Florida Insurance Council - Major Workers' Compensation Insurance Bills from the 2007 Regular Session

Major Workers' Compensation Insurance Bills from the 2007 Regular Session

06/21/2007

Major workers' compensation insurance bills from the 2007 regular session; summaries from the Senate Banking & Insuance Committee session wrap-up.

CS/CS/CS/SB 1894 — Joint Underwriting Plan/Workers Compensation - by General Government Appropriations Committee; Governmental Operations Committee; Banking and Insurance Committee; and Senator Posey

SB 1748 — Insurance Contracts/Workers’ Compensation - by Senators Gaetz, Baker, Bennett, and Lynn

HB 7169 — Public Records and Meeting Exemption/Florida Workers’ Compensation Joint Underwriting Association, Inc. - by Jobs and Entrepreneurship Council and Rep. Reagan and others (CS/SB 628 by Governmental Operations Committee and Senators Lawson and Posey)

CS/CS/SB 1624 — Insurance/Public Construction Projects - by General Government Appropriations Committee; Banking and Insurance Committee; and Senator Bennett

FIR: Late-breaking Insurance News
May 23, 2007

CS/SB 746 — Workers’ Compensation/First Responders - by General Government Appropriations Committee and Senators Alexander, Atwater, Gaetz, Fasano, and Justice

The bill provides standards for determining benefits for employment-related accidents and injuries of “first responders,” which generally increase the amount and likelihood of eligibility for workers’ compensation benefits. Many of these provisions have the effect of reversing the application to first responders of benefit changes to the workers’ compensation law enacted in 2003.

The bill defines “first responder” to include a law enforcement officer, a firefighter, an emergency medical technician or paramedic, and a volunteer firefighter. The bill provides the following changes in workers’ compensation for first responders:

Lowers the standard of proof and other requirements for compensability for toxic substance exposure, occupational disease, and mental or nervous injury.
Authorizes payment for medical benefits in cases involving a mental or nervous injury without an accompanying physical injury requiring medical treatment.
Eliminates the six-month limitation on temporary total disability benefits for compensable mental or nervous injuries after a first responder reaches maximum medical improvement and the 1 percent limitation for permanent impairment benefits for psychiatric impairment.
Provides that any adverse result or complication caused by a smallpox vaccination is deemed to be an injury arising out of work performed in the course and scope of employment.
Extends the payment of permanent total disability supplemental benefits beyond age 62 for first responders that were employed by a public employer that did not participate in the social security program whether or not the employer provided an alternative retirement program.

If approved by the Governor, these provisions take effect upon becoming law.
Vote: Senate 40-0; House 109-2

The bill amends laws governing the Florida Workers Compensation Joint Underwriting Association, Inc., (JUA) to provide greater accountability and oversight, to assist the JUA in achieving tax-exempt status, and to authorize additional funding mechanisms.

JUA Board Oversight; Tax-Exempt Status

The bill revises the JUA board appointment process by requiring the Financial Services Commission (FSC) to appoint eight of the nine members instead of three members. The insurance industry will have five representatives, as currently provided by law; however, the FSC will select and appoint each respective representative from a list of five nominees for each vacancy, which would be submitted by the industry. The number of state governmental appointees (including the Consumer Advocate of the Department of Financial Services) would remain at four members.

Upon dissolution of the JUA, the bill requires that all assets of the JUA first be used to pay all debts and obligations of the plan and that any remaining assets would revert to the state. This provision will also assist the JUA in its effort to obtain tax-exempt status.

To avoid significant future federal tax liabilities, the bill requires that, on or before January 1, 2008, the JUA must seek a letter ruling or determination from the IRS regarding the JUA’s eligibility as a tax-exempt organization. Since its inception in 1994, the JUA has incurred an estimated $33 million in federal income tax expenses, including $16 million in 2006.

Code of Ethics and Financial Disclosure

Senior managers, officers, and board members are subject to certain provisions of ch. 112, part III, F.S., including, but not limited to, standards of conduct, public disclosure requirements, and reporting of financial interests to the Commission on Ethics on an annual basis. The bill authorizes an employee, director, etc., of an insurance entity to be a board member unless the insurance entity provides certain services to the JUA. The bill prohibits such a board member from voting on a matter if the insurance entity would obtain a special benefit that would not apply to similarly situated entities.

Current and prospective employees are required to submit an annual statement to the JUA attesting that no conflict of interest exists. Any senior manager or officer of the JUA employed as of January 1, 2008, who retires or terminates employment, is prohibited from representing another person before the JUA for a two-year period. Employees and board members are prohibited from accepting gifts of any value from a person or entity, or an employee or representative of such person or entity, that has a contractual relationship with the plan or who is under consideration for a contract. Employees or board members that fail to comply with this provision are subject to penalties, such as fines. The executive and legislative branches of government are subject to a similar prohibition as that applied to lobbyists.

