economic development and innovation policy, Florida Chamber of Commerce

Following the rulings, the National Council on Compensation Insurance (NCCI) filed for a 19.6 percent increase. The Florida Office of Insurance Regulation disapproved the filing, but approved the amended increase of 14.5 percent.

The attorney fee decision resulted in about 10 percent of the 14.5 percent rate increase, and the invalidation of the cap on benefits resulted in about 2.2 percent, with the remaining portion due to the Florida Legislature having to ratify any rulemaking that has a significant impact on the business community.

“The key thing for the Florida Chamber of Commerce and Florida’s business community is how do we put constraints on how much claimant attorneys can make under the system of the post-Castellanos world,” Johnson said.

“We started out last year’s legislative session suggesting that the state move to a claimant-pay attorney fee system, but the political reality was that no one wanted to touch that.”

The Florida House’s initial proposal was to cap attorney fees at $150 an hour if the fee that the claimant’s attorney was making was 40 percent below or 120 percent above what the average defense attorney was making on a workers’ comp case.

The bill would not only have controlled costs, but would have also tied the cap to defense attorney fees, Johnson said.

The Florida Senate took a much different approach to solving the workers’ comp problem, as lawmakers believed it was time to move from an administered rate system to a loss cost system, she said. Florida is one of the few states that still has administered pricing.

“But we believe that is a red herring and will not reduce rates,” Johnson said.

Senate legislation would have codified the court’s decision but with one caveat — capping claimant attorney fees at $250 an hour, but business groups contended that would not have resulted in any real savings to the workers’ comp system.

“We believe any reforms to the workers’ comp system should first focus on making sure the injured worker is getting back to work as quickly as possible, while getting the benefits they deserve under the workers’ comp system,” she said.

“We also need to control and reduce the amount of litigation, and really take a look at what’s driving litigation.”

One cost driver is the amount of claimant attorney fees, and business groups are now looking at how to derive an attorney fee schedule in which a “departure fee” from the current statutory fee structure is narrow enough to control the amount in attorney fees, but meets the Florida Supreme Court’s decision in Castellanos, Johnson said.

There are also other areas for reform, such as requiring a good-faith effort to resolve the dispute before it goes on to a hearing, which includes requiring more information about what benefits are being sought, Johnson said.

“If it’s an average weekly wage issue, we would like for the claimant to let the employer know what they think the number should be, and what formula is being used to calculate that number,” she said.

“That way, claims can be resolved faster. We should try to make our workers’ comp system fully self-executing.”

Pressure to Build

Tom Feeney, president and chief executive of Associated Industries of Florida, said that 2016 was largely “an educational process” for lawmakers about the state’s workers’ comp system.

Out of the 160 lawmakers, likely only five had ever voted on a comprehensive workers’ comp reform bill before.

The last reform occurred in 2003, which Feeney said took Florida from being the most expensive workers’ comp state to being in the top half of the least expensive states, with an annual savings of more than 60 percent for the average business.

“Legislators will soon get an earful from their constituents going into an election year, and maybe we’ll go back to a system of putting the focus back on getting injured workers healthy and not making lawyers wealthy.” — Tom Feeney, president and chief executive, Associated Industries of Florida

“The consequence of those cases is that lawyers who are now getting into the business know they can run up bills that their client won’t have to pay — it will be the employers paying,” he said.

“We estimate that the increased costs to the system because of these decisions will ultimately be between 30 percent and 40 percent, after two or three more rate increases.”

When rates rise again this summer, small businesses will likely start talking to legislators and the pressure will continue to mount, Feeney said. That’s what happened during the last crisis that came to a head in 2003, which drove reform efforts.

“Legislators will soon get an earful from their constituents going into an election year, and maybe we’ll go back to a system of putting the focus back on getting injured workers healthy and not making lawyers wealthy,” he said.

Shifting the Burden

A simple way to fix the problem would be for the claimant to pay their own attorney fee — presumably Floridians would not hire a lawyer for a frivolous claim if they had to pay a lawyer, Feeney said.

Tom Feeney, president and chief executive, Associated Industries of Florida

Thirty-one states have some version of a claimant-pay system, with some having the employer paying a fixed amount and the claimant paying the overage. The claimant pay could be a contingency fee.

“However, in Florida we’ve never had a workers’ comp system where claimants pay their own lawyers, so politically it could be unpopular,” he said. “But if we build in some additional benefits and more pay, we could likely get more support from more advocacy groups.”

There are other things that can be done to lower costs, Feeney said. For example, before a lawyer files a claim for an injured worker, the claim should detail exactly what that claimant is entitled to.

If a worker twisted their ankle, what kind of specific treatment do they want, and if they need psychotherapy, what kind of specific therapy do they need and why.

“Right now, lawyers are filing dozens of unrelated claims, which puts pressure on Florida employers and insurance companies to settle claims that have no value,” he said.

What are the chances for such reforms?

“I’m an optimist and I think we made progress this year,” Feeney said. “When the next rate increases start generating enormous grassroots heat from small businesses, I could see landscape contractors, manufacturing facilities with 15 employees, and others telling lawmakers that they can no longer make a profit because of the rising rates,” he said.

“At that point, it will be crucial for lawmakers to do something to help Florida’s employers that are being crushed by alarmingly high costs.”

Katie Kuehner-Hebert is a freelance writer based in California. She has more than two decades of journalism experience and expertise in financial writing. She can be reached at [email protected]

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