HB 1241

CS

CHAMBER ACTION

1	The Committee on Insurance recommends the following:
2
3	Committee Substitute
4	Remove the entire bill and insert:
5	A bill to be entitled
6	An act relating to workers' compensation; creating s.
7	624.4315, F.S.; requiring workers' compensation insurers
8	to notify the Office of Insurance Regulation of
9	significant underwriting changes; amending s. 627.171,
10	F.S.; providing that the 10-percent limit on the
11	percentage of commercial insurance policies that an
12	insurer may write at a rate in excess of the applicable
13	filed rate excludes workers' compensation policies written
14	for an employer in lieu of coverage from the joint
15	underwriting plan established under s. 627.311(5), F.S.;
16	amending s. 627.211, F.S.; revising the standards used by
17	the Office of Insurance Regulation in approving or
18	disapproving an insurer's deviation from the approved
19	workers' compensation rate filing; requiring the Office of
20	Insurance Regulation to submit an annual report to the
21	Legislature which evaluates competition in the workers'
22	compensation insurance market; amending s. 627.311, F.S.;
23	revising provisions governing the depopulation program of
24	the workers' compensation joint underwriting plan;
25	providing an effective date.
26
27	Be It Enacted by the Legislature of the State of Florida:
28
29	Section 1.  Section 624.4315, Florida Statutes, is created
30	to read:
31	624.4315  Workers' compensation insurers; notice of
32	significant underwriting change.--Each workers' compensation
33	insurer shall notify the office in writing or by electronic
34	means of a significant underwriting change that materially
35	limits or restricts the number of workers' compensation policies
36	or premiums written in this state. The commission may adopt
37	rules to administer this requirement.
38	Section 2.  Section 627.171, Florida Statutes, is amended
39	to read:
40	627.171  Excess rates.--
41	(1)  With written consent of the insured signed prior to
42	the policy inception date and filed with the insurer, the
43	insurer may use a rate in excess of the otherwise applicable
44	filed rate on any specific risk.  The signed consent form must
45	include the filed rate as well as the excess rate for the risk
46	insured, and a copy of the form must be maintained by the
47	insurer for 3 years and be available for review by the office.
48	(2)  An insurer may not use excess rates pursuant to this
49	section for more than 10 percent of its commercial insurance
50	policies written or renewed in each calendar year for any line
51	of commercial insurance or for more than 5 percent of its
52	personal lines insurance policies written or renewed in each
53	calendar year for any line of personal insurance. In determining
54	the 10-percent limitation for commercial insurance policies, the
55	insurer shall exclude any workers' compensation policy that was
56	written for an employer who had coverage in the joint
57	underwriting plan created by s. 627.311(5) immediately prior to
58	the writing of the policy by the insurer and any workers'
59	compensation policy that was written for an employer who had
60	been offered coverage in the joint underwriting plan but who had
61	a policy that was written by the insurer in lieu of accepting
62	the joint underwriting plan policy. These workers' compensation
63	policies shall be excluded from the 10-percent limitation for
64	the first 3 years of coverage.
65	Section 3.  Subsection (3) of section 627.211, Florida
66	Statutes, is amended, and subsection (6) is added to that
67	section, to read:
68	627.211  Deviations; workers' compensation and employer's
69	liability insurances.--
70	(3)  In considering an application for the deviation, the
71	office shall give consideration to the applicable principles for
72	ratemaking as set forth in ss. 627.062 and 627.072 and, the
73	financial condition of the insurer, and the impact of the
74	deviation on the current market conditions including the
75	composition of the market, the stability of rates, and the level
76	of competition in the market.  In evaluating the financial
77	condition of the insurer, the office may consider: (1) the
78	insurer's audited financial statements and whether the
79	statements provide unqualified opinions or contain significant
80	qualifications or "subject to" provisions; (2) any independent
81	or other actuarial certification of loss reserves; (3) whether
82	workers' compensation and employer's liability reserves are
83	above the midpoint or best estimate of the actuary's reserve
84	range estimate; (4) the adequacy of the proposed rate; (5)
85	historical experience demonstrating the profitability of the
86	insurer; (6) the existence of excess or other reinsurance that
87	contains a sufficiently low attachment point and maximums that
88	provide adequate protection to the insurer; and (7) other
89	factors considered relevant to the financial condition of the
90	insurer by the office. The office shall approve the deviation if
91	it finds it to be justified, it would not endanger the financial
92	condition of the insurer, it would not adversely affect the
93	current market conditions including the composition of the
94	market, the stability of rates, and the level of competition in
95	the market, and it that the deviation would not constitute
96	predatory pricing. The office It shall disapprove the deviation
97	if it finds that the resulting premiums would be excessive,
98	inadequate, or unfairly discriminatory, would endanger the
99	financial condition of the insurer, or would adversely affect
100	current market conditions including the composition of the
101	marketplace, the stability of rates, and the level of
102	competition in the market, or would result in predatory pricing.
