| 1 | A bill to be entitled |
| 2 | An act relating to a joint underwriting plan of insurers; |
| 3 | amending s. 627.311, F.S.; revising provisions requiring |
| 4 | the Office of Insurance Regulation to approve a joint |
| 5 | underwriting plan for workers' compensation and employer's |
| 6 | liability insurers; requiring plan rates to be |
| 7 | noncompetitive with the voluntary market for certain |
| 8 | purposes; deleting authorization for insureds to select |
| 9 | certain alternative coverages; revising criteria, |
| 10 | requirements, and limitations for certain required |
| 11 | subplans; requiring participants in certain subplans to |
| 12 | pay certain plan premiums plus a surcharge imposed by the |
| 13 | plan's board of governors for certain purposes; deleting a |
| 14 | surcharge limitation for certain organizations; revising |
| 15 | criteria, requirements, and limitations for a required |
| 16 | depopulation program to reduce numbers of insureds under |
| 17 | certain subplans; revising certain subplan notice |
| 18 | requirements; providing for funding of the plan through |
| 19 | deficit funding; providing for a one-time capital |
| 20 | contribution from the Workers' Compensation Administration |
| 21 | Trust Fund to defray certain subplan deficits prior to |
| 22 | certain assessments; authorizing the board of governors of |
| 23 | the plan to levy assessments to cover certain subplan |
| 24 | deficits under certain circumstances; providing criteria |
| 25 | and limitations; providing an effective date. |
| 26 |
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| 27 | Be It Enacted by the Legislature of the State of Florida: |
| 28 |
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| 29 | Section 1. Paragraphs (a), (c), (d), and (g) of subsection |
| 30 | (5) of section 627.311, Florida Statutes, are amended to read: |
| 31 | 627.311 Joint underwriters and joint reinsurers; public |
| 32 | records and public meetings exemptions.-- |
| 33 | (5)(a) The office shall, after consultation with insurers, |
| 34 | approve a joint underwriting plan of insurers which shall |
| 35 | operate as a nonprofit entity. For the purposes of this |
| 36 | subsection, the term "insurer" includes group self-insurance |
| 37 | funds authorized by s. 624.4621, commercial self-insurance funds |
| 38 | authorized by s. 624.462, assessable mutual insurers authorized |
| 39 | under s. 628.6011, and insurers licensed to write workers' |
| 40 | compensation and employer's liability insurance in this state. |
| 41 | The purpose of the plan is to provide workers' compensation and |
| 42 | employer's liability insurance to applicants who are required by |
| 43 | law to maintain workers' compensation and employer's liability |
| 44 | insurance and who are in good faith entitled to but who are |
| 45 | unable to procure purchase such insurance through the voluntary |
| 46 | market. The plan must have actuarially sound rates that are not |
| 47 | competitive with approved voluntary market rates so that the |
| 48 | plan functions as a residual market mechanism assure that the |
| 49 | plan is self-supporting. |
| 50 | (c) The operation of the plan shall be governed by a plan |
| 51 | of operation that is prepared at the direction of the board of |
| 52 | governors. The plan of operation may be changed at any time by |
| 53 | the board of governors or upon request of the office. The plan |
| 54 | of operation and all changes thereto are subject to the approval |
| 55 | of the office. The plan of operation shall: |
| 56 | 1. Authorize the board to engage in the activities |
| 57 | necessary to implement this subsection, including, but not |
| 58 | limited to, borrowing money. |
| 59 | 2. Develop criteria for eligibility for coverage by the |
| 60 | plan, including, but not limited to, documented rejection by at |
| 61 | least two insurers which reasonably assures that insureds |
| 62 | covered under the plan are unable to acquire coverage in the |
| 63 | voluntary market. Any insured may voluntarily elect to accept |
| 64 | coverage from an insurer for a premium equal to or greater than |
| 65 | the plan premium if the insurer writing the coverage adheres to |
| 66 | the provisions of s. 627.171. |
| 67 | 3. Require notice from the agent to the insured at the |
| 68 | time of the application for coverage that the application is for |
| 69 | coverage with the plan and that coverage may be available |
| 70 | through an insurer, group self-insurers' fund, commercial self- |
| 71 | insurance fund, or assessable mutual insurer through another |
| 72 | agent at a lower cost. |
| 73 | 4. Establish programs to encourage insurers to provide |
