At this point, we have heard about, talked about and read updates on the Florida Supreme Court cases changing Work Comp legislation. So, what do the changes mean to employers? What do business owners need to plan for?
At Lykes, we help our clients strategize and implement internal controls to address rising costs associated with Work Comp. Those who understand the impact of maintaining proactive business practices will have more control and ultimately more opportunities to eliminate wasted premium dollars than those who don’t or who simply aren’t paying attention.
Here’s what you should know about the Supreme Court decisions. First of all, the case law and legislative changes are basically the biggest Work Comp cases in the state… ever. This is national news and sets precedent for how Work Comp cases will be tried in Florida. There is no going back or unwinding the outcome through 2016.
So what’s the big deal? Here’s some history for comparison. Prior to the 2003 Reform Act, lawyers were having great time dealing with Work Comp cases. Most cases were set up to drag on into perpetuity and the resulting legal bills were sizable. After the state of Florida filed legislation in 2003 to address this issue, the perpetual ligation largely went away due to a fee schedule for attorneys; cases began settling and Work Comp rates decreased by over 60%! Now, here we are in 2016 with new case law taking us back to pre-2003:
- Will it make businesses more expensive to operate?...Yes…
- Is it better for Work Comp attorneys in Florida?…Definitely…
- Is it fairer to the claimants?...Maybe…
These changes will put some people out of business and may even do the same to a few insurance companies through the result of unfunded liability. So what matters most to business owners? Keep reading and pay attention, this means you!
Will these rulings apply to all Work Comp claims whether open or closed?
Yes, all of them! Unless they have been settled and the right paperwork has been filed by your carrier/attorney.
Will my businesses’ Work Comp costs go up?
Yes, it just depends on how much. The National Council of Compensation Insurance (NCCI) has requested almost 20% increase in Work Comp rates for Florida beginning 10/1/2016. This may or may not be approved in the full amount but expect an increase of at least double digits sometime between 10/1 and 1/1.
How will my Experience Modifier be affected?
That’s a tricky one. Insurance companies have already started reserving claims for higher amounts and will likely do so for longer periods of time. Carriers will also be less aggressive on claim closure. Consequently, your E-Mod will go up unless you are really paying attention. Most employers will feel the effects of future claims via E-Mod inflation in policy year 2017 onward. For some employers, there will be ‘zombie claims’ that re-open and re-allocate reserves which will hit the E-Mod immediately, driving costs up.
Is there any silver lining here? Why don’t I move my business to Georgia?!
That’s a valid question, but don’t pack your bags just yet. Those employers paying attention to this stuff and implementing a Work Comp strategy to address the changes may have a hidden silver lining here. The court’s decision may seem sour and difficult to accept, but for proactive employers with Work Comp claims management partnerships in place – the impact on their E-Mods will be vastly different. Here’s how:
We know that E-Mod is calculated via formula Actual Losses / Expected Losses. The new rates will increase Expected Losses for FL employers. This will drive the E-Mod down if Actual Losses stay the same over time. This result will occur for a very select few employers that have a strong strategy already in place.
Remember, we are here to help. What’s your plan?