103	The insurer may not use a deviation unless the deviation is
104	specifically approved by the office.
105	(6)  The office shall submit an annual report to the
106	President of the Senate and the Speaker of the House of
107	Representatives by January 1 of each year which evaluates
108	competition in the workers' compensation insurance market in
109	this state. The report must contain an analysis of the
110	availability and affordability of workers' compensation coverage
111	and whether the current market structure, conduct, and
112	performance are conducive to competition, based upon economic
113	analysis and tests. The purpose of this report is to aid the
114	Legislature in determining whether changes to the workers'
115	compensation rating laws are warranted. The report must also
116	document that the office has complied with the provisions of s.
117	627.096 which require the office to investigate and study all
118	workers' compensation insurers in the state and to study the
119	data, statistics, schedules, or other information as it finds
120	necessary to assist in its review of workers' compensation rate
121	filings.
122	Section 4.  Paragraph (c) of subsection (5) of section
123	627.311, Florida Statutes, is amended to read:
124	627.311  Joint underwriters and joint reinsurers; public
125	records and public meetings exemptions.--
126	(5)
127	(c)  The operation of the plan shall be governed by a plan
128	of operation that is prepared at the direction of the board of
129	governors. The plan of operation may be changed at any time by
130	the board of governors or upon request of the office. The plan
131	of operation and all changes thereto are subject to the approval
132	of the office. The plan of operation shall:
133	1.  Authorize the board to engage in the activities
134	necessary to implement this subsection, including, but not
135	limited to, borrowing money.
136	2.  Develop criteria for eligibility for coverage by the
137	plan, including, but not limited to, documented rejection by at
138	least two insurers which reasonably assures that insureds
139	covered under the plan are unable to acquire coverage in the
140	voluntary market. Any insured may voluntarily elect to accept
141	coverage from an insurer for a premium equal to or greater than
142	the plan premium if the insurer writing the coverage adheres to
143	the provisions of s. 627.171.
144	3.  Require notice from the agent to the insured at the
145	time of the application for coverage that the application is for
146	coverage with the plan and that coverage may be available
147	through an insurer, group self-insurers' fund, commercial self-
148	insurance fund, or assessable mutual insurer through another
149	agent at a lower cost.
150	4.  Establish programs to encourage insurers to provide
151	coverage to applicants of the plan in the voluntary market and
152	to insureds of the plan, including, but not limited to:
153	a.  Establishing procedures for an insurer to use in
154	notifying the plan of the insurer's desire to provide coverage
155	to applicants to the plan or existing insureds of the plan and
156	in describing the types of risks in which the insurer is
157	interested. The description of the desired risks must be on a
158	form developed by the plan.
159	b.  Developing forms and procedures that provide an insurer
160	with the information necessary to determine whether the insurer
161	wants to write particular applicants to the plan or insureds of
162	the plan.
163	c.  Developing procedures for notice to the plan and the
164	applicant to the plan or insured of the plan that an insurer
165	will insure the applicant or the insured of the plan, and notice
166	of the cost of the coverage offered; and developing procedures
167	for the selection of an insuring entity by the applicant or
168	insured of the plan.
169	d.  Provide for a market-assistance plan to assist in the
170	placement of employers. All applications for coverage in the
171	plan received 45 days before the effective date for coverage
172	shall be processed through the market-assistance plan. A market-
173	assistance plan specifically designed to serve the needs of
174	small, good policyholders as defined by the board must be
175	finalized by January 1, 1994.
176	5.  Provide for policy and claims services to the insureds
177	of the plan of the nature and quality provided for insureds in
178	the voluntary market.
179	6.  Provide for the review of applications for coverage
180	with the plan for reasonableness and accuracy, using any
181	available historic information regarding the insured.
182	7.  Provide for procedures for auditing insureds of the
183	plan which are based on reasonable business judgment and are
184	designed to maximize the likelihood that the plan will collect
185	the appropriate premiums.
186	8.  Authorize the plan to terminate the coverage of and
187	refuse future coverage for any insured that submits a fraudulent
188	application to the plan or provides fraudulent or grossly
189	erroneous records to the plan or to any service provider of the
190	plan in conjunction with the activities of the plan.
191	9.  Establish service standards for agents who submit
192	business to the plan.
193	10.  Establish criteria and procedures to prohibit any
194	agent who does not adhere to the established service standards
195	from placing business with the plan or receiving, directly or
196	indirectly, any commissions for business placed with the plan.
197	11.  Provide for the establishment of reasonable safety
198	programs for all insureds in the plan. All insureds of the plan
199	must participate in the safety program.
