Citizens Assessments Personal Injury Protection (PIP) Insurance Workers' Comp Drug Costs Workers' Compensation Exemptions
PROBLEM—Under current law, non-Citizens' policyholders can incur a one-time "Regular Assessment" of
up to 18 percent of their annual insurance premium if the state-run insurer suffers a major loss (or
"deficit") in the three accounts it maintains: coastal, personal lines, and commercial lines. The
assessments are levied on all insurance companies doing business in Florida, which must remit payment
to Citizens within 30 days. Companies can recoup the costs from their policyholders, but that could take
over a year. Regular Assessments threaten the solvency of insurance companies doing business in
Florida and discourage new companies from coming.
BACKGROUND—A major hurricane could cause a deficit in one or more of Citizens' three accounts in any
calendar year. Deficits are erased by levying assessments, of which there are three tiers:
SOLUTION—Senate Bill 1346 by Sen. Oelrich and House Bill 1127 by Rep. Albritton eliminate the Regular
Assessment for personal lines and commercial lines accounts and reduce the maximum Regular
Assessment for the coastal account from six percent to two percent, shrinking the potential maximum
assessment on the average policyholder by $640 in the first year. Those dollars would still be paid, but
over time via Emergency Assessment, which is levied on non-Citizens' and Citizens' policyholders alike.
In effect, the bills shift an additional portion of the deficit to Citizens' policyholders and reduce the
amount of money that insurance companies have to "front" Citizens. Finally, this change doesn't alter
the amount Citizens needs to collect to pay claims; it just makes the assessment process more equitable.
All policyholders pay the same percentage of their premium to cover the Citizens deficit regardless of
which company holds their policy
CALL TO ACTION—Support SB 1346 and HB 1127.
PROBLEM—Staged accidents and other fraudulent activity, coupled with high attorney
involvement in a supposedly no-fault system, is driving up the cost of personal injury protection
(PIP) insurance to a level at which many Floridians can no longer afford it.
BACKGROUND—In 1972, Florida adopted a mandatory no-fault motor vehicle insurance law.
Florida's no-fault coverage, also known as PIP coverage, provides for up to $10,000 in medical,
disability, and funeral benefits to those injured in motor vehicle accidents. It is a "first party"
coverage, meaning that the injured person gets the benefits from their own insurance policy
without having to sue, regardless of who caused the accident—hence, the "no-fault" name. In
exchange for the benefits, restrictions are placed on the person's ability to bring suit for things
such as "pain and suffering."
While this system worked well in the past, staged accidents and dishonest doctors, clinics, and
attorneys have created a scam system that in effect imposes a "tort tax" on Florida's citizens.
According to the Office of Insurance Regulation, insurers are paying out $1.04 for every
premium dollar collected, one of the highest loss ratios in the nation. Florida also exceeds the
national average for the number of health care provider charges per PIP claim.
SOLUTION—CS/HB 119 by Rep. Boyd and others aims to reduce fraud and lower the cost of PIP
coverage by replacing it with Emergency Care Coverage. The bill provides coverage for
emergency medical treatment at a hospital for crash victims and makes emergency room
doctors—who have no monetary interest in providing excess treatment—the gatekeepers for
referrals to other health care providers. To rein in excessive litigation, there is a rebuttable
presumption that the diagnosis of the emergency medical condition is correct; and to temper
excessive attorney costs, the bill caps attorneys' fees and prohibits the use of contingency fee
multipliers. The bill requires accident reports where the responding officer must list the
identities of all those injured in the crash, eliminating later claims of "phantom" passengers.
Additionally, it gives insurers time to investigate when fraud is suspected, and bars payment of
benefits to persons who submit false statements or false information.
CALL TO ACTION—Support CS/HB 119 by Rep. Boyd and others.
PROBLEM—Some physicians are using a loophole in Florida's workers' compensation law to
charge exorbitant prices for prescription drugs dispensed from their offices.
