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Florida Workers Compensation Overview

Florida Workers Compensation Overview. Presented by Tony DiDonato, NCCI, Inc. 2003 CAS Spring Meeting Marco Island, Florida May 19, 2003 CS7. Impact of Dividends on Premium in Florida. Based on Florida data through 12/31/01. Florida Accident Year Combined Ratios.

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Florida Workers Compensation Overview

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  1. FloridaWorkers CompensationOverview Presented by Tony DiDonato, NCCI, Inc.2003 CAS Spring MeetingMarco Island, FloridaMay 19, 2003CS7

  2. Impact of Dividends on Premium in Florida Based on Florida data through 12/31/01. FL WC Overview 5/03

  3. Florida Accident Year Combined Ratios FL WC Overview 5/03

  4. After Adjusting to Florida’s Payroll Distribution, Florida’s Average Loss Costs Remain the Highest in the RegionCurrent Average Voluntary Pure Loss Costs UsingFlorida’s Payroll Distribution Based on the latest NCCI published rates and loss costs in the various states. FL WC Overview 5/03

  5. Florida WC Premium Dollar –Where Does It Go? Taxes & Assessments Policyholder Dividends Claimant Attorney Fees Commissions Carrier Portion Defense & Cost Containment … 8% Claims Adjusting ………………. 6% General …………………………. 9% Other Acquisition ……….………. 6% Underwriting Loss ………….… -27% TOTAL 2% + Investment income ………… 10% 12% Medical Benefits Indemnity Benefits Taxes & Assessments – latest state mandated amounts Claimant Attorney Fees – estimated from Div of WC data All Other items from Calendar Yr 2001 data or Accident Yr 2000 data developed to ult  2003 National Council on Compensation Insurance, Inc.

  6. FloridaWorkers Compensation System Overview  Three cost drivers have been identified: (1) High frequency of permanent total claims - four times higher than countrywide. (2) High medical costs for permanent partial claims - nearly two times higher than countrywide . (3) High medical costs for temporary total claims - 50% higher than countrywide FL WC Overview 5/03

  7. FloridaWorkers Compensation System Overview (Continued …)  Hospital costs are relatively high in Florida according to WCRI studies. Since they generally represent nearly half of the Medical dollar, this is a significant reason for the high Medical costs.  Physician costs may also contribute to the high Medical costs. Although Florida’s Physician Fee schedule is relatively low, there could be high utilization of physician services or a relatively expensive mix of services being provided. Florida does NOT have unusual types of injuries that would explain the higher costs.  Attorney involvement is significant in Florida and also helps explain the cost drivers. When attorneys are not involved, the difference in claim costs between Florida and countrywide is minimal. When attorneys are involved, the difference in claim size between Florida and countrywide is nearly 40%. Attorneys may contribute to the frequency of PT claims and to increased Medical services. FL WC Overview 5/03

  8. Indemnity Medical Medical Costs Constitute the Majority of Total Losses in Florida Florida Countrywide Average Based on the latest available year of NCCI’s WCSP data. Includes Lost Time and Medical-Only claims. FL WC Overview 5/03

  9. Permanent Total Costs in Florida Are a Larger Percentage of Total Costs Than Countrywide Florida Countrywide Medical Only Temporary Total Permanent Partial Permanent Total Fatal Based on the latest available year of NCCI’s WCSP data (or equivalent in non-NCCI states) FL WC Overview 5/03

  10. Workers Compensation Benefit Cost Components The overall level of benefit costs are determined from: • Indemnity benefits • Medical benefits • Frequency of Claims • The following slides will examine the three most costly injury types to see which of the above components are higher than average. FL WC Overview 5/03

  11. Florida’s Permanent Total Indemnity Average Cost per Case is Less than Countrywide However, recent FL Case Law may have significantly increased this historical (1999) average Based on the latest available year of NCCI’s WCSP data (or equivalent in non-NCCI states) FL WC Overview 5/03

  12. Florida’s Permanent Total Medical Average Cost per Case is Lower than Countrywide Based on the latest available year of NCCI’s WCSP data (or equivalent in non-NCCI states) FL WC Overview 5/03

  13. Florida’s Frequency of Permanent Total Claims is Five Times Greater than Countrywide Permanent Total Frequency per 100,000 Workers Based on the latest available year of NCCI’s WCSP data (or equivalent in non-NCCI states) FL WC Overview 5/03

  14. As a Result of a Higher Frequency, Florida’s Total Cost for Permanent Total Claims is More than 4 Times Greater than CountrywidePermanent Total Costs per 100,000 Workers Based on the latest available year of NCCI’s WCSP data FL WC Overview 5/03