200	12.  Authorize the plan to terminate the coverage of and
201	refuse future coverage to any insured who fails to pay premiums
202	or surcharges when due; who, at the time of application, is
203	delinquent in payments of workers' compensation or employer's
204	liability insurance premiums or surcharges owed to an insurer,
205	group self-insurers' fund, commercial self-insurance fund, or
206	assessable mutual insurer licensed to write such coverage in
207	this state; or who refuses to substantially comply with any
208	safety programs recommended by the plan.
209	13.  Authorize the board of governors to provide the
210	services required by the plan through staff employed by the
211	plan, through reasonably compensated service providers who
212	contract with the plan to provide services as specified by the
213	board of governors, or through a combination of employees and
214	service providers.
215	14.  Provide for service standards for service providers,
216	methods of determining adherence to those service standards,
217	incentives and disincentives for service, and procedures for
218	terminating contracts for service providers that fail to adhere
219	to service standards.
220	15.  Provide procedures for selecting service providers and
221	standards for qualification as a service provider that
222	reasonably assure that any service provider selected will
223	continue to operate as an ongoing concern and is capable of
224	providing the specified services in the manner required.
225	16.  Provide for reasonable accounting and data-reporting
226	practices.
227	17.  Provide for annual review of costs associated with the
228	administration and servicing of the policies issued by the plan
229	to determine alternatives by which costs can be reduced.
230	18.  Authorize the acquisition of such excess insurance or
231	reinsurance as is consistent with the purposes of the plan.
232	19.  Provide for an annual report to the office on a date
233	specified by the office and containing such information as the
234	office reasonably requires.
235	20.  Establish multiple rating plans for various
236	classifications of risk which reflect risk of loss, hazard
237	grade, actual losses, size of premium, and compliance with loss
238	control. At least one of such plans must be a preferred-rating
239	plan to accommodate small-premium policyholders with good
240	experience as defined in sub-subparagraph 22.a.
241	21.  Establish agent commission schedules.
242	22.  Establish four subplans as follows:
243	a.  Subplan "A" must include those insureds whose annual
244	premium does not exceed $2,500 and who have neither incurred any
245	lost-time claims nor incurred medical-only claims exceeding 50
246	percent of their premium for the immediate 2 years.
247	b.  Subplan "B" must include insureds that are employers
248	identified by the board of governors as high-risk employers due
249	solely to the nature of the operations being performed by those
250	insureds and for whom no market exists in the voluntary market,
251	and whose experience modifications are less than 1.00.
252	c.  Subplan "C" must include all insureds within the plan
253	that are not eligible for subplan "A," subplan "B," or subplan
254	"D."
255	d.  Subplan "D" must include any employer, regardless of
256	the length of time for which it has conducted business
257	operations, which has an experience modification factor of 1.10
258	or less and either employs 15 or fewer employees or is an
259	organization that is exempt from federal income tax pursuant to
260	s. 501(c)(3) of the Internal Revenue Code and receives more than
261	50 percent of its funding from gifts, grants, endowments, or
262	federal or state contracts. The rate plan for subplan "D" shall
263	be the same rate plan as the plan approved under ss. 627.091-
264	627.151, and each participant in subplan "D" shall pay the
265	premium determined under such rate plan, plus a surcharge
266	determined by the board to be sufficient to ensure that the plan
267	does not compete with the voluntary market rate for any
268	participant, but not to exceed 25 percent. However, the
269	surcharge shall not exceed 10 percent for an organization that
270	is exempt from federal income tax pursuant to s. 501(c)(3) of
271	the Internal Revenue Code.
272	23.  Provide for a depopulation program to reduce the
273	number of insureds in subplan "D." If an employer insured
274	through subplan "D" is offered coverage from a voluntary market
275	carrier:
276	a.  During the first 30 days of coverage under the subplan;
277	b.  Before a policy is issued under the subplan;
278	c.  By issuance of a policy upon expiration or cancellation
279	of the policy under the subplan; or
280	d.  By assumption of the subplan's obligation with respect
281	to an in-force policy,
282
283	that employer is no longer eligible for coverage through the
284	plan. The premium for risks assumed by the voluntary market
285	carrier must be the same premium plus, for the first 2 years,
286	the surcharge as determined in sub-subparagraph 22.d. A premium
287	under this subparagraph, including surcharge, is deemed approved
288	and is not an excess premium for purposes of s. 627.171.
289	24.  Require that policies issued under subplan "D" and
290	applications for such policies must include a notice that the
291	policy issued under subplan "D" could be replaced by a policy
292	issued from a voluntary market carrier and that, if an offer of
293	coverage is obtained from a voluntary market carrier, the
294	policyholder is no longer eligible for coverage through subplan
295	"D." The notice must also specify that acceptance of coverage
296	under subplan "D" creates a conclusive presumption that the
297	applicant or policyholder is aware of this potential.
298	Section 5.  This act shall take effect July 1, 2004.

CODING: Words stricken are deletions; words underlined are additions.