By Tom Murphy
For the fifth straight year, workers compensation premiums have fallen. Effective January 1, 2008 the NCCI (National Council for Compensation Insurance) recommended a 16.5% rate decrease. Florida’s insurance commissioner Kevin McCarty signed off on a larger average decrease of 18.4%. This is the largest workers compensation decrease in the history of the state. These consecutive decreases have totaled more than 50% in rate reductions in the past five years.
How did we get to this point?
The reasons for this dramatic decline are similar to those we are starting to see in the medical malpractice insurance market. Legislative reforms combined with a decrease in claims frequency have been instrumental in creating a stable environment in which employers and insurance companies can operate. Another factor that is much harder to quantify but cannot go unrecognized as contributing to both the current workers comp and medical malpractice markets is the greater awareness and practice of risk management principles.
What does the future hold?
Many experts believe that the reform pendulum has swung too far and that the current rates are unsustainable in the long run. Nobody can predict how much further the rates will decline or how long we will be able to enjoy the soft market. History has shown that similar to other insurance markets, the workers comp system goes through cycles and the length of these cycles depends on many factors including claims frequency, medical and health related costs as well as the legal environment.
The Legal Environment
It plays a large role and currently the legislative changes from the past few years have limited the fees that attorneys can charge in a workers compensation claim. As you might imagine, these attorneys are not happy with the current system and they have already started their campaign to change the reforms from the past few years. The trial attorneys are pinning their hopes on a recent Florida Supreme Court decision to hear a challenge to the attorney fee schedule. Oral arguments are set for April 2008.
It’s the Economy
One of the major factors that can affect claims frequency is the economy. History has shown that when the economy is strong and unemployment is low, claims frequency is typically low. When the economy is not strong and unemployment increases, we generally see an increase in the number of claims as well as in the severity of claims. Some experts attribute this to employees earning less as well as the fear of losing their job.
Maintaining a Safe Medical Practice
I always like to remind our physicians and administrators that the current Florida law requires any non-construction employer with 4 or more employees to provide workers compensation coverage to those employees. This includes any W-2 employee regardless of their full-time or part-time status. I always recommend that you seriously consider providing the coverage to all employees even if you have less than 4 employees. The cost for coverage is much less than you could eventually pay if one of the employee’s is injured on the job.
It is always prudent to have a formal safety plan for your office and the staff. A wonderful resource for a formal safety program is your current workers compensation carrier. The vast majority of carriers are happy to assist you with the implementation of a program and for larger practices, the carrier may send a specialist to your practice for an on-site visit at no cost to you. This could potentially lead to a premium credit. You can visit your carrier website or the division website at www.fldfs.com for additional information.
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