Understanding NCCI's Proposed 15.1% Florida Workers’ Compensation Rate Decrease

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31 Oct

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Regarding workers’ compensation, Florida seems poised for a transformative 2024. Recently, the National Council on Compensation Insurance (NCCI) unveiled a proposal that could be a game-changer for businesses in the state.

The proposal, a substantial 15.1% average rate decrease, marks the most significant proposed rate cut in over a decade, according to the Nassau County Florida Chamber. If approved by the Office of Insurance Regulation (OIR), this new rate will be in effect for new and renewal policies starting January 1, 2024.

Why the 15.1% Decrease?

COVID-19 primarily influenced the NCCI's recommendation for this notable rate decrease and how it affected workplace dynamics. With a significant shift towards remote and hybrid work models, the National Council on Compensation Insurance noticed a significant reduction in the frequency and severity of claims. As workers adopted these newer work models, the risks associated with traditional workplace environments decreased, leading to lower claims.

Over the past few years, Florida has seen a consistent downward trend in workers’ compensation rates. “The filing, which will be reviewed by the Florida Office of Insurance Regulation, follows an 8.4% decrease recommended last year, a 4.9% decrease in 2021 and a 5.7% cut in 2020,” reports Insurance Journal. As the state continues to adapt to modern work arrangements and practices, how these rates will further evolve remains to be seen.

What's Driving Up Costs?

A few factors are exerting upward pressure on costs nationwide. For instance, recent wage hikes are outpacing average claim costs. The year 2022 saw a notable spike in claim costs, with medical claims surging by about 5% and indemnity claims rising by about 6%. Over the period from 2019 to 2022, the average medical lost-time claim cost saw an increase of around 3%, while the average indemnity for lost-time claim costs jumped by about 8%.

Another element adding to the cost is the potential upward pressure on medical expenses. This is due to the Amended Final Order issued by the Florida Division of Administrative Hearings in May 2023, specifically in the case of Zenith Insurance Company vs. Department of Financial Services. This case highlighted tensions between providers like Lawnwood and insurers like Zenith over “reasonable” medical charges, potentially escalating medical expenses in the state.

Factors Supporting a Rate Decrease:

Despite the cost drivers, there have been key developments that have favored a rate decrease:

Favorable Loss Experience: For policy years 2020, 2021, and 2022, there was a favorable loss experience, i.e., fewer claims filed, which is a primary driver for the proposed rate cut.
Changes in Medical Fee Schedule: The proposed rate factors in revisions to the current medical fee schedule.
Higher Investment Returns: Higher investment returns are expected with the prevailing interest rate environment, contributing to the rate reduction decision.

The Bottom Line

While this proposal offers a favorable prospect for Florida’s small businesses and employees, especially those wrestling with pandemic-induced challenges, it’s still awaiting the green light from regulators.

Historically, regulatory authorities advocated for more significant rate reductions and never an increase. Businesses should await a definitive decision from the regulatory body; however, the evolving workers’ compensation landscape looks promising for potential benefits, like reduced premiums.

These rate decreases are in contrast to the rate increases for most of the insurance lines in the State of Florida. Florida businesses are getting the benefit of a functioning workers’ compensation system. Recent changes to the law regarding attorney fees have shown to have nothing but a positive impact on how the system functions.

At Carrillo Injury Law, we recognize the profound impact such changes can have on businesses and employees. If you have questions or concerns about how this proposed decrease may affect you or your business, don't hesitate to reach out to our team. Let's navigate this together. Contact us today at office@carrilloinjurylaw.com or call 352-371-4000.