HB 1251CS

CHAMBER ACTION



2The Committee on Insurance recommends the following:
3
4     Committee Substitute
5     Remove the entire bill and insert:
6
A bill to be entitled
7An act relating to a joint underwriting plan of insurers;
8amending s. 627.311, F.S.; revising provisions requiring
9the Office of Insurance Regulation to approve a joint
10underwriting plan for workers' compensation and employer's
11liability insurers; requiring plan rates to be
12noncompetitive with the voluntary market for certain
13purposes; deleting authorization for insureds to select
14certain alternative coverages; requiring the plan of
15operation to establish three tiers for eligible employers;
16specifying criteria and rates for each tier; providing for
17an Assigned Risk Adjustment Program for certain employers;
18deleting provisions requiring establishment of certain
19subplans; providing policyholder choice under certain
20circumstances; providing requirements for premiums under
21such tiers; revising criteria, requirements, and
22limitations for a required depopulation program to reduce
23numbers of insureds under the tiers; providing an
24application fee for administration and fraud prevention;
25revising certain tier notice requirements; providing for
26funding of the plan through deficit funding; providing for
27a one-time capital contribution from the Workers'
28Compensation Administration Trust Fund to defray deficits
29prior to certain assessments; providing a mechanism for
30collecting deficit assessments; providing duties of the
31office; providing requirements, procedures, and
32limitations for collecting and enforcing deficit
33assessments; providing for transfers of funds from the
34Workers' Compensation Administration Trust Fund to the
35plan under certain circumstances; providing an exclusion
36for deficit assessments from certain taxes; specifying
37that deficit assessments are plan funds when collected;
38providing notice requirements for certain policies;
39providing for liability of certain insureds for certain
40additional deficit assessments; specifying venue for
41proceedings to enforce or collect assessments; expanding a
42prohibition against providing certain persons with
43workers' compensation and employers' liability insurance;
44providing an exclusion for the plan from certain taxes and
45assessments; providing an effective date.
46
47Be It Enacted by the Legislature of the State of Florida:
48
49     Section 1.  Paragraphs (a), (c), (d), (e), (g), and (p) of
50subsection (5) of section 627.311, Florida Statutes, are
51amended, and paragraph (q) is added to said subsection, to read:
52     627.311  Joint underwriters and joint reinsurers; public
53records and public meetings exemptions.--
54     (5)(a)  The office shall, after consultation with insurers,
55approve a joint underwriting plan of insurers which shall
56operate as a nonprofit entity. For the purposes of this
57subsection, the term "insurer" includes group self-insurance
58funds authorized by s. 624.4621, commercial self-insurance funds
59authorized by s. 624.462, assessable mutual insurers authorized
60under s. 628.6011, and insurers licensed to write workers'
61compensation and employer's liability insurance in this state.
62The purpose of the plan is to provide workers' compensation and
63employer's liability insurance to applicants who are required by
64law to maintain workers' compensation and employer's liability
65insurance and who are in good faith entitled to but who are
66unable to procure purchase such insurance through the voluntary
67market. The plan must have actuarially sound rates that are not
68competitive with approved voluntary market rates so assure that
69the plan functions as a residual market mechanism is self-
70supporting.
71     (c)  The operation of the plan shall be governed by a plan
72of operation that is prepared at the direction of the board of
73governors. The plan of operation may be changed at any time by
74the board of governors or upon request of the office. The plan
75of operation and all changes thereto are subject to the approval
76of the office. The plan of operation shall:
77     1.  Authorize the board to engage in the activities
78necessary to implement this subsection, including, but not
79limited to, borrowing money.
80     2.  Develop criteria for eligibility for coverage by the
81plan, including, but not limited to, documented rejection by at
82least two insurers which reasonably assures that insureds
83covered under the plan are unable to acquire coverage in the
84voluntary market. Any insured may voluntarily elect to accept
85coverage from an insurer for a premium equal to or greater than
86the plan premium if the insurer writing the coverage adheres to
87the provisions of s. 627.171.
88     3.  Require notice from the agent to the insured at the
89time of the application for coverage that the application is for
90coverage with the plan and that coverage may be available
91through an insurer, group self-insurers' fund, commercial self-
92insurance fund, or assessable mutual insurer through another
93agent at a lower cost.
94     4.  Establish programs to encourage insurers to provide
95coverage to applicants of the plan in the voluntary market and
96to insureds of the plan, including, but not limited to:
97     a.  Establishing procedures for an insurer to use in
98notifying the plan of the insurer's desire to provide coverage
99to applicants to the plan or existing insureds of the plan and
100in describing the types of risks in which the insurer is
101interested. The description of the desired risks must be on a
102form developed by the plan.
103     b.  Developing forms and procedures that provide an insurer
104with the information necessary to determine whether the insurer
105wants to write particular applicants to the plan or insureds of
106the plan.
