HB 1251

1
A bill to be entitled
2An act relating to a joint underwriting plan of insurers;
3amending s. 627.311, F.S.; revising provisions requiring
4the Office of Insurance Regulation to approve a joint
5underwriting plan for workers' compensation and employer's
6liability insurers; requiring plan rates to be
7noncompetitive with the voluntary market for certain
8purposes; deleting authorization for insureds to select
9certain alternative coverages; revising criteria,
10requirements, and limitations for certain required
11subplans; requiring participants in certain subplans to
12pay certain plan premiums plus a surcharge imposed by the
13plan's board of governors for certain purposes; deleting a
14surcharge limitation for certain organizations; revising
15criteria, requirements, and limitations for a required
16depopulation program to reduce numbers of insureds under
17certain subplans; revising certain subplan notice
18requirements; providing for funding of the plan through
19deficit funding; providing for a one-time capital
20contribution from the Workers' Compensation Administration
21Trust Fund to defray certain subplan deficits prior to
22certain assessments; authorizing the board of governors of
23the plan to levy assessments to cover certain subplan
24deficits under certain circumstances; providing criteria
25and limitations; providing an effective date.
26
27Be It Enacted by the Legislature of the State of Florida:
28
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
32records and public meetings exemptions.--
33     (5)(a)  The office shall, after consultation with insurers,
34approve a joint underwriting plan of insurers which shall
35operate as a nonprofit entity. For the purposes of this
36subsection, the term "insurer" includes group self-insurance
37funds authorized by s. 624.4621, commercial self-insurance funds
38authorized by s. 624.462, assessable mutual insurers authorized
39under s. 628.6011, and insurers licensed to write workers'
40compensation and employer's liability insurance in this state.
41The purpose of the plan is to provide workers' compensation and
42employer's liability insurance to applicants who are required by
43law to maintain workers' compensation and employer's liability
44insurance and who are in good faith entitled to but who are
45unable to procure purchase such insurance through the voluntary
46market. The plan must have actuarially sound rates that are not
47competitive with approved voluntary market rates so that the
48plan functions as a residual market mechanism assure that the
49plan is self-supporting.
50     (c)  The operation of the plan shall be governed by a plan
51of operation that is prepared at the direction of the board of
52governors. The plan of operation may be changed at any time by
53the board of governors or upon request of the office. The plan
54of operation and all changes thereto are subject to the approval
55of the office. The plan of operation shall:
56     1.  Authorize the board to engage in the activities
57necessary to implement this subsection, including, but not
58limited to, borrowing money.
59     2.  Develop criteria for eligibility for coverage by the
60plan, including, but not limited to, documented rejection by at
61least two insurers which reasonably assures that insureds
62covered under the plan are unable to acquire coverage in the
63voluntary market. Any insured may voluntarily elect to accept
64coverage from an insurer for a premium equal to or greater than
65the plan premium if the insurer writing the coverage adheres to
66the provisions of s. 627.171.
67     3.  Require notice from the agent to the insured at the
68time of the application for coverage that the application is for
69coverage with the plan and that coverage may be available
70through an insurer, group self-insurers' fund, commercial self-
71insurance fund, or assessable mutual insurer through another
72agent at a lower cost.
73     4.  Establish programs to encourage insurers to provide
74coverage to applicants of the plan in the voluntary market and
75to insureds of the plan, including, but not limited to:
76     a.  Establishing procedures for an insurer to use in
77notifying the plan of the insurer's desire to provide coverage
78to applicants to the plan or existing insureds of the plan and
79in describing the types of risks in which the insurer is
80interested. The description of the desired risks must be on a
81form developed by the plan.
82     b.  Developing forms and procedures that provide an insurer
83with the information necessary to determine whether the insurer
84wants to write particular applicants to the plan or insureds of
85the plan.
86     c.  Developing procedures for notice to the plan and the
87applicant to the plan or insured of the plan that an insurer
88will insure the applicant or the insured of the plan, and notice
89of the cost of the coverage offered; and developing procedures
90for the selection of an insuring entity by the applicant or
91insured of the plan.
92     d.  Provide for a market-assistance plan to assist in the
93placement of employers. All applications for coverage in the
94plan received 45 days before the effective date for coverage
95shall be processed through the market-assistance plan. A market-
96assistance plan specifically designed to serve the needs of
97small, good policyholders as defined by the board must be
98finalized by January 1, 1994.
