• 300 Words (More or Less) 2012

    AdvocacySmallEach year, FAIA's advocacy staff develops succinct summaries of insurance-related issues to help lawmakers, the media, and the public better understand these often-complicated insurance topics. 

    Citizens Assessments 
    Personal Injury Protection (PIP) Insurance 
    Workers' Comp Drug Costs 
    Workers' Compensation Exemptions 

    Citizens Assessments

    PROBLEMUnder 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:

    • Policyholder Surcharge: Citizens' policyholders incur a one-time surcharge of up to 15 percent of their annual insurance premium for each Citizens account.
    • Regular Assessment: Non-Citizens' policyholders (except medical malpractice and workers'
      compensation policyholders) incur a one-time assessment of up to six percent of their annual insurance premium for each Citizens account that experiences a deficit. Notably, Regular Assessments are not levied on Citizens' policies.
    • Emergency Assessment: If a deficit still remains, Citizens' and non-Citizens' policyholders are levied an Emergency Assessment of up to 10 percent of their annual premium for all of their policies (except medical malpractice and workers' compensation) per Citizens account. An Emergency Assessment may occur over a number of years until the deficit in Citizens' accounts has been paid. Insurers collect the Emergency Assessment from policyholders and forward those monies to Citizens.

    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.

    Personal Injury Protection (PIP) Insurance

    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.

    Workers' Compensation Drug Costs

    PROBLEMSome 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 otherwise payable.

    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.

    Workers' Compensation Exemptions

    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.