BACKGROUND—Under Florida's workers' compensation law, §440.13 (12), F.S., the price
charged for drugs is regulated by a state-appointed three-member panel of medical experts and
set, using a formula, generally equal to the average wholesale price (AWP) plus a $4.18
dispensing fee. A new class of businesses—drug re-packagers—however, may change the
quantity or label of prescription drugs, thus requiring a new National Drug Code and triggering
the assignment of a new, different, and frequently higher AWP. Data from the National Council
on Compensation Insurance indicates this prescription drug mark-up can exceed 600 percent.
By purchasing drugs through re-packagers, physicians purchase drugs at a lower cost and
dispense them at a much higher price. This practice has turned drug dispensing by a physician's
office into a profit center, costing the workers' compensation system millions of dollars a year.
SOLUTION—SB 668 (by Sen. Hays) and HB 511 (by Reps. Hudson, Ahern, Albritton, Boyd, Burgin,
Caldwell, Gonzalez, Ingram, Julien, Mayfield, Oliva, Perry, Pilon, Ray, Rooney, and Wood) allow
physicians to dispense drugs from their offices and collect the $4.18 dispensing fee. However, if
the drug has been repackaged or relabeled, the reimbursement amount would be calculated by
multiplying the number of units dispensed by the per-unit AWP set by the original
manufacturer, which may not be the manufacturer of the repackaged or relabeled drug. Unless
the carrier has contracted for a lower price, the repackaged price cannot exceed the amount
Legislation in 2010 (vetoed) and 2011 (considered but not passed) included reasonable
restrictions but would not have placed any restrictions on the ability of physicians to dispense
prescriptions from their offices.
CALL TO ACTION—Support SB 668 by Sen. Hays and HB 511 by Rep. Hudson and others.
PROBLEM—Florida law needs clarity on whether non-construction limited liability companies
(LLC) can obtain exemptions from workers' compensation coverage requirements.
BACKGROUND—Under Florida law, some corporate officers can elect to be exempt from
workers' compensation coverage requirements. Individuals so exempted are not considered
employees, and cannot be charged a premium or receive workers' compensation benefits if
injured. In the construction industry, members of LLCs and corporate officers who are at least
10-percent owners may elect to be exempt. For non-construction LLC members, the rules are
not as clear. With no ownership percentage requirements and no definition as corporate
officers, insurers often treat eligibility for exempt status in different ways.
SOLUTION—Senate Bill 676 by Sen. Smith/HB 307 by Rep. Bernard addresses these issues. It
excludes non-construction LLC members from the definition of "employee"–the same way sole
proprietors and partners are treated–meaning they are exempt from the coverage
requirements of workers' compensation unless they elect to be included. Some suggest that all
businesses should be covered by workers' compensation insurance. While FAIA agrees in
theory, in practice that goal cannot be met if a business can easily obtain an exemption.
Requiring coverage but allowing an exemption only causes additional paperwork for both the
Division of Workers' Compensation and the insurance agent. It also creates potential liability for
the insurer and the agent if the business alleges that the impact of the elimination of coverage
was not adequately explained. Conversely, if there is no coverage for non-construction LLC
members unless requested, as proposed in SB 676/HB 307, then the potential for liability is
reduced or eliminated and the Division is able to operate more efficiently.
The bill allows for electronic submission of exemption applications, eliminating the burdensome
notarization requirement. Instead, the applicant must swear, under penalty of perjury, that the
information is accurate. The bill also eliminates the requirement that officers in construction
classifications provide stock certificates to prove their ownership interest. That, too, is enforced
by a sworn statement, under penalty of perjury. Finally, in an effort to streamline and maintain
the accuracy of the Division of Workers' Compensation's records, all exemptions issued on or
after Jan.1, 2013, are valid for two years from the effective date stated on the certificate.
CALL TO ACTION—Support SB 676 by Sen. Smith and HB 307 by Rep. Bernard.
2012 Legislative Summary