107     c.  Developing procedures for notice to the plan and the
108applicant to the plan or insured of the plan that an insurer
109will insure the applicant or the insured of the plan, and notice
110of the cost of the coverage offered; and developing procedures
111for the selection of an insuring entity by the applicant or
112insured of the plan.
113     d.  Provide for a market-assistance plan to assist in the
114placement of employers. All applications for coverage in the
115plan received 45 days before the effective date for coverage
116shall be processed through the market-assistance plan. A market-
117assistance plan specifically designed to serve the needs of
118small, good policyholders as defined by the board must be
119finalized by January 1, 1994.
120     5.  Provide for policy and claims services to the insureds
121of the plan of the nature and quality provided for insureds in
122the voluntary market.
123     6.  Provide for the review of applications for coverage
124with the plan for reasonableness and accuracy, using any
125available historic information regarding the insured.
126     7.  Provide for procedures for auditing insureds of the
127plan which are based on reasonable business judgment and are
128designed to maximize the likelihood that the plan will collect
129the appropriate premiums.
130     8.  Authorize the plan to terminate the coverage of and
131refuse future coverage for any insured that submits a fraudulent
132application to the plan or provides fraudulent or grossly
133erroneous records to the plan or to any service provider of the
134plan in conjunction with the activities of the plan.
135     9.  Establish service standards for agents who submit
136business to the plan.
137     10.  Establish criteria and procedures to prohibit any
138agent who does not adhere to the established service standards
139from placing business with the plan or receiving, directly or
140indirectly, any commissions for business placed with the plan.
141     11.  Provide for the establishment of reasonable safety
142programs for all insureds in the plan. All insureds of the plan
143must participate in the safety program.
144     12.  Authorize the plan to terminate the coverage of and
145refuse future coverage to any insured who fails to pay premiums
146or surcharges when due; who, at the time of application, is
147delinquent in payments of workers' compensation or employer's
148liability insurance premiums or surcharges owed to an insurer,
149group self-insurers' fund, commercial self-insurance fund, or
150assessable mutual insurer licensed to write such coverage in
151this state; or who refuses to substantially comply with any
152safety programs recommended by the plan.
153     13.  Authorize the board of governors to provide the
154services required by the plan through staff employed by the
155plan, through reasonably compensated service providers who
156contract with the plan to provide services as specified by the
157board of governors, or through a combination of employees and
158service providers.
159     14.  Provide for service standards for service providers,
160methods of determining adherence to those service standards,
161incentives and disincentives for service, and procedures for
162terminating contracts for service providers that fail to adhere
163to service standards.
164     15.  Provide procedures for selecting service providers and
165standards for qualification as a service provider that
166reasonably assure that any service provider selected will
167continue to operate as an ongoing concern and is capable of
168providing the specified services in the manner required.
169     16.  Provide for reasonable accounting and data-reporting
170practices.
171     17.  Provide for annual review of costs associated with the
172administration and servicing of the policies issued by the plan
173to determine alternatives by which costs can be reduced.
174     18.  Authorize the acquisition of such excess insurance or
175reinsurance as is consistent with the purposes of the plan.
176     19.  Provide for an annual report to the office on a date
177specified by the office and containing such information as the
178office reasonably requires.
179     20.  Establish multiple rating plans for various
180classifications of risk which reflect risk of loss, hazard
181grade, actual losses, size of premium, and compliance with loss
182control. At least one of such plans must be a preferred-rating
183plan to accommodate small-premium policyholders with good
184experience as defined in sub-subparagraph 22.a.
185     21.  Establish agent commission schedules.
186     22.  For employers otherwise eligible for coverage under
187the plan, establish three tiers of employers meeting the
188criteria and subject to the rate limitations specified in this
189subparagraph. Establish four subplans as follows:
190     a.  Tier One.--
191     (I)  Criteria; rated employers.--An employer that has an
192experience modification rating shall be included in Tier One if
193the employer meets all of the following:
194     (A)  The experience modification is below 1.00.
195     (B)  The employer had no lost-time claims subsequent to the
196applicable experience modification rating period.
197     (C)  The total of the employer's medical-only claims
198subsequent to the applicable experience modification rating
199period did not exceed 20 percent of premium.
200     (II)  Criteria; non-rated employers.--An employer that does
201not have an experience modification rating shall be included in
202Tier One if the employer meets all of the following:
203     (A)  The employer had no lost-time claims for the 3-year
204period immediately preceding the inception date or renewal date
205of the employer's coverage under the plan.
206     (B)  The total of the employer's medical-only claims for
207the 3-year period immediately preceding the inception date or
208renewal date of the employer's coverage under the plan did not
209exceed 20 percent of premium.
210     (C)  The employer has secured workers' compensation
211coverage for the entire 3-year period immediately preceding the
212inception date or renewal date of the employer's coverage under
213the plan.
214     (D)  The employer is able to provide the plan with a loss
215history generated by the employer's prior workers' compensation
216insurer.
217     (E)  The employer is not a new business.
