NCCI Proposes 13% Rate Decrease for Florida Workers Comp, Notes Future Challenges

Florida businesses could see another significant rate decrease in workers’ compensation rates next year if Florida regulators approve the latest filing from the National Council on Compensation Insurance (NCCI).

But the recent trend of lower rates may not last for long as two-year-old Florida Supreme Court decisions begin to catch up with insurer loss experience.

NCCI, the licensed rating organization authorized to make rate filings on behalf of workers’ compensation insurance companies in Florida, has filed for a statewide decrease of 13.4 percent with the Florida Office of Insurance Regulation, which is now reviewing the filing. The new rates would become effective Jan. 1, 2019.

If approved, it would be the would the third decrease in workers’ compensation rates since two 2016 Florida Supreme Court decisions initially spurred an increase of 14.5 percent for 2017.

NCCI said in its 2019 filing summary that the rate filing is based on experience data as of year-end 2017 from policy years 2015 and 2016, which show continued significant improvement in loss experience, and before the cases Castellanos v. Next Door Company and Westphal v. City of St. Petersburg were decided by the Florida Supreme Court. Those decisions created panic in the workers’ compensation space because they undid a primary cost-reduction component of reforms passed by Florida lawmakers in 2003.

In the Castellanos v. Next Door Co. decision, the state’s high court found the state’s mandatory attorney fee schedule unconstitutional as a violation of due process under both the Florida and United States Constitutions. In the Westphal v. City of St. Petersburg decision the court found the 104-week statutory limitation on temporary total disability benefits unconstitutional because it said it causes a statutory gap in benefits. The court reinstated a previous 260-week limitation.

“In 2016, [the Supreme Court decisions] resulted in changes to the Florida workers compensation landscape,” NCCI said. “…However, the favorable loss experience in Policy Years 2015 and 2016 has more than offset the combined cost increases that have emerged from those Court decisions.”

NCCI said 50 percent of the data analyzed for the 2019 rate filing relates to policies that became effective after the Castellanos and Westphal decisions and that these decisions are “now exerting upward pressure on system costs, and they will continue to influence Florida workers compensation rates.”

The 2017 policy year will be the first full year since Castellanos, but NCCI said the full effects of that decision will not materialize for several years to come.

NCCI said the workers’ compensation reforms passed in 2003, namely the caps on attorney fees that were instituted and found unconstitutional in 2016 by the Florida Supreme Court, had led to a 60 percent reduction in rates by 2015.

Rate Fluctuations Since Supreme Court Decisions

Shortly after the Florida Supreme Court’s Castellanos and Westphal decision’s, NCCI filed for a 19.6 percent rate increase for 2017 workers’ compensation rates, with Castellanos accounting for 15 percent of the increase. However, OIR disapproved the filing saying it wasn’t justified and later approved a 14.5 percent increase that took effect Dec. 1, 2016. The Castellanos decision accounted for 10.1 percent of the overall rate increase, with Westphal accounting for 2.2 percent.

But just a year later in Nov. 2017, NCCI filed for an overall rate decrease of 9.5 percent that was approved and took effect Jan. 1, 2018. NCCI said at the time declining loss ratios, with a significant reduction in the lost-time claim frequency between 2001 and 2015, helped contribute to the 2018 rate decrease.

In May of this year, OIR approved an additional 1.8 percent rate decrease filed by NCCI in a law-only filing resulting from the effects of the Federal Tax Cuts and Jobs Act. It applied to both new and renewal workers’ compensation insurance policies effective in Florida as of June 1, 2018.

Emerging Impact of Court Decisions

OIR requested when it approved the 9.5 percent rate decrease last year that NCCI include an assessment of the emerging impact of the Castellanos decision on Florida’s workers comp marketplace as part of its 2019 filing. NCCI said in doing so, it reviewed insurance company feedback, the change in claimant attorney fees, and the change in loss experience that has occurred since the Castellanos decision.

“To date, observed system changes in each of these areas are directionally consistent with NCCI’s initial assessment of how the Castellanos decision would impact the Florida marketplace,” NCCI said in its filing report.

Most insurance companies said they have experienced claim cost increases since the Castellanos decision, NCCI said, while a minority of carriers have not been materially impacted. All insurers said they have experienced increases in claimant attorney fees as well as litigated claims taking longer to close and costing more than non-litigated claims. In addition, NCCI said some insurers reported that litigated claims now represent a “relatively larger portion of their book of business,” and companies are adjusting their case reserves because of the Castellanos decision.