| 74 | coverage to applicants of the plan in the voluntary market and |
| 75 | to insureds of the plan, including, but not limited to: |
| 76 | a. Establishing procedures for an insurer to use in |
| 77 | notifying the plan of the insurer's desire to provide coverage |
| 78 | to applicants to the plan or existing insureds of the plan and |
| 79 | in describing the types of risks in which the insurer is |
| 80 | interested. The description of the desired risks must be on a |
| 81 | form developed by the plan. |
| 82 | b. Developing forms and procedures that provide an insurer |
| 83 | with the information necessary to determine whether the insurer |
| 84 | wants to write particular applicants to the plan or insureds of |
| 85 | the plan. |
| 86 | c. Developing procedures for notice to the plan and the |
| 87 | applicant to the plan or insured of the plan that an insurer |
| 88 | will insure the applicant or the insured of the plan, and notice |
| 89 | of the cost of the coverage offered; and developing procedures |
| 90 | for the selection of an insuring entity by the applicant or |
| 91 | insured of the plan. |
| 92 | d. Provide for a market-assistance plan to assist in the |
| 93 | placement of employers. All applications for coverage in the |
| 94 | plan received 45 days before the effective date for coverage |
| 95 | shall be processed through the market-assistance plan. A market- |
| 96 | assistance plan specifically designed to serve the needs of |
| 97 | small, good policyholders as defined by the board must be |
| 98 | finalized by January 1, 1994. |
| 99 | 5. Provide for policy and claims services to the insureds |
| 100 | of the plan of the nature and quality provided for insureds in |
| 101 | the voluntary market. |
| 102 | 6. Provide for the review of applications for coverage |
| 103 | with the plan for reasonableness and accuracy, using any |
| 104 | available historic information regarding the insured. |
| 105 | 7. Provide for procedures for auditing insureds of the |
| 106 | plan which are based on reasonable business judgment and are |
| 107 | designed to maximize the likelihood that the plan will collect |
| 108 | the appropriate premiums. |
| 109 | 8. Authorize the plan to terminate the coverage of and |
| 110 | refuse future coverage for any insured that submits a fraudulent |
| 111 | application to the plan or provides fraudulent or grossly |
| 112 | erroneous records to the plan or to any service provider of the |
| 113 | plan in conjunction with the activities of the plan. |
| 114 | 9. Establish service standards for agents who submit |
| 115 | business to the plan. |
| 116 | 10. Establish criteria and procedures to prohibit any |
| 117 | agent who does not adhere to the established service standards |
| 118 | from placing business with the plan or receiving, directly or |
| 119 | indirectly, any commissions for business placed with the plan. |
| 120 | 11. Provide for the establishment of reasonable safety |
| 121 | programs for all insureds in the plan. All insureds of the plan |
| 122 | must participate in the safety program. |
| 123 | 12. Authorize the plan to terminate the coverage of and |
| 124 | refuse future coverage to any insured who fails to pay premiums |
| 125 | or surcharges when due; who, at the time of application, is |
| 126 | delinquent in payments of workers' compensation or employer's |
| 127 | liability insurance premiums or surcharges owed to an insurer, |
| 128 | group self-insurers' fund, commercial self-insurance fund, or |
| 129 | assessable mutual insurer licensed to write such coverage in |
| 130 | this state; or who refuses to substantially comply with any |
| 131 | safety programs recommended by the plan. |
| 132 | 13. Authorize the board of governors to provide the |
| 133 | services required by the plan through staff employed by the |
| 134 | plan, through reasonably compensated service providers who |
| 135 | contract with the plan to provide services as specified by the |
| 136 | board of governors, or through a combination of employees and |
| 137 | service providers. |
| 138 | 14. Provide for service standards for service providers, |
| 139 | methods of determining adherence to those service standards, |
| 140 | incentives and disincentives for service, and procedures for |
| 141 | terminating contracts for service providers that fail to adhere |
| 142 | to service standards. |
| 143 | 15. Provide procedures for selecting service providers and |
| 144 | standards for qualification as a service provider that |
| 145 | reasonably assure that any service provider selected will |
| 146 | continue to operate as an ongoing concern and is capable of |
| 147 | providing the specified services in the manner required. |
