Cost of Workers’ Compensation Claims Going Up… Again
June 15, 2016
The Florida Supreme Court has delivered another blow to Florida employers with its recent ruling on the Westphal v City of St. Petersburg decision. The case challenged the 104 week cap on indemnity benefits that was passed during the 2003 workers’ compensation reform bill. The court concluded that the 104-week cap on temporary total disability benefits results in a statutory gap in benefits and violates the constitutional right of access to court. Additionally, the ruling states that cap/limitation cuts off a severely injured worker from disability benefits at a “critical time, when the worker cannot return to work and is totally disabled but the worker’s doctors – chosen by the employer – deem that the worker may still continue to medically improve.”
With the Supreme Court decision, the 104 week cap is now unconstitutional, and they opted to employ “statutory revival” which essentially reverts to the last cap prior to the 2003 reform which was 260 weeks.
This decision will drive the cost of claims up. The total exposure of claims are increased and when reserving or evaluating for settlement, claims managers will take the increased cap into consideration which will lead to higher settlements. NCCI will take these increased costs into consideration in their soon to be proposed rate filing. As you’ll recall from a recent News You Can Use, NCCI has already proposed a 17% rate increase to go into effect on August, 1st due to an earlier decision regarding the cap on attorney fees being unconstitutional. The January filing was likely to go up again, but now the Westphal decision will ensure that even higher rates are proposed.
The Castellanos and Westphal decisions are huge wins for the Plaintiff’s Bar and they have gained momentum. It is anticipated that they will continue to challenge the provisions within the 2003 reform in an attempt to bring cases to the Florida Supreme Court.
In 2002 NCCI judged Florida’s workers’ compensation system a failure. Permanent total claims were five times higher than the rest of the country. Medical costs sored despite Florida having one of the lowest medical fee schedules, and frequent attorney involvement led to claims being 40% higher. In 2002 the average claim cost was $10,424.00 without attorney involvement and $41,584.00 with plaintiff representation.
This led to a demand for a systemic change and resulted in 4 special sessions by the Florida Legislature. Ultimately, the 2003 reform led to a 70% reduction in rates through 2015. During that time attorney fees went down 60%. Some of the noteworthy changes were the cap on attorney fees, 104 week cap on temporary indemnity benefits, major contributing cause (probably the most employer friendly law in the country regarding pre-existing conditions) , and copay after maximum medical improvement among others.
It is important to note that there have been no formal rate increases to date. NCCI has made a rate proposal, but public hearings have not yet occurred. In the meantime, employers should emphasize safety, loss control and claims management. Reporting claims timely, accurately and keep a track of the injured worker’s status are all important factors in mitigating the cost of claims.