For claimant attorney fees, NCCI reported that data from the Florida Division of Administrative Hearings (DOAH) showed an increase of 13 percent in the ratio of claimant attorney fees to benefit and settlement amounts in 2014 and 2015, a 15 percent increase in 2016, and a 19 percent increase in the ratio in 2017. NCCI said through June of 2018, claimant attorney fees have continued to rise and now represent almost 22 percent of benefit and settlement amounts.

NCCI also found that Florida’s paid loss ratios have slowed as insurers noted a slowdown in the payout of workers’ comp claims in the post-Castellanos environment and had therefore increased their case reserves.

In The Meantime…

The National Federation of Independent Businesses praised the news of the rate decrease, saying lower workers’ comp rates directly reduce business owners’ expenses, which encourages growth.

“Small business owners are reporting record high levels of optimism, according to NFIB’s Small Business Optimism Index, and news like lower workers’ comp rates fuels their confidence,” said Bill Herrle, NFIB’s executive director in Florida.Small business owners are in the driver’s seat and Florida’s economy can look forward to the results – increased job growth, increased wages, and unprecedented expansion overall for the small business sector.”

And while Florida CFO Jimmy Patronis said the potential significant rate decrease was encouraging and a testament to the state’s “commitment to ensuring Florida is an attractive place for all business owners,” he also added “We must keep a vigilant eye on Florida’s workers’ compensation insurance marketplace to make certain we don’t return to the age of skyrocketing rates.”

The Property Casualty Insurers Association (PCI), an insurance industry trade association, noted that the Florida workers’ comp market could see a significant shift down the road.

“While we are still reviewing the proposed decrease, it’s important to point out that the NCCI data does not include the lingering impact of the Castellanos decision, which we believe will not materialize for a few more years,” Logan McFaddin, PCI Regional Manager.

OIR would not comment on the specifics of the filing but said it will review the proposed changes to ensure they are not excessive, inadequate or unfairly discriminatory and evaluate its potential effects on the insurance marketplace and employers. A public rate hearing will be conducted in October.

NCCI 2019 Florida Workers’ Compensation Rate Filing

*Original article



Minimum Wage Impacts on Workers Compensation

By John Deacon, FCAS, MAAA

Recently, some states have implemented minimum wage increases, and there has been discussion about increasing the federal minimum wage. In this article, we examine changes to minimum wage levels and the potential impacts on workers compensation (WC) stakeholders and NCCI ratemaking.

In 2017, 2.3% of hourly paid workers earned the federal minimum wage or less, and 58.3% of all workers over age 16 were paid hourly1. Therefore, minimum wage workers comprise less than 2% of all workers on a countrywide basis. The share of hourly paid workers earning the minimum wage varies significantly by industry and occupation.

Food Preparation and Serving occupations have more minimum wage earners than all other occupation groups. In fact, more than half of minimum wage workers are in Food Preparation and Serving occupations.

The definition of minimum wage worker does not address pay from tips or overtime, and there are many legitimate reasons why a worker could earn less than the minimum. Some workers (e.g., food servers) would not be directly affected by an increase in minimum wage since their wages, including tips, would likely be higher than the minimum.

NCCI classification codes for restaurants (9082 and 9083) are likely to address some food preparation and restaurant workers earning the minimum wage. Based on policies effective in 2016, we estimate that these class codes comprise approximately 3% of payroll and standard premium across all classes and NCCI states2. Note, however, that only a portion of this payroll and premium would be associated with minimum wage workers.

For 2018, 18 states (and some individual cities) increased their minimum wage3. Currently, 29 states plus the District of Columbia have a minimum wage that is higher than the federal minimum of $7.25, ranging from $7.50 to $12.504. The US Department of Labor publishes an interactive map of the United States and each states’ minimum wage compared to the federal minimum wage5. If the federal minimum wage were to increase, but remain lower than that for some states, then stakeholders in those states would be generally unaffected.

Next, we analyze how a minimum wage increase (federal or state-specific) would impact the following WC stakeholders:

Workers earning between the current minimum wage and an increased minimum wage would receive an increase in their hourly pay rate. Workers earning just above the new minimum wage may also see an increase in their pay rate, as determined by their employer and not otherwise required by law, as some employers may seek to maintain pay-equity amongst their employees.

Injured workers earning at or near the minimum wage would receive greater WC wage-replacement (indemnity) benefits after a work-related injury than they would have before a minimum wage increase. However, many states have minimum weekly benefit provisions that may mitigate an increase in benefits from a minimum wage change.

The employment effect after a minimum wage increase is unclear, however. One overview of minimum wage changes around the United States showed no adverse employment effects6, but another recent paper7 found significant negative employment effects in Seattle, WA, after a large minimum wage increase. Most evidence shows that the magnitude of any reduced employment or reduction in hours worked is smaller than the increase in wages, but the magnitude of the employment impact may depend on the magnitude of the minimum wage increase.