| 148 | 16. Provide for reasonable accounting and data-reporting |
| 149 | practices. |
| 150 | 17. Provide for annual review of costs associated with the |
| 151 | administration and servicing of the policies issued by the plan |
| 152 | to determine alternatives by which costs can be reduced. |
| 153 | 18. Authorize the acquisition of such excess insurance or |
| 154 | reinsurance as is consistent with the purposes of the plan. |
| 155 | 19. Provide for an annual report to the office on a date |
| 156 | specified by the office and containing such information as the |
| 157 | office reasonably requires. |
| 158 | 20. Establish multiple rating plans for various |
| 159 | classifications of risk which reflect risk of loss, hazard |
| 160 | grade, actual losses, size of premium, and compliance with loss |
| 161 | control. At least one of such plans must be a preferred-rating |
| 162 | plan to accommodate small-premium policyholders with good |
| 163 | experience as defined in sub-subparagraph 22.a. |
| 164 | 21. Establish agent commission schedules. |
| 165 | 22. Establish four subplans as follows: |
| 166 | a. Subplan "A" must include those insureds whose manual |
| 167 | annual premium does not exceed $20,000 at the time of |
| 168 | application, $2,500 and who have neither incurred any lost-time |
| 169 | claims nor incurred medical-only claims exceeding 20 50 percent |
| 170 | of their premium for the immediately preceding 3 immediate 2 |
| 171 | years of available data, and who have an experience modification |
| 172 | factor of 1.05 or less. The rate plan for subplan "A" shall be |
| 173 | the same rate plan as the plan approved under ss.627.091- |
| 174 | 627.151, and each participant in subplan "A" shall pay the |
| 175 | premium determined under such rate plan, plus a surcharge |
| 176 | determined by the board to be sufficient to ensure that the plan |
| 177 | does not compete with the voluntary market rate for any |
| 178 | participant, but not to exceed 25 percent. |
| 179 | b. Subplan "B" must include insureds that are employers |
| 180 | identified by the board of governors as high-risk employers due |
| 181 | solely to the nature of the operations being performed by those |
| 182 | insureds and for whom no market exists in the voluntary market, |
| 183 | and who have an whose experience modification factor of |
| 184 | modifications are less than 1.00 or less. The rate plan for |
| 185 | subplan "B" shall be the same rate plan as the plan approved |
| 186 | under ss.627.091-627.151, and each participant in subplan "B" |
| 187 | shall pay the premium determined under such rate plan, plus a |
| 188 | surcharge determined by the board to be sufficient to ensure |
| 189 | that the plan does not compete with the voluntary market rate |
| 190 | for any participant, but not to exceed 50 percent. |
| 191 | c. Subplan "C" must include all insureds within the plan |
| 192 | that are not eligible for subplan "A," subplan "B," or subplan |
| 193 | "D." The rates for subplan "C" shall be actuarially sound to |
| 194 | assure that subplan "C" is self-supporting. |
| 195 | d. Subplan "D" must include any employer, regardless of |
| 196 | the length of time for which it has conducted business |
| 197 | operations, which has an experience modification factor of 1.10 |
| 198 | or less and either employs 15 or fewer employees or is an |
| 199 | organization that is exempt from federal income tax pursuant to |
| 200 | s. 501(c)(3) of the Internal Revenue Code and receives more than |
| 201 | 50 percent of its funding from gifts, grants, endowments, or |
| 202 | federal or state contracts. The rate plan for subplan "D" shall |
| 203 | be the same rate plan as the plan approved under ss. 627.091- |
| 204 | 627.151, and each participant in subplan "D" shall pay the |
| 205 | premium determined under such rate plan, plus a surcharge |
| 206 | determined by the board to be sufficient to ensure that the plan |
| 207 | does not compete with the voluntary market rate for any |
| 208 | participant, but not to exceed 35 25 percent. However, the |
| 209 | surcharge shall not exceed 10 percent for an organization that |
| 210 | is exempt from federal income tax pursuant to s. 501(c)(3) of |
| 211 | the Internal Revenue Code. |
| 212 | 23. Provide for a depopulation program to reduce the |
| 213 | number of insureds in subplans "A," "B," and subplan "D." If an |
| 214 | employer insured through subplan "A," subplan "B," or subplan |
| 215 | "D" is offered coverage from a voluntary market carrier: |
| 216 | a. During the first 30 days of coverage under the subplan; |
| 217 | b. Before a policy is issued under the subplan; |
| 218 | c. Effective By issuance of a policy upon the renewal date |
