Employers in Florida will be paying more for workers’ compensation coverage next year following the state insurance chief’s approval of an 8.9 percent statewide average rate hike.
Florida Insurance Commissioner Kevin McCarty said that he will approve the 8.9 percent rate bid filed by the insurers’ rating organization, the National Council on Compensation Insurance (NCCI).
The new rates will apply to all new and renewal business, effective Jan. 1, 2012.
In granting the rate request, McCarty noted that the state’s overall rate level has fallen significantly since lawmakers rewrote the state’s workers’ compensation law nearly a decade ago.
“The rate increase that has just been justified would still give Florida the lowest workers’ compensation rates among the large states, the lowest workers’ compensation insurance rates in the southeast, and more importantly a 58.6 percent cumulative decrease from the highs prior to the legislative reforms in 2003,” McCarty said.
McCarty’s action is technically a disapproval of NCCI’s rate filing since state actuaries disagreed with the council on its calculation of policyholder dividends and their investment yield. Actuaries also rejected several specific rate changes include “F” classes, which cover federal workers, and changes in roofers and ambulance and emergency medical services classes.
At a public hearing on the filing, NCCI officials attributed the need for the rate increase to several factors including a slight increase in indemnity and medical benefits. Additionally, the state’s claim frequency has started to creep upward after a nine-year decline.
NCCI State Relations Executive Lori Lovgren told regulators that this year’s proposed increase shouldn’t be read a sign the system is failing. Instead, she said, it reflects a normal variance in rates, given that the savings from the 2003 reforms have now been fully realized.
“This is not a sign that the system is slipping toward a crisis,” she said. “It is more of an effort to find a new normal, a new baseline in Florida.”
McCarty called for legislative action next year on a cost issue cited at the previous public rate hearing: the dispensing and repackaging of drugs by physicians out of their own offices.
Florida law specifies that pharmacies are to be reimbursed at a drug’s average wholesale price, plus $4.18. However, the law is silent when it comes to doctors who sell and repackage drugs in their office. Industry officials say there has been an explosion of physician-dispensed drugs, with markups as high as 600 percent or more.
NCCI calculated that in 2003, only nine percent of drugs were dispensed by doctors. That number has risen to over 50 percent, making Florida the highest of 40 states.
NCCI said the doctor-dispensed drugs accounted for 2.5 percent of the 8.9 percent rate filing, representing $62 million in additional costs to the state’s workers’ compensation system.
“I am very concerned about the evidence presented in the filing and during the rate hearing about the increased costs associated with physician-dispensed repackaged drugs,” said McCarty. “It is imperative that the Florida legislature address this issue during the upcoming legislative session.”
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