Given an increase in pay for minimum wage workers (and assuming small employment effects), the employers of minimum wage workers would face an increase in WC premiums, because payroll is a direct input into premium calculations.

Depending on how financially impactful the labor costs and WC premium changes may be on their overall expenses, employers may adapt by reconsidering: i) workflows, ii) workforce, iii) hours worked, iv) prices for goods and services, or v) other aspects of their business. For employers with few minimum wage workers, the impacts may be minor. The impact on total payroll for a given employer of minimum wage workers may reflect offsetting effects from a potential decrease in staffing (or hours worked) and the increase in the minimum wage itself.

For insurers, the wage increase would likely result in higher indemnity benefit costs and premiums for those affected policyholders. Premium audits after policy expiration would address premium changes due from any payroll changes occurring after policy premium was initially calculated and paid.

Apart from those insurers focused on industries with high concentrations of minimum wage workers, it is likely that most insurers would not necessarily notice the impacts, since the share of minimum wage workers is low overall.

Changes in minimum wage levels impact NCCI rate-making as well, although the impacts are expected to be minimal.

Historically, NCCI has not explicitly adjusted loss costs or rates after changes to a state or federal minimum wage. Since the share of payroll and benefits from minimum wage employees is low, the impact of small changes in the minimum wage is generally expected to be low on a statewide level. The impact of increasing the minimum wage is expected to vary by class code, but the impacts are uncertain due, in part, to potential offsetting changes in employment or hours worked.

After a minimum wage change, the payroll and loss data for policies subject to the new level is reported to NCCI. Any impact on loss costs and rates would then be reflected in future NCCI filings that rely on that data.


A minimum wage change would increase wages and wage-replacement benefits for injured minimum-wage workers. Employers of minimum wage workers would incur increased labor costs and WC premiums, unless they adapt by reducing staffing levels. Insurers would see higher benefit costs with offsetting impacts on the bottom line due to higher premiums. On a statewide level and even for the job classes with the highest shares of minimum wage workers, the impacts on WC would be minimal due to the relatively low share of minimum wage workers to all workers.

*Original Article


Oregon-Revisions to and Establishment of Oregon Worker Leasing Company Rules, Endorsement, and Other Related Rules for Oregon

AUGUST 29, 2018                                                                                                                        OR-2018-05


Oregon-Approval of Item 02-OR-2018-Revisions to and Establishment of Oregon Worker Leasing Company Rules, Endorsement, and Other Related Rules


This circular announces the approval ofltem 02-OR-2018-Revisions to and Establishment of Oregon Worker Leasing Company Rule s, Endorsement, and Other Related Rules.

The Oregon Department of Consumer and Business Services has approved this item as filed for new and renewal policies effective on and after October 1, 2018.

Oregon Company Response

In Oregon, a participating company may respond to an NCCI filing as follows:

Application of approved NCCI rules, classifications, and rating plans is mandatory. Additional Compliance Guidelines can be found by referring to Oregon Insurance Division Bulletin INS 92-5.

The material contained herein is based on NCCI’s latest research but is subject to periodic change. This information is provided as a guide to voluntary market carriers and is not intended as an interpretation of state law. Refer to state law for current and detailed information because there may be additional laws that may impact your response to an NCCI item filing. While all due effort is made to keep the material up to date, NCCI assumes no responsibility for the use of this material.



Circular OR-2018-02, dated August 21, 2018, announced the filing ofltem 02-OR-2018. Refer to the announcement circular for complete details on this item.



No statewide premium impact will result from changes proposed in this item. Further, no impact on how worker leasing company and client policies are written will result from the changes proposed in this item.



NCCI will take the following actions for Item 02-OR-2018:

  • Update the weekly Status of Item Filings circular on com with the approval
  • Add the downloadable version of any impacted endorsements to the weekly Status of Item Filings circular
  • Publish updated pages for NCCI’s Basic Manual, Experience Rating Plan Manual, Forms Manual, and Statistical Plan before the effective date

If you would like to subscribe to any of our manuals , please call our Customer Service Center at 800-NCCI-123 (800-622-4123).



If you have any ques tions , please contact: Todd Johnson

State Relations Executive


901 Peninsula Corporate Circle Boca Raton, FL 33487-1362 503-892-8919

todd j


Technical Contact: William Dodds

Underwriting Filing Consultant


901 Peninsula Corporate Circle Boca Raton, FL 33487-1362 561-893-3182

bi11_dodds @ncc