99     5.  Provide for policy and claims services to the insureds
100of the plan of the nature and quality provided for insureds in
101the voluntary market.
102     6.  Provide for the review of applications for coverage
103with the plan for reasonableness and accuracy, using any
104available historic information regarding the insured.
105     7.  Provide for procedures for auditing insureds of the
106plan which are based on reasonable business judgment and are
107designed to maximize the likelihood that the plan will collect
108the appropriate premiums.
109     8.  Authorize the plan to terminate the coverage of and
110refuse future coverage for any insured that submits a fraudulent
111application to the plan or provides fraudulent or grossly
112erroneous records to the plan or to any service provider of the
113plan in conjunction with the activities of the plan.
114     9.  Establish service standards for agents who submit
115business to the plan.
116     10.  Establish criteria and procedures to prohibit any
117agent who does not adhere to the established service standards
118from placing business with the plan or receiving, directly or
119indirectly, any commissions for business placed with the plan.
120     11.  Provide for the establishment of reasonable safety
121programs for all insureds in the plan. All insureds of the plan
122must participate in the safety program.
123     12.  Authorize the plan to terminate the coverage of and
124refuse future coverage to any insured who fails to pay premiums
125or surcharges when due; who, at the time of application, is
126delinquent in payments of workers' compensation or employer's
127liability insurance premiums or surcharges owed to an insurer,
128group self-insurers' fund, commercial self-insurance fund, or
129assessable mutual insurer licensed to write such coverage in
130this state; or who refuses to substantially comply with any
131safety programs recommended by the plan.
132     13.  Authorize the board of governors to provide the
133services required by the plan through staff employed by the
134plan, through reasonably compensated service providers who
135contract with the plan to provide services as specified by the
136board of governors, or through a combination of employees and
137service providers.
138     14.  Provide for service standards for service providers,
139methods of determining adherence to those service standards,
140incentives and disincentives for service, and procedures for
141terminating contracts for service providers that fail to adhere
142to service standards.
143     15.  Provide procedures for selecting service providers and
144standards for qualification as a service provider that
145reasonably assure that any service provider selected will
146continue to operate as an ongoing concern and is capable of
147providing the specified services in the manner required.
148     16.  Provide for reasonable accounting and data-reporting
149practices.
150     17.  Provide for annual review of costs associated with the
151administration and servicing of the policies issued by the plan
152to determine alternatives by which costs can be reduced.
153     18.  Authorize the acquisition of such excess insurance or
154reinsurance as is consistent with the purposes of the plan.
155     19.  Provide for an annual report to the office on a date
156specified by the office and containing such information as the
157office reasonably requires.
158     20.  Establish multiple rating plans for various
159classifications of risk which reflect risk of loss, hazard
160grade, actual losses, size of premium, and compliance with loss
161control. At least one of such plans must be a preferred-rating
162plan to accommodate small-premium policyholders with good
163experience 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
167annual premium does not exceed $20,000 at the time of
168application, $2,500 and who have neither incurred any lost-time
169claims nor incurred medical-only claims exceeding 20 50 percent
170of their premium for the immediately preceding 3 immediate 2
171years of available data, and who have an experience modification
172factor of 1.05 or less. The rate plan for subplan "A" shall be
173the same rate plan as the plan approved under ss.627.091-
174627.151, and each participant in subplan "A" shall pay the
175premium determined under such rate plan, plus a surcharge
176determined by the board to be sufficient to ensure that the plan
177does not compete with the voluntary market rate for any
178participant, but not to exceed 25 percent.
179     b.  Subplan "B" must include insureds that are employers
180identified by the board of governors as high-risk employers due
181solely to the nature of the operations being performed by those
182insureds and for whom no market exists in the voluntary market,
183and who have an whose experience modification factor of
184modifications are less than 1.00 or less. The rate plan for
185subplan "B" shall be the same rate plan as the plan approved
186under ss.627.091-627.151, and each participant in subplan "B"
187shall pay the premium determined under such rate plan, plus a
188surcharge determined by the board to be sufficient to ensure
189that the plan does not compete with the voluntary market rate
190for any participant, but not to exceed 50 percent.
191     c.  Subplan "C" must include all insureds within the plan
192that are not eligible for subplan "A," subplan "B," or subplan
193"D." The rates for subplan "C" shall be actuarially sound to
194assure that subplan "C" is self-supporting.