Deficit Funding

The JUA is required to use any policyholder surplus attributable to former subplan C prior to assessing policyholders in the voluntary market for funding subplan D deficits on a cash flow basis. The surplus in subplan C is approximately $39 million and the estimated additional funding needed is less than $5 million. The deadline for levying “below-the-line” assessments to fund deficits in subplan D, and Tiers One and Two is extended from July 1, 2007, to July 1, 2012.

Regulatory Oversight

The JUA is required to refund premiums to their policyholders if the OIR subsequently disapproves the rate. Also, the OIR is required to conduct periodic market conduct examinations of the JUA.

Procurement of Goods and Services

Competitive selection of goods and services valued at over $25,000 is generally required. Exceptions for exempted services (legal and auditing, etc.), sole sourcing and emergency purchases are authorized. Any purchase that exceeds $100,000 requires approval by the board of governors. Guidelines and criteria are provided for determining whether staff attorneys or outside attorneys should be used and factors to be used in selecting outside firms.

If approved by the Governor, these provisions take effect July 1, 2007.
Vote: Senate 40-0; House 117-0

SB 1748 — Insurance Contracts/Workers’ Compensation - by Senators Gaetz, Baker, Bennett, and Lynn

The bill prohibits a person, such as a contractor, from rejecting workers’ compensation coverage from a self-insurance fund that is subject to ch. 631, part V, F.S., based upon the self-insurance fund not being rated by a nationally recognized insurance rating agency. Such coverage is required pursuant to a construction project. Chapter 631, part V, F.S., establishes the Florida Workers’ Compensation Insurance Guaranty Association to pay claims for insolvent insurers and self-insurance funds. Presently, some builders, notably national companies, require contractors or subcontractors to secure coverage with a workers’ compensation carrier rated not less than an “A” by a nationally recognized rating agency as a condition of being a vendor or receiving payment. In Florida, workers’ compensation insurance is offered by insurance companies and commercial self-insurance funds whose claims are protected by the Florida Workers’ Compensation Insurance Guaranty Association in the event of insolvency. There is no current law requiring workers’ compensation insurers or self-insurance funds to be rated by a rating service as a condition of being authorized to write workers’ compensation insurance.

If approved by the Governor, these provisions take effect July 1, 2007.
Vote: Senate 40-0; House 117-0

The bill creates an exemption for certain records and portions of meetings of the Florida Workers’ Compensation Joint Underwriting Association, Inc. (JUA), the insurer of last resort for employers who are unable to secure workers’ compensation insurance coverage in the voluntary market. The bill makes confidential and exempt underwriting files, claims files until termination of litigation and settlement, audit records, certain proprietary information, medical records, records relative to an employee’s participation in an employee assistance program, certain information related to negotiations, reports regarding fraud until the investigation is closed or ceases to be active, and payroll and client lists of employee leasing companies obtained from the Department of Revenue. The bill also makes confidential and exempt certain records prepared by an attorney retained by the association to protect or represent the interests of the association. Exceptions are provided. The bill also makes exempt that portion of a meeting at which exempt records are discussed and the minutes of that portion of such meetings. The exemption is subject to future review and repeal under the Open Government Sunset Review Act in 2012.

If approved by the Governor, these provisions take effect July 1, 2007.
Vote: Senate 39-0; House 119-0

CS/CS/SB 1624 — Insurance/Public Construction Projects - by General Government Appropriations Committee; Banking and Insurance Committee; and Senator Bennett

The bill provides the following changes to the current statutory provisions regulating the use of an owner-controlled-insurance program (OCIP) by a public agency:

Provides that a “specified contracted work site” for purposes of an OCIP applies to a single continuous system.
Clarifies when a capital infrastructure improvement program at multiple work sites meets the $75 million threshold requirement in order for the construction project to be eligible to use an OCIP. A capital infrastructure improvement program must be for a single public service, system, or facility that cannot be combined with another project unless certain conditions are met. The term “capital infrastructure improvement program” is also defined.
Specifies that, under an OCIP with a large deductible workers’ compensation rating plan, the individual contractors and subcontractors are not required to individually satisfy eligibility requirements and may combine their payroll if the deductible is $100,000 or more and the standard premium is $500,000 or more.
Requires an OCIP to provide completed operations coverage, which insures against construction defections after the completion of the project, for at least 10 years rather than 5 years.

If approved by the Governor, these provisions take effect October 1, 2007.
Vote: Senate 38-0; House 117-0

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