  15. Florida’s Permanent Partial Indemnity Average Cost per Case is Comparable to Countrywide Based on the latest available year of NCCI’s WCSP data (or equivalent in non-NCCI states) FL WC Overview 5/03

  16. Florida’s Permanent Partial Medical Average Cost per Case is Nearly Two Times Greater than Countrywide Based on the latest available year of NCCI’s WCSP data (or equivalent in non-NCCI states) FL WC Overview 5/03

  17. Florida’s Frequency of Permanent Partial Claims is Slightly Less than Countrywide Permanent Partial Frequency per 100,000 Workers Based on the latest available year of NCCI’s WCSP data (or equivalent in non-NCCI states) FL WC Overview 5/03

  18. As a Result of Higher Medical Costs, Florida’s Total Cost for Permanent Partial Claims is 15% Higher than Countrywide Permanent Partial Costs per 100,000 Workers Based on the latest available year of NCCI’s WCSP data FL WC Overview 5/03

  19. Florida’s Temporary Total Indemnity Average Cost per Case is Higher than Countrywide Based on the latest available year of NCCI’s WCSP data (or equivalent in non-NCCI states) FL WC Overview 5/03

  20. Florida’s Temporary Total Medical Average Cost per Case is 80% Higher than Countrywide Based on the latest available year of NCCI’s WCSP data (or equivalent in non-NCCI states) FL WC Overview 5/03

  21. Florida’s Frequency of Temporary Total Claims is Comparable to Countrywide Temporary Total Frequency per 100,000 Workers Based on the latest available year of NCCI’s WCSP data (or equivalent in non-NCCI states) FL WC Overview 5/03

  22. Primarily as a Result of Higher Medical Costs, Florida’s Total Cost for Temporary Total Claims is 40% Higher than Countrywide Temporary Total Costs per 100,000 Workers Based on the latest available year of NCCI’s WCSP data. FL WC Overview 5/03

  23. Adjusting Three Florida Cost Drivers Would Yield Total Costs Comparable to Countrywide Total Overall Costs per 100,000 Workers *Assumes the CW values for: PT Freq, PP Med Avg, and TT Med Avg and no other changes Based on the latest available year of NCCI’s WCSP data (or equivalent in non-NCCI states) FL WC Overview 5/03

  24. Indemnity Costs With and Without Attorney Involvement FL WC Overview 5/03

  25. Medical Costs With and Without Attorney Involvement FL WC Overview 5/03

  26. Attorney Involvement Has a Bigger Impact in Florida Than Countrywide - Driving Up Indemnity & Medical Costs Avg Cost per Case -Indemnity & Medical Combined CW FL CW FL Based on NCCI’s Detailed Claim Information database for 1998. FL WC Overview 5/03

  27. Attorney Involvement Helps Explain Florida’s Higher Costs  Attorney involvement is significant in Florida and helps explain the cost drivers shown on the prior slides.  When attorneys are not involved, the difference in claim costs between Florida and countrywide is minimal.  When attorneys are involved, the difference in claim size between Florida and countrywide is nearly 40%. Both Medical and Indemnity costs are impacted.  This helps explain the high Medical costs in the prior slides. FL WC Overview 5/03

  28. Summary of Key ProvisionsConsidered by Legislature Provision Eliminating PTD COLA at age 62 Eliminating PTD basic at age 65 or 70 Eliminating Social Security standard for PTD Doubling PPD Impairment benefit from 1/3 AWW to 2/3 Eliminating PPD Supplemental benefits Increasing Physician Fees & Reducing Hospital Fees Potential Impact -5% Indem, -1% Med +7% Indem, -1% Med -2% to -4% Generally cost neutral FL WC Overview 5/03

  29. Summary of Key ProvisionsConsidered by Legislature Continued … Provision Changes to Attorney Fees Changes to Dispute Resolution Tightening Compensability Standards Apportionment of 2nd Injury Construction Exemptions Impact -4% to +5% 0 to -2% 0 to -2% -1% -1% FL WC Overview 5/03

  30. Glossary of Terms WCSP - Workers Compensation Statistical Plan. Payroll, premium and claim information by injury type is collected for individual risks. The data shown represents the most recent information available and generally is from policies expiring in 2000 or early 2001. DCI - Detailed Claim Information. This data provides more detail than is available under the WCSP data. It is collected on a sample of claims and contains information such as attorney involvement. C/W – Countrywide. For WCSP, the data would exclude DE and PA. For DCI, the data would exclude several states. FL WC Overview 5/03

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