195     d.  Subplan "D" must include any employer, regardless of
196the length of time for which it has conducted business
197operations, which has an experience modification factor of 1.10
198or less and either employs 15 or fewer employees or is an
199organization that is exempt from federal income tax pursuant to
200s. 501(c)(3) of the Internal Revenue Code and receives more than
20150 percent of its funding from gifts, grants, endowments, or
202federal or state contracts. The rate plan for subplan "D" shall
203be the same rate plan as the plan approved under ss. 627.091-
204627.151, and each participant in subplan "D" shall pay the
205premium determined under such rate plan, plus a surcharge
206determined by the board to be sufficient to ensure that the plan
207does not compete with the voluntary market rate for any
208participant, but not to exceed 35 25 percent. However, the
209surcharge shall not exceed 10 percent for an organization that
210is exempt from federal income tax pursuant to s. 501(c)(3) of
211the Internal Revenue Code.
212     23.  Provide for a depopulation program to reduce the
213number of insureds in subplans "A," "B," and subplan "D." If an
214employer 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
219expiration or cancellation of the policy under the subplan; or
220     d.  By assumption of the subplan's obligation with respect
221to an in-force policy,
222
223that employer is no longer eligible for coverage through the
224plan. As part of the depopulation program, The premium for risks
225assumed by the voluntary market carrier may offer the employer
226coverage at approved voluntary market must be the same premium
227plus, for the first 2 years, the surcharge as determined for the
228subplan in which the employer is insured in sub-subparagraph
22922.d. A premium under this subparagraph, including surcharge,
230for an offer of coverage by a voluntary market carrier is deemed
231approved and is not an excess premium for purposes of s.
232627.171.
233     24.  Require that policies issued under subplans "A," "B,"
234and subplan "D" and applications for such policies must include
235a notice that the policy issued under subplan "A," subplan "B,"
236or subplan "D" could be replaced by a policy issued from a
237voluntary market carrier and that, if an offer of coverage is
238obtained from a voluntary market carrier, the policyholder is no
239longer eligible for coverage through subplan "D." The notice
240must also specify that acceptance of coverage under subplan "A,"
241subplan "b," or subplan "D" creates a conclusive presumption
242that the applicant or policyholder is aware of this potential.
243     (d)1.  The plan must be funded through actuarially sound
244premiums charged to insureds of the plan and deficit funding as
245provided for in paragraph (g). However, a one-time capital
246contribution is appropriated from the Workers' Compensation
247Administration Trust Fund in the amount of $10 million to defray
248any deficit in subplans "A," "B," and "D" prior to levying
249assessments.
250     2.  The plan may issue assessable policies only to those
251insureds in subplan subplans "C." and "D." Subject to
252verification by the department, the board may levy assessments
253against insureds in subplan "C" or subplan "D," on a pro rata
254earned premium basis, to fund any deficits that exist in those
255subplans. Assessments levied against subplan "C" participants
256shall cover only the deficits attributable to subplan "C," and
257assessments levied against subplan "D" participants shall cover
258only the deficits attributable to subplan "D." In no event may
259the plan levy assessments against any person or entity, except
260as authorized by this paragraph for deficits attributable to
261subplan "C." Those assessable policies must be clearly
262identified as assessable by containing, in contrasting color and
263in not less than 10-point type, the following statements: "This
264is an assessable policy. If the plan is unable to pay its
265obligations, policyholders will be required to contribute on a
266pro rata earned premium basis the money necessary to meet any
267assessment levied."
268     3.  The plan may issue assessable policies with differing
269terms 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
272plans to encourage loss prevention programs.
273     (g)  Whenever a deficit exists in subplan "A," subplan "B,"
274or subplan "D," the board shall levy, after verification by the
275office, assessments for as many years as necessary to cover the
276deficits but not to exceed 2 percent of premium annually to be
277collected by insurers to be paid by their workers' compensation
278policyholders in this state on a pro rata basis as a line item
279in addition to the calculated premium. Whenever a deficit exists
280in subplan "C," the plan shall, within 90 days, provide the
281office with a program to eliminate the deficit within a
282reasonable time. The deficit in subplan "C" may be funded
283through increased premiums charged to insureds of the plan for
284subsequent years, through the use of policyholder surplus
285attributable to any year, and through assessments on insureds in
286the plan if the plan uses assessable policies.
287     Section 2.  This act shall take effect upon becoming a law.


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