Companies with higher loss histories receive higher mods and thus pay more in premium. And since the cost of a specific accident is statistically less predictable than the frequency, NCCI has long given greater weight (and penalty) to accident frequency than to accident severity through a split-point rating approach for costs. However, a change to this process is on the horizon.

Historically, NCCI divides losses into primary and excess portions, with a longtime split point with a $5,000 cap. (The primary costs are weighted at 100 percent in the mod formula for lost-time claims; any amount over that is allocated to excess and weighted at a lower percentage.) A company with several small losses creates a higher mod than a company with a single, larger loss even if the total loss dollars are the same.

NCCI has proposed changing that primary loss cap beginning in 2013, the first such change in 25 years. The anticipated change (if approved) is expected to more than triple the current cap by 2015.

This gradual increase over 3 years is intended to compensate for the increased claims amounts over the past years. While the optimum goal for employers will still be zero accidents and a mod of 1.00 or lower, the change is expected to bring an immediate and significant mind-shift about the impact of losses. By 2015, when the phase-in is complete, approximately $17,000 in claims costs will be factored into mods at 100 percent. This amount will be indexed for inflation for years after 2015. The result is premiums for companies with higher-than-average losses will increase, while companies with better-than-average losses will be reduced.

These changes emphasize the value of loss control return-to-work programs. If employers improve their loss experience, then they can improve their mods, which will reduce their premiums in the long run. For employers who are not mod-eligible, improving loss experience can still save money by lowering claims costs. And given today’s soft market, better loss experience can also help with insurability.

On October 26, 2011, NCCI submitted an amended filing to OIR addressing each of the miscellaneous issues as instructed by the order and OIR is currently reviewing the amended filing. NCCI will release the updated rate pages when the amended filing is approved.

Once it is approved, the cumulative impact to Florida’s workers’ compensation rates since the 2003 reform will be -58.6%. Florida will continue to rank among the 20 states with the lowest workers’ compensation rates nationally.

More assortments of changes to the law were seen during the 1960s. This time can be best described as a period of development of the idea of the law, which had begun in the preceding decades to cover injuries that had never before been covered. The Governmental Reorganization Act of 1969 was established to consider appeals of workers’ compensation cases. These cases would be seen by the Industrial Relations Commission, full-time deputy commissioners, were hired to give a ruling on disagreements between employers and employee

An 18 member commission, the National Commission on State Workmen’s Compensation Laws was put together by the Federal Occupational Safety & Health Act (OSHA) in 1970. This Commission consisted of three cabinet level appointees (appointed by President Richard Nixon) along with representatives of various groups. Its purpose was to determine the fairness and adequacy of state workers’ compensation laws.

While this commission was deliberating, workers’ compensation became mandatory in Florida and multiple changes in the law were made. The governor of the state of Florida in 1974 appointed a task force to update planned changes in the law, a crucial development in the workers’ compensation laws in Florida.

The “Papy Package” was created for legislative reform. This was ultimately passed by the Legislature and singed into law by the governor. The changes seen as a result of these amendments can be best described as liberal, expensive, and unquestionably pro-labor. Even with attempts to reform, premiums increased by 200% between 1974 and 1978. Between the months of June and October, 1974 19,430 claims were filed.

A maximum fee schedule for reimbursing medical care providers was put into action by the Legislature during the 1940s. Back in 1935, the average weekly wage for benefits due an injured worker was calculated by dividing annual earnings by 52; 1941 saw the calculation changed to a procedure of averaging earnings for the 13 weeks preceding a date of accident. That same year “reasonable” attorney’s fees were deemed payable to the injured worker’s attorney in addition to the compensation otherwise due and payable to the injured worker.

The Florida Industrial Commission, in a preface to the act said:

The Florida Workmen’s Compensation Law is a plan or system for compensating workmen accidentally injured and disable as a direct result of their employment, regardless of the question of fault or negligence. It is based, in the main, on the English Compensation Act. The principles of the Florida law are basically the same.

Strangely enough, the English deserted their workers’ compensation law in 1964, while Florida and many other states based their law on the English law. The English then replaced it with a more complete health insurance law and it was in line with the compensation law developed in Germany.

The English compensation law failed primarily because it was unable to maintain the self-executing design of the system. Litigation was widespread and the costs of such added enormously to the total cost of the system.

Click here to read more about Workers Comp History.

• Failure to obtain workers’ compensation insurance
• Materially understating or concealing payroll
• Materially misrepresenting or concealing employee duties to avoid paying the proper premium
• Materially concealing information pertinent to the calculation of an experience modification factor
• Failure to produce business records in a timely manner

The assessed penalty is 1.5 times what the employer would have paid in workers’ compensation insurance premiums for all periods of non-compliance during the preceding three-year period with the minimum penalty being a $1,000 fine.

