AAI Objects to Fla. WC State Fund Proposal

The Alliance of American Insurers (AAI) announced its strong opposition to legislation aimed at creating a new, state-run mutual insurance company for the purpose of writing workers’ compensation policies in Florida.

“SB 1946 and HB 1655 would create yet another state bureaucracy in the guise of a private company to provide coverage for a limited number of contractors at an artificially lower price,” said William Stander, the Alliance’s Tallahassee-based government affairs representative. “The bills do not deal with the real problems facing Florida’s workers compensation market – out of control costs created in part by fraudulent claims and abusive attorneys.”

Stander noted that insurers in the state pay out an average of $1.27 for every $1 they collect in premium. “Florida has the second-highest workers compensation rates in the nation, and insurers are still losing money. That tells you that another state-run fund is not going to solve the larger problem.

“The state already has the Florida Workers Compensation Joint Underwriting Association in place to provide a pool for companies that can’t find coverage in the private market. That pool can come up with a solution for the contractors to address their availability and affordability concerns, so it makes no sense to throw out what has been almost universally seen as a very successful program and start over with an even riskier concept.

“These bills are a bold attempt by the trial bar to confuse the issue. Unfortunately, they have found unlikely allies in the homebuilders who would not object to creating a special market for small contractors who have traditionally used a loophole in the law to avoid buying workers compensation coverage for employees. That loophole has cost the system billions of dollars, and now that it may be closed, these same groups are once again trying to set up their own system to avoid paying their fair share.”

Stander said Florida should look at what’s happened in other states where a state-run fund has been created expressly to benefit a pool of small employers. The sponsors of SB 1946 and HB 1655 point to the Missouri Employers Mutual Insurance Co. (MEM) as a model. Created in 1995 and now that state’s largest workers compensation insurer, MEM was given a “very weak” financial safety rating last fall by a national rating company because its premium-to-surplus ratio was well below industry standards. In addition, their average rates were increased more than 14 percent for 2003.

The Alliance has worked with the Coalition of Business and Insurance to propose a bill that provides an effective remedy to the state’s workers compensation woes and creates a level playing field for private insurers to continue to compete in the market.

Among other things, the bill would:
* Limit hourly attorney fees to medical-only cases and cap them at $1,000.
* Freeze hospital per diem rates through 2003 and replace them in 2004 with a federal Medicare schedule to achieve an appropriate level of reimbursement in line with the majority of other states.
* Reduce hospital fee schedules and use that savings to increase physicians’ medical fees.
* Increase penalties for fraud.
* Further restrict exemptions from workers compensation coverage.
* Eliminate other inappropriate cost increasing provisions, yet, at the same time, increase the amounts allowed for truly injured workers.