Florida Passes Workers’ Comp Changes

While debates over property insurance and no-fault auto insurance consumed the attention of state officials and the media, Florida lawmakers quietly dealt with several other insurance issues, including workers’ compensation.

While they did not resolve their differences over the costs of physician-dispensed drugs, lawmakers agreed to repeal an excess profits provision in state law and beef up regulation of check cashing firms that critics say have been gaming the workers’ compensation system.

First and foremost was the attempt to control the cost associated with allowing physicians to repackage drugs and redistribute them. The issue dates back to 2010, when the legislature passed a cap on physician-provided drugs only to see then Gov. Charlie Crist veto the measure.

The issue gained more prominence last month when Insurance Commissioner Kevin McCarty approved an 8.9 percent increase in workers’ comp insurance rates, of which insurers’ said 2.5 percent could be attributed to rising drug costs. The 2.5 percent figure translates into $62 million in additional costs to businesses, according to the National Council on Compensation (NCCI).

State Sen. Alan Hays and Rep. Matt Hudson filed joint bills calling for a limit to be placed on physician-dispensed drugs. The bills were designed to bring the reimbursement level of doctor-dispensed drugs in line with those of pharmacies, a cost that is three times the drug manufacturer’s wholesale price, plus a $4.18 dispensing fee.

Despite the support of Associated Industries of Florida, the Florida Chamber of Commerce, and others, however, that proved to be a quixotic effort as Automated HealthCare Solutions and drug companies convinced Senate lawmakers to kill the bill.

Senate President Mike Haridopolos refused to let the measure come up for a vote in any form, despite repeated deals offered by other lawmakers.

NCCI State Regulation Executive Lori Lovgren said the bill’s lack of progress was disappointing.

Excess Profits

Meanwhile, lawmakers advanced other workers’ comp issues including a repeal of a 32-year old law that requires workers’ compensation insurers to return premiums to policyholders if they are in excess of 5 percent of their anticipated underwriting profits.

Sponsored by Sen. Doug Holder, SB 941 put an end to the so-called excess profits law, which he said has outlived its usefulness.

The state’s Office of Insurance Regulation said it collected nearly $16.7 million in excess profits from insurers in 2010 and 2011. Since 2003, the OIR has collected $200 million, which is less than 1 percent of the state’s total premium base.

But Associated Industries of Florida General Counsel Tami Perdue told lawmakers the excess profit law is antiquated and no longer necessary. “This is in line with what we have done over the past years,” she said. “Find areas where there are laws that are over-burdensome, regardless of what their industry is, and eliminate them.”

Since 2003, workers’ compensation rates have dropped by 58 percent, although they have risen the past two years. Those rate cuts have been in addition to the economic downturn that has cut the state’s private carrier premium base from $1.5 billion in 2007 to a projected $1 billion in 2010.

Check Cashing Firms

Lawmakers successfully addressed the role of check cashing firms in facilitating fraud in the workers’ compensation construction industry.

Based on the recommendations of Money Service Business Facilitated — Workers’ Compensation Work Group established last year, lawmakers passed HB 1277.

Law enforcement officials say that unscrupulous individuals and subcontractors have been using check cashing firms to avoid paying their proper premiums. They say the scheme allows some subcontractors to use undocumented workers, giving them a competitive advantage over contractors who comply with the law.

One scenario has an individual setting up a shell company and obtaining a certificate of insurance by purchasing a minimal workers’ comp policy. The individual then allows subcontractors to, in effect, “rent” the certificate to show general contractors in order to be hired. Once the work is complete, the general contractor cuts a check to the shell company. The individual running the shell company then goes to a check cashing company where he cashes the check and collects a fee. The subcontractor is then paid in cash.

The bill that passed requires check cashing companies to be licensed and to deposit all checks into one account under its own name. The bill also prevents check cashing firms from possessing or using any fraudulent identification devices. If a check cashing company violates these provisions, state regulators can shut down the business.

Topics Florida Legislation Workers' Compensation Excess Surplus