During their 2010-2011 fiscal year, the Bureau conducted 34,252 investigations, of which 2,044 investigations were conducted in response to referrals alleging employer noncompliance. Investigations are physical, on-site inspections of an employer’s job-site or business location to determine compliance with workers’ compensation coverage requirements. Some investigations originate from referrals and consist of on-site inspections of residential and commercial construction sites.

Taken from the Florida Workers Compensation 2011 Annual Report, the graphics below demonstrate the impact of these investigations on the workers comp marketplace:

If your business has received a stop-work order, please contact me or one of our insurance agents as soon as possible, because there are other ramifications for not having workers compensation coverage. If you know of a business operating in Florida without workers’ compensation insurance, click here for more information about reporting them.

On August 18, 2011, the National Council on Compensation Insurance (NCCI) delivered its annual workers compensation rate filing to the Florida Office of Insurance Regulation (OIR). Based upon its review of the most recent data available, NCCI has proposed, effective January 1, 2012, an overall workers compensation rate level increase of 8.9%.

Here are some of the key observations:

• Following several years of significant declines, claim frequency in 2009 was up significantly. Preliminary 2010 data also shows claim frequency up further. This might be explained by the impact of the economy on workers compensation.
• There has been a small deterioration in recent loss experience (+1.1%).
• It has become more evident in recent years that the significant ongoing experience improvements which occurred after the 2003 reform have ended and that the system is operating from a new baseline reflecting the total cumulative effects of the reform. As a result, it has been necessary to adjust the very optimistic outlook, or trend, underlying rates to reflect that significant ongoing experience improvements are no longer occurring and are no longer expected. Trend adjustments reflecting less optimistic outlooks were approved in the 1/1/11 rates. Another such adjustment is indicated. The new outlook still calls for continued experience improvement (i.e., negative trends), but at a much slower pace (i.e., less negative than current trends). The new outlook would bring Florida more in line with long-term Florida trends and current countrywide trends. This adjustment has the effect of increasing rates (+8.2%).

The cumulative impact of the rate decreases after the 2003 reform was -64.7%. Assuming the filing is approved as proposed, the cumulative impact for the period 10/1/03 through 1/1/12 is -58.6%. NCCI estimates that if this filing were approved as proposed, Florida would compare to other states as follows:

• Florida would continue to rank among the 20 states with the lowest workers compensation rates nationally.
• Florida has and would continue to have the distinction of being the only large state* within the group of 20 states with the lowest workers compensation rates nationally.
• Florida also has and would continue to have the lowest workers compensation rates of any state in the Southeast.**

Assuming the filing is approved as proposed, the overall average rate impact at an industry group level would be as follows:

There are a couple areas where Florida workers compensation cost drivers, if addressed legislatively, could bring system cost savings and assist Florida with maintaining or improving its current ranking:

• In 2009, Florida became the state with the highest rate of physician-dispensed drugs (50% of the total Rx dollar is physician-dispensed drugs). Most repackaged drugs come from physicians. Florida’s fee schedule for drugs is based on Average Wholesale Price. Any firm that repackages a drug is permitted to set a new, higher, Average Wholesale Price. As a result, data shows that the average unit price of a repackaged drug can range up to 679% above the same drug in its non-repackaged form. Subjecting repackaged drugs to the per unit price of the original manufacturer’s Average Wholesale Price in Florida’s fee schedule could result in a savings of 2.5% or $62M.
• A 2007 study conducted by Research & Planning Consultants (RPC) notes that Section 440.13, Florida Statutes, requires that Florida hospitals be paid for most workers compensation outpatient services at a percentage of their usual and customary charges. Conversely, Florida physicians are by statute reimbursed at 110%-140% of Medicare. RPC also notes that if Florida hospitals were reimbursed at a Medicare rate equal to the charges received by Florida hospitals for most workers compensation outpatient services, Florida hospitals would be reimbursed at 181%-330% of Medicare which would be the highest rate in the country.

The OIR is expected to schedule a public rate hearing in October.

When the verification has been sent on when the employee may return to work, there may or may not be limitations indicated by the doctor. They should be specific enough for the employer to make an accurate judgment as to what duties the employee is physically able to perform. Specific forms should be developed to determine what the injured worker’s restrictions are. The employer should concentrate on the worker’s abilities rather than the disabilities. Asking the doctor what he can perform rather than what he cannot perform is a good first step. Some employers may want to consider having a Functional Capacities Evaluation performed by a qualified evaluator.

The offered job does not have to be the exact job the employee was executing at the time of the injury. Likewise, it does not have to be the same hours of employment. The job simply has to fit the limitations indicated by the doctor, and be within the worker’s abilities. The employer can try to be original in developing such a job, using an injured employee to perform light duty jobs. An employer should not insist that the injured employee have a full release form the doctor before he is allowed to return to work; such a position could be in violation of the ADA (Americans with Disabilities Act).

Altered duty jobs should be acknowledged within an organization before accidents occur. An official transitional return-to-work program should already be recognized. The job descriptions should be completed so there is a clear understanding of the requirements. All of these actions make the physician’s job of reviewing the exact job that is being offered easier and can then also give an opinion as to the employee’s capability in performing the responsibilities of the job. Alternate work programs are oftentimes damaged by an unknowing supervisor unaware of the injured employee’s medical restrictions.

