How Workers’ Compensation Fared in 2012 Florida Legislature

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

Lawmakers managed to make workers’ compensation one of the more intriguing stories of the recent session.

Since 2003, when lawmakers last reformed the state’s workers’ compensation law, any proposed workers’ compensation changes have been deemed a non-starter and at first that looked like it would be true again in 2012.

But while they did not resolve their differences over the costs of physician-dispensed drugs, lawmakers did agree 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 from their offices. The issue dates back to 2010, when the legislature passed a cap on physician-provided drugs only to see then Governor Charlie Crist veto the measure.

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

State Senator Alan Hays (R-Umatilla) and Representative Matt Hudson (R-Naples) filed joint bills calling for a limit to be placed on physician-dispensed drugs in light of this year’s workers’ compensation rate increase. 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 the drug companies flexed their combined muscles and convinced Senate lawmakers to kill the bill.

Senate President Mike Haridopolos (R-Melbourne) 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.

“We were prepared to file for a rate decrease, effective July 1,” said Lovgren. “They are just making it harder to give rate decreases. It doesn’t make common sense.”

Excess Profits

While that issue was consuming all the oxygen in the room, lawmakers advanced other workers’ compensation 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 Senator Doug Holder (R-Sarasota), 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 one percent of the state’s total premium base.

But Associated Industries of Florida General Counsel Tami Perdue told lawmakers earlier this year 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.”

The industry could probably use the money. 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 downturn in the economy 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, sponsored by Rep. Daniel Davis (R-Jacksonville).

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 is allowing 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’ compensation 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 they cash the check and collects a fee. The subcontractor is then paid in cash.

The bill that passed this session requires check cashing companies to be licensed and requires them 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 is found to be in violation of these provisions, state regulators can shut down the business.