| 219 | expiration or cancellation of the policy under the subplan; or |
| 220 | d. By assumption of the subplan's obligation with respect |
| 221 | to an in-force policy, |
| 222 |
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| 223 | that employer is no longer eligible for coverage through the |
| 224 | plan. As part of the depopulation program, The premium for risks |
| 225 | assumed by the voluntary market carrier may offer the employer |
| 226 | coverage at approved voluntary market must be the same premium |
| 227 | plus, for the first 2 years, the surcharge as determined for the |
| 228 | subplan in which the employer is insured in sub-subparagraph |
| 229 | 22.d. A premium under this subparagraph, including surcharge, |
| 230 | for an offer of coverage by a voluntary market carrier is deemed |
| 231 | approved and is not an excess premium for purposes of s. |
| 232 | 627.171. |
| 233 | 24. Require that policies issued under subplans "A," "B," |
| 234 | and subplan "D" and applications for such policies must include |
| 235 | a notice that the policy issued under subplan "A," subplan "B," |
| 236 | or subplan "D" could be replaced by a policy issued from a |
| 237 | voluntary market carrier and that, if an offer of coverage is |
| 238 | obtained from a voluntary market carrier, the policyholder is no |
| 239 | longer eligible for coverage through subplan "D." The notice |
| 240 | must also specify that acceptance of coverage under subplan "A," |
| 241 | subplan "b," or subplan "D" creates a conclusive presumption |
| 242 | that the applicant or policyholder is aware of this potential. |
| 243 | (d)1. The plan must be funded through actuarially sound |
| 244 | premiums charged to insureds of the plan and deficit funding as |
| 245 | provided for in paragraph (g). However, a one-time capital |
| 246 | contribution is appropriated from the Workers' Compensation |
| 247 | Administration Trust Fund in the amount of $10 million to defray |
| 248 | any deficit in subplans "A," "B," and "D" prior to levying |
| 249 | assessments. |
| 250 | 2. The plan may issue assessable policies only to those |
| 251 | insureds in subplan subplans "C." and "D." Subject to |
| 252 | verification by the department, the board may levy assessments |
| 253 | against insureds in subplan "C" or subplan "D," on a pro rata |
| 254 | earned premium basis, to fund any deficits that exist in those |
| 255 | subplans. Assessments levied against subplan "C" participants |
| 256 | shall cover only the deficits attributable to subplan "C," and |
| 257 | assessments levied against subplan "D" participants shall cover |
| 258 | only the deficits attributable to subplan "D." In no event may |
| 259 | the plan levy assessments against any person or entity, except |
| 260 | as authorized by this paragraph for deficits attributable to |
| 261 | subplan "C." Those assessable policies must be clearly |
| 262 | identified as assessable by containing, in contrasting color and |
| 263 | in not less than 10-point type, the following statements: "This |
| 264 | is an assessable policy. If the plan is unable to pay its |
| 265 | obligations, policyholders will be required to contribute on a |
| 266 | pro rata earned premium basis the money necessary to meet any |
| 267 | assessment levied." |
| 268 | 3. The plan may issue assessable policies with differing |
| 269 | terms and conditions to different groups within subplans "C" and |
| 270 | "D" when a reasonable basis exists for the differentiation. |
| 271 | 3.4. The plan may offer rating, dividend plans, and other |
| 272 | plans to encourage loss prevention programs. |
| 273 | (g) Whenever a deficit exists in subplan "A," subplan "B," |
| 274 | or subplan "D," the board shall levy, after verification by the |
| 275 | office, assessments for as many years as necessary to cover the |
| 276 | deficits but not to exceed 2 percent of premium annually to be |
| 277 | collected by insurers to be paid by their workers' compensation |
| 278 | policyholders in this state on a pro rata basis as a line item |
| 279 | in addition to the calculated premium. Whenever a deficit exists |
| 280 | in subplan "C," the plan shall, within 90 days, provide the |
| 281 | office with a program to eliminate the deficit within a |
| 282 | reasonable time. The deficit in subplan "C" may be funded |
| 283 | through increased premiums charged to insureds of the plan for |
| 284 | subsequent years, through the use of policyholder surplus |
| 285 | attributable to any year, and through assessments on insureds in |
| 286 | the plan if the plan uses assessable policies. |
| 287 | Section 2. This act shall take effect upon becoming a law. |