Keeping Workers' Compensation Premiums Low Through Independent Medical Review

Before workers’ compensation laws were enacted, the only recourse available to U.S. workers who suffered serious injuries on the job and survivors of workers who were killed on the job, and who wanted compensation for their (or their survivors’) injuries, was to sue their employer. Few workers, however, took this action because the lawsuits were expensive, and the workers didn’t have sufficient funds.

By the early 20th century, the American public had become sympathetic to the injured workers’ plight and demanded reforms. In 1911, Wisconsin passed the first workers’ compensation law in the U.S. Other states quickly followed and, by 1920, a majority of states had passed a workers’ compensation law. The last state (Mississippi) enacted its workers’ compensation laws in 1948. 

If an employee is injured or becomes ill while working and cannot work because of the injury, the employee is paid from the employer’s workers’ compensation insurance. Although the benefits afforded to injured workers are enumerated in state laws, the types of benefits are fairly consistent, including:

• Medical coverage --- Includes medical expenses for doctor, hospital and nursing care; medications; diagnostic tests; physical therapy; and medical equipment.
• Disability --- Provides partial reimbursement of wages lost during a temporary or permanent disability. The disability may be total or partial.
• Rehabilitation --- Provides vocational training for workers who must change occupations due to their injury. 
• Death --- Pays death benefits to the surviving spouse and minor children of workers killed on the job.

It is important to note that, when an employee is injured or becomes ill in the workplace and accepts the workers’ compensation insurance, they must necessarily give up the right to sue their employer. Workers’ compensation is intended to be the sole remedy available to employees who are injured at their workplace.

Most Florida employers are required to carry worker’s compensation insurance to cover injuries suffered while on the job. Specific employer coverage requirements are based on the type of industry, number of employees and entity organization. Workers’ compensation insurance is designed to assure the quick and efficient delivery of disability and medical benefits to an injured worker and to facilitate the worker’s return to gainful reemployment at a reasonable cost to the employer.

In Florida, the Division of Workers’ Compensation within the Department of Financial Services is the primary regulator for ensuring employees receive the proper benefits under this coverage, which includes benefits for medical expenses, disability, or death. The Office of Insurance Regulation (OIR) regulates the rates, forms, and solvency for workers’ compensation insurance coverage. The amount of compensation is established by law.

The premiums Florida employers pay for workers’ insurance are based upon a system in which employers are categorized into groups called classifications. Each classification is assigned a rate, which may vary from state to state. All employers located in one state that are assigned to a particular classification will pay the same rate. 

Florida is one of 35 states and District of Columbia that has adopted the classification and rating system developed by the National Council on Compensation Insurance (NCCI). The NCCI periodically evaluates the current loss costs or rates for each state to ensure they are adequate but not excessive. First, the NCCI reviews the aggregate premium and loss data it has collected from insurers operating in a particular state. This is to determine whether insurers have experienced more or fewer losses in that state than initially projected. Next, the NCCI evaluates premium and loss data for each class code. Depending on the results, the NCCI may recommend an increase or decrease to some or all of the loss costs or rates used in that state. It is important to note that the NCCI is an advisory organization and has no regulatory authority.

A December 2016 study by the Oregon Department of Consumer and Business Services compared the workers’ compensation premium rates for each state and the District of Columbia against the national median premium rate of $1.84 for every $100 of payroll. Rates ranged from a low of $0.89 for every $100 of payroll (North Dakota) to a high of $3.24 for every $100 of payroll (California). Florida, with a premium rate of $1.66 for every $100 of payroll, ranked 33rd among the states in 2016. Only 17 states and the District of Columbia had premium rates lower than Florida’s.