Work Comp Rates set to increase 14.5% on December 1st. Why?
Commercial Insurance is one of the main costs for a small-business. In the state of Florida, this cost is about to rise significantly for workers’ compensation policies. Beginning December 1st, rates for workers’ compensation policies are going to increase 14.5 percent on average. The amount of increase each business will see is dependent on their industry classification code, their claims history and the revenue of their business. All businesses should prepare themselves for a significant increase in premium for workers’ compensation coverage.
Why did this happen?
In the Spring of 2016, the National Council on Compensation Insurance (NCCI) actually recommended a modest decrease in premium for the state of Florida. This recommendation came before two rulings by the Florida Supreme Court. Those two cases were Castellanos vs. Next Door Company and Westphal vs. City of St. Petersburg. A small portion of the increase was also due to a previous ruling by the State Senate due to a new printing of the Florida Workers’ Compensation HCPR Manual. Here is a brief explanation of the cases and why they resulted in an increase on premium.
Castellanos vs. Next Door Company
Marvin Castellanos was an injured employee who sued Next Door Company. This court decision ruled that a previous court ruling from 2009 was invalid. This previous ruling was invalid because it limited the ability of the claimant to get a reasonable amount for attorney’sfees. In short the majority of the workers’ compensation settlements were going to the attorneys and not the injured workers because of this fee schedule. Over turning this ruling meant judges no longer had to stick to the mandatory fee schedule and now can award additional compensation for attorney’s fees. These judges can now simply use the fee schedule as a starting point or a guideline. This will cause the amount judges award to injured employees to increase dramatically because there is no longer a cap on what the judges can recommend for compensation to the injured employees attorney fees. As a result of this ruling, the Florida Office of Insurance Regulation (OIR) approved an increase of 10.1 percent on average statewide.
The Westphal vs. City of St. Petersburg case found the 104-week statutory limitation on temporary total disability benefits to be unconstitutional. It was ruled unconstitutional because it denied injured workers the ability to get proper right of access to the courts. As part of this ruling, the Florida Supreme Court reinstated a 260-week limitation. This means injured employees will get partial salary benefits for an additional 156 weeks. Because of this additional 156 of coverage OIR approved an average increase of 2.2 percent statewide.
Senate Bill 1402
The additional 1.8 percent increase on premium for workers’ compensation was related to updates within the Florida Workers’ Compensation HCPR Manual. This increase was approved as part of Senate Bill 1402.
What can small business owners do about this increase?
There are several things a business owner can do to help limit an increase to their businesses workers compensation rates. First and foremost, the business should shop around their policy. They can do this themselves by getting on the phone and calling several agencies to get competitive quotes on their coverage. One way to shop a policy effectively is to partner with an agent who can quote your policy with several carriers. Many carriers only partner with one or a select few carriers. This does not allow them to get you the best rate or the best coverage. In many cases, an independent insurance agent can quote your policy with more than 10 different carriers. Because of this competition they are able to search for more comprehensive coverage and the most competitive price on premium.
Another cost saving measure for some businesses is going with an alternative payment option. Many agencies offer flexible payment options like Pay as You Go Workers Compensation.
Pay as You GO Workers Compensation allows the business to get a policy in place at a significantly lower up front cost. Most policies require 25 percent of the premium to be paid up front just to establish coverage. Depending on premium, most small businesses can get coverage in place for only a few hundred dollars. Pay as You Go also allows the business to pay their premium each month based on the payroll of the business. Pay as You Go is good for cash strapped and seasonal businesses. It also prevents businesses from over or under paying on premium because of their payroll or being misclassified. Businesses that are classified incorrectly can pay much more or less in premium throughout the year. These discrepancies typically get corrected during an end of year audit, but the Pay as You Go Method may be able to prevent these mistakes from happening in the first place.
Walt Capell is the President/Owner of Workers Compensation Shop. Walt started Workers Compensation Shop in 2005. Workers Compensation Shop is a rapidly growing national insurance agency with a strong reputation for forward-thinking, out-of-the-box products and solutions for business owners. Walt would like to use his experience in insurance and as a small business owner to benefit the small business community.