Many times an employer does not offer light duty jobs because no jobs are available. This is when an alternate plan is developed. For example, a Midwest department store had a hard time establishing a light duty program for its warehouse workers. The store sent its workers to pre-approved community service positions with full pay and benefits. The employer would no doubt be required to agree to be responsible for any possible liability if the employee was injured in the community service position. There is the possibility of an employee refusing the job altogether. The employer is required to re-offer it to him on a periodic basis. If the employee continues to refuse, you can continue to deny him indemnity benefits.

At times the employee can be reluctant to return to work for fear of adverse effects on the other employees and widespread moral within the company. This can happen if the injured employee is a troublemaker or someone with less than satisfactory work habits. The employer should move the injured employee away from others so the he cannot affect the performance of other employees. He could also change the hours of the employee. In short, do anything within reason to get that worker back on the job and away from the costly payment of workers’ compensation.

REFUSAL

The refusal to take the employee back by the employer is a huge cause of failure of the workers’ compensation system in Florida. If the employer will not hire back the employee it is questionable that other employers will hire this same person. There is a huge difficulty in securing employment if the employee is disabled or has a pending workers’ compensation claim. Locating work under these conditions is very limited. This could possibly cause a very long term pay out of benefits.

It has been proven that medical costs are significantly higher for the unemployed disabled employee who spends most of the day thinking about his injuries as compared to the employee who has returned to a job. Medical costs are now over 60% of all benefits paid in the worker’s compensation system. Every effort should be made to reduce these payments.

Some worker’s compensation carriers have tried to stop the spiraling costs associated with continued payment of compensation, rehabilitation, and medical expenses by settling cases. Settlements can be an effective way of controlling an employer’s long term workers’ compensation costs. Employers should not be unwilling to provide post-injury employment which can be the driving factor in establishing the value of such settlements.

In 2003, the NCCI released statistics showing attorney involvement in only 4% of the cases in which the injured employee returned to his old job. The average cost of a workers’ compensation case where no attorney is involved was $10, 424. With the attorney involvement the average cost was $41,584. This is just further evidence that a return-to-work program should be put in to position in the work place, and is cost friendly.

Only the employer can make a difference as to whether or not a small claim turns into a much larger quantity requiring greater financial payouts. This is the time when it can make or break the whole system. This can be done by developing an aggressive rehiring program, especially in the area of adapted work. A program like this can save a significant amount of money. Failure to set up rehiring procedures can result in high payouts. An insurance company cannot withdraw or cancel the employee’s workers’ compensation policy because the employee has returned to work.

An injured employee is denied workers’ compensation if he refuses to accept employment suitable to his abilities unless the judge determines that the refusal to accept the employment is reasonable. A great way to defend a permanent total claim is to show that a good faith offer of employment has been made to the injured worker. Another way is to make sure the employee has a job within a 50-mile radius of their home at least at the sedentary level of employment. Injured employees cannot be considered permanently and totally disabled if they can perform sedentary work and there is a job available with 50 miles of their home.

A real incentive for returning an injured employee to work is to avoid excessive liability for a permanent total case or the payment of temporary partial benefits. Another potential incentive is the creation of the “Preferred Worker Program.” A preferred worker is basically an individual who because of a permanent impairment from an injury or occupational disease is unable to return to regular employment. An injured employee may also qualify as a preferred worker and has been issued an identify car by the Division of Workers’ Compensation. If the employer then rehires the individual, the Special Disability Trust Fund will reimburse the employer the cost of three years of continuous employment after returning to work. This programs efficiency has not yet been recognized and there has only been a small use of it by Florida employers.

In 1993, changes were made in the Law and an injured employee now had to make sure to review early and continuous their employability. It encouraged the coordination of medical care and re-employment services. Sixty days after the date of an injury, the carrier must determine whether an employee is likely to return to work. The employer can also access alternative assessments which are provided to the carrier. The Division of Workers’ Compensation provides vocational evaluations and the training and education screenings to help with this process. This division is also sanctioned to apply monies for the actual training and education that is suggested by a vocational evaluator and considered necessary by the Division, his weekly compensation benefits can be reduce by 50%. A judge of Compensation Claims may not arbitrate an employee permanently and totally disabled until the carrier is give the opportunity to provide a re-employment evaluation.

Testing can be provided by a rehabilitation advisor or provider chose by the employer or carrier. Training can also include referrals to community colleges and vocational-technical schools and securing a general education diploma if necessary. When an employee reaches maximum medical improvement and is unable to earn at least 80% of the compensation rate and requires additional training and education, up to 52 weeks are payable. These benefits are not in surplus of the maximum 104 weeks of temporary benefits payable.

Any return to work program should be very specific with management support and each department sharing different responsibilities. Returning an injured employed should be everyone’s responsibility.