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Florida businesses could soon be paying almost 20 percent more for workers’ compensation coverage. In response to a recent decision from the Florida Supreme Court, the National Council on Compensation ÈȵãºÚÁÏ (NCCI) filed a 17.1 percent rate increase with the Florida Office of ÈȵãºÚÁÏ Regulation (OIR) for all new, renewal and additional policies in effect on a “pro-rata” basis.

It’s the first rate filing from NCCI, which files on behalf of 260 Florida workers’ comp insurers, since the Florida Supreme Court struck a devastating blow to the state’s workers’ compensation system.

The court ruled on April 28 that the attorney fee schedule passed in 2009 is unconstitutional under both Florida’s and the U.S. Constitution as a violation of due process. NCCI said the increase addresses the first year projected impact of the Court’s ruling on what was a key cost-reducing component to Florida’s Workers’ Compensation Act.

The state’s high court issued the ruling in the case of Marvin Castellanos, an injured employee who sued his employer Next Door Co. and its insurer, Amerisure.

The Castellanos court ruling said the current schedule eliminates the right of a claimant to get a reasonable attorney’s fees – a “critical feature” of the workers’ compensation law. The court said the statute violates due process by installing an “irrebuttable presumption” that whatever fee the schedule comes up with is reasonable and by not providing any way for a claimant to refute the fee.

NCCI submitted its rate filing on May 27 with proposed rate increases of 17.1 percent, equaling $623 million. The statewide average increase of 15 percent was proposed to cover the first year impact to workers’ comp costs in Florida from the Castellano decision and a 1.8 percent increase related to the adoption of the 2015 Edition of the HCPR Manual, which goes into effect July 1, 2016.

Former Florida ÈȵãºÚÁÏ Commissioner Kevin McCarty predicted the court’s decision would have a significant impact on rates. McCarty, who was still commissioner at the time of the ruling, said OIR would go to work immediately with NCCI to determine what the rate impact would be, but said the increase would be significant.

And the higher rates could also be coming sooner than expected. NCCI proposed an effective date of August 1, 2016 for new and renewal workers’ compensation policies and that the 17.1 percent rate increase apply to all workers’ compensation policies in effect as of August 1, 2016 on a pro-rata basis for the remainder of each policy’s term. NCCI’s rate changes have traditionally gone into effect on January 1.

State insurance experts, including McCarty, expect rates will not be the only consequence of the court’s ruling. Attorneys specializing in workers’ compensation claims said a wave of new litigation challenging old claims with the now-declared unconstitutional fee schedule is expected. McCarty said the ruling could have a destabilizing effect on Florida’s workers’ comp market.

In its proposed rate filing, NCCI did not consider the retroactive impact as part of the proposed rate increase, but said the Castellanos decision is expected to increase overall system costs in the state for accidents occurring prior to August 1, 2016 that remain open or are re-opened.

“Because workers compensation ratemaking is prospective only, insurers are not afforded the opportunity to recoup premium to cover such unforeseen increases in system costs. Therefore, it is expected that a significant unfunded liability will be created due to the retroactive impact of this court decision,” NCCI said in its rate filing release.

NCCI said it is currently in the process of estimating the unfunded liability and will provide further information on those costs at a later date.

OIR plans to hold a public rate hearing in July to give NCCI an opportunity to discuss the filing and interested parties and other stakeholders the ability to provide testimony or comments. If the rate increase is approved, NCCI said Florida’s rates would be the highest of its Southeast neighbors, as well as Louisiana.

The rate increase from NCCI is the first one the state has seen from the organization since 2014. Rate decreases for 2016 of 4.7 percent went into effect in January.

Related:

• Florida Supreme Court Finds Attorney Fee Schedule Unconstitutional; Passes on Other Key Workers’ Comp Case
• Florida Braces for Rate Hikes, Litigation Due to Workers’ Compensation Fee Ruling
• Report: Florida’s Workers’ Comp Market Still Strong but Uncertainty Remains
• Florida Supreme Court Asked to Decide Constitutionality of Workers’ Comp
• Judge’s Ruling Leaves Florida Workers’ Comp System in Limbo
• Court Urges Change in Florida Workers’ Comp Law
• Stay the Course on Florida Workers’ Comp Reform
• Florida Court Upholds Workers’ Compensation ‘Exclusive Remedy’

Topics Florida Legislation Workers' Compensation