Preparing for Change: Florida Workers' Compensation - 2016

Preparing for ChangeFlorida Workers’ Compensation - 2016Nonprofits First - August 2016

Steven Light, MBA, CIC

Vice President – Property & CasualtyMarsh & McLennan Agency1000 Corporate Drive, Suite 400Fort Lauderdale, FL 33334

MARSH & McLENNAN AGENCY, LLC • FLORIDA

Understand basic concepts of Worker’s Compensation

Understand the reason for major changes in Florida in 2016

Quantify the financial impact to your organization

Identify strategies to mitigate future costs

By the end of our presentation, you will be able to:

Objectives


• Prior to the enactment of workers’ compensation laws, employees had to prove the employer was negligent to gain any compensation for lost wages or medical bills.

• This was not only a costly process for both the employee and employer but fraught with uncertainty.

• 1911 — “The Great Tradeoff” debate. Before any plan could move forward, an agreement between labor and industry had to be reached; each had to be willing to give up something for a workers’ compensation system to function properly.

• A “no-fault” system – The employer agreed to pay medical bills and lost wages, regardless of fault; and the employee agreed to give up the right to sue.

Workers’ Compensation History - The Great Tradeoff


Workers’ Compensation – The Basics

Compensable Injury or Illness:Injury or Illness must arise out of and

in the course and scope of employment

The Federal Government mandates that each state has its own law and process. Each state developed an employer-paid program for

employees that sustain occupational injuries or illnesses.


Includes:• medical costs for work related injury or illness

• wage replacement while unable to work

• compensation for permanent injuries

• costs for retraining

• death benefits for workers’ dependents when the injuries result in death.

The COMP in Workers’ Compensation


How does Workers’ Comp insurance work in Florida?

Mandatory for all employers with 4+ employees Applies like a payroll tax (state-wide rate x gross

payroll) Experience modification for each individual

employer – reward / penalty for claims experience

Affects your budget / profit margin Affects $ available for salaries,

bonuses, fringe benefits Affects your viability Affects morale


Understand basic concepts of a worker’s compensation

Understand the reason for major changes in Florida in

2016




Objectives


History of Florida Workers’ Comp rates.

Early 2000s: Florida had the highest Workers’ Comp rates of any state.

The cost to employers caused a crisis that constricted business and employment, kept employers from relocating to FL and caused business to relocate out of FL

2003: FL Legislature approves tort reform that includes caps on the fees that Workers’ Compensation attorneys could charge. The cost of claims and number of law suits against WC carriers plummets.

2003 – 2016: FL Workers’ Comp rates fell by an average of 65-70%

2016: FL Supreme Court rules caps on WC attorney fees are unconstitutional

2016: FL Supreme Court rules that the 2-year limit for temporary disability payments is insufficient and increases the limit to 5 years.

2016: June - Industry rating organization files for a 19.6% rate increase to be effective October 1, 2016. Approval by OIR pending.







Objectives


• Approved on a state-wide basis for each employee classification

• Rate is commensurate with risk. The rate for a carpenter is higher that the rate for a computer programmer.

• Rates are represented as a % of gross wages (like a payroll tax)

How is your WC premium determined?

RATES


Classification Gross Payroll X Rate = Basic Premium

ABC Services of Palm Beach County

Oct. 2016 (est.)

8864 - Social Services $4,000,000 1.63% = $ 65,200 1.95% = $ 78,000

8842 – Group Homes $1,000,000 2.41% = $ 24,100 2.88% = $ 28,800

8810 – Clerical $ 500,000 0.23% = $ 1,150 0.28% = $ 1,400

$5,500,000 $ 90,450 $108,200

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The Math – Basic Premium (no experience modification)


Experience modifier –

- factor that compares your claim expenses over a rolling 3-year period (not including most recent year) to industry average.

- credit for better than average / penalty for worse

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So how is your experience?

MARSH & McLENNAN AGENCY, LLC • FLORIDA 13

Full impact of Oct 2016 rate increase?

ABC Services of Palm Beach County

NOW

Basic Premium X Exp Mod = Modified Premium

$ 90,450 X 0.75 = $ 67,837$ 90,450 X 1.50 = $135,675

OCTOBER 2016 (proposed)

$108,200 X 0.75 = $ 81,150$108,200 X 1.50 = $162,300







Objectives


What’s your strategy???

Mitigating your costs.

Changes in the law mean the cost of claims will

increase, including current claims that have not yet

closed.

Higher claim costs will have more impact on

experience mods.


• Florida Drug Free Workplace – claim prevention, premium discount

• Post Offer Health Self Assessment – prevention, cost containment

• Workplace Safety Committee – prevention, premium discount

• Safety Training - prevention

• Claim Reporting Protocols – cost containment

• Transitional (Modified) Duty Requirement – cost containment

• Pre-claim Triage Services – cost containment

Best Practices – prevention & claim cost reduction


Change is coming!

Be prepared and be proactive!

AIM HIGH!!


ANY QUESTIONS?

Preparing for Change: Florida Workers' Compensation - 2016

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