Workers’ compensation exempt from excess profits law

Jan 30, 2012

The following article was published in The Florida Current on January 30, 2012:

Workers’ comp exempt from excess profits law

By Christine Jordan Sexton

Workers’ compensation carriers would no longer be required to return “excess profits” to policyholders under a bill approved by the House Insurance and Banking Subcommittee Monday afternoon. 

The bill passed along partisan lines and heads to the Economic Affairs Committee next. There is no Senate companion. The measure was supported by Associated Industries of Florida, the Florida Chamber of Commerce and other business interests. It was opposed by the Florida Justice Association and well as the workers’ compensation organization Florida Workers Advocate.

The Office of Insurance Regulation reports that the workers’ compensation carriers have returned more than $200 million in excess profits to their policyholders since 2003. Bill sponsor Rep. Daniel Davis, R-Jacksonville, downplayed the $200 million figure, saying it amounted to less than 1 percent of overall premium collected during that same time.

Florida’s excess-profits law kicks into effect after insurers’ underwriting gains exceed the anticipated underwriting profit, plus 5 percent, for the three most recent calendar years. When that occurs, insurers are required to issue refunds in the form of cash or credit.  Employer liability, commercial property and commercial casualty still are subject to the requirement.

Rep. Evan Jenne, D-Fort Lauderdale, noted that the law was originally passed in 1979 and that no governor since that time — from Republicans Bob Martinez and Jeb Bush to Democrats Lawton Chiles and Bob Graham — have tried to repeal the law.

“Why is the time now that we need to do this after 32 years?”Jenne asked. 

Davis said that the law penalizes companies that are efficient and keep their costs low by mandating that they return the excessive profits. He said the law keeps companies out of the market and that carriers may begin writing in Florida if it is repealed.

“I think in a capitalist society it’s not bad to make a profit. And I think that the competition we have seen across all the other states will create a more profitability opportunity for the consumer as well.”

The committee approved two other workers’ compensation related bills, HB 4181 and the proposed committee substitute for HB 1277. The latter is the first of what bill sponsor Davis says is a two-step process to help eradicate fraud. The second round of proposals,Davis said, would be crafted by a fraud task force appointed by Chief Financial Officer Jeff Atwater.

The bill allows the Office of Insurance Regulation more flexibility when it comes to examining businesses by eliminating a requirement that the OIR provide a 15-day advance notice to money services business licensees prior to conducting an examination or investigation. The bill also eliminates the requirement that the OFR conduct an examination of a business within six months of the business becoming licensed.  

SB 1586,sponsored by Sen.John Thrasher, R-St.Augustine, is the companion bill. It  has been referred to the Senate Banking and Insurance and Budget committees. 

The committee also approved 4181, which removes a requirement that the Department of Financial Services maintain a list of “certifiable” health-care providers that are authorized to treat workers’ compensation patients. There is no Senate companion.

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