218     (III)  Premiums.--The premiums for Tier One insureds shall
219be set at a premium level 25 percent above the comparable
220voluntary market premiums until the plan has sufficient
221experience as determined by the board to establish an
222actuarially sound rate for Tier One, at which point the board
223shall adjust the rates, if necessary, to produce actuarially
224sound rates, provided, such rate adjustment shall not take
225effect prior to January 1, 2007. Subplan "A" must include those
226insureds whose annual premium does not exceed $2,500 and who
227have neither incurred any lost-time claims nor incurred medical-
228only claims exceeding 50 percent of their premium for the
229immediate 2 years.
230     b.  Tier Two.--
231     (I)  Criteria; rated employers.--An employer that has an
232experience modification rating shall be included in Tier Two if
233the employer meets all of the following:
234     (A)  The experience modification is equal to or greater
235than 1.00 but not greater than 1.10.
236     (B)  The employer had no lost-time claims subsequent to the
237applicable experience modification rating period.
238     (C)  The total of the employer's medical-only claims
239subsequent to the applicable experience modification rating
240period did not exceed 20 percent of premium.
241     (II)  Criteria; non-rated employers.--An employer that does
242not have any experience modification rating shall be included in
243Tier Two if the employer is a new business. An employer shall be
244included in Tier Two if the employer has less than 3 years of
245loss experience in the 3-year period immediately preceding the
246inception date or renewal date of the employer's coverage under
247the plan and the employer meets all of the following:
248     (A)  The employer had no lost-time claims for the 3-year
249period immediately preceding the inception date or renewal date
250of the employer's coverage under the plan.
251     (B)  The total of the employer's medical-only claims for
252the 3-year period immediately preceding the inception date or
253renewal date of the employer's coverage under the plan did not
254exceed 20 percent of premium.
255     (C)  The employer is able to provide the plan with a loss
256history generated by the workers' compensation insurer that
257provided coverage for the portion or portions of such period
258during which the employer had secured workers' compensation
259coverage.
260     (III)  Premiums.--The premiums for Tier Two insureds shall
261be set at a rate level 50 percent above the comparable voluntary
262market premiums until the plan has sufficient experience as
263determined by the board to establish an actuarially sound rate
264for Tier Two, at which point the board shall adjust the rates,
265if necessary, to produce actuarially sound rates, provided, such
266rate adjustment shall not take effect prior to January 1, 2007.
267     (IV)  Assigned Risk Adjustment Program.--Employers assigned
268to Tier Two shall be subject to the Assigned Risk Adjustment
269Program, as applicable. Subplan "B" must include insureds that
270are employers identified by the board of governors as high-risk
271employers due solely to the nature of the operations being
272performed by those insureds and for whom no market exists in the
273voluntary market, and whose experience modifications are less
274than 1.00.
275     c.  Tier Three.--
276     (I)  Eligibility.--An employer shall be included in Tier
277Three if the employer does not meet the criteria for Tier One or
278Tier Two.
279     (II)  Rates.--The board shall establish, and the plan shall
280charge, actuarially sound rates for Tier Three insureds.
281     (III)  Assigned Risk Adjustment Program.--Employers
282assigned to Tier Three shall be subject to the Assigned Risk
283Adjustment Program, as applicable. Subplan "C" must include all
284insureds within the plan that are not eligible for subplan "A,"
285subplan "B," or subplan "D."
286     d.  Subplan "D" must include any employer, regardless of
287the length of time for which it has conducted business
288operations, which has an experience modification factor of 1.10
289or less and either employs 15 or fewer employees or is an
290organization that is exempt from federal income tax pursuant to
291s. 501(c)(3) of the Internal Revenue Code and receives more than
29250 percent of its funding from gifts, grants, endowments, or
293federal or state contracts. The rate plan for subplan "D" shall
294be the same rate plan as the plan approved under ss. 627.091-
295627.151, and each participant in subplan "D" shall pay the
296premium determined under such rate plan, plus a surcharge
297determined by the board to be sufficient to ensure that the plan
298does not compete with the voluntary market rate for any
299participant, but not to exceed 25 percent. However, the
300surcharge shall not exceed 10 percent for an organization that
301is exempt from federal income tax pursuant to s. 501(c)(3) of
302the Internal Revenue Code.
303     23.  Provide for a depopulation program to reduce the
304number of insureds in the plan subplan "D." If an employer
305insured through the plan subplan "D" is offered coverage from a
306voluntary market carrier:
307     a.  During the first 30 days of coverage under the plan
308subplan;
309     b.  Before a policy is issued under the plan subplan;
310     c.  By issuance of a policy upon expiration or cancellation
311of the policy under the plan subplan; or
312     d.  By assumption of the plan's subplan's obligation with
313respect to an in-force policy,
314
315that employer is no longer eligible for coverage through the
316plan. The premium for risks assumed by the voluntary market
317carrier must be the same premium plus, for the first 2 years,
318the surcharge as determined in subparagraph 22. unless the
319employer's experience modification rating and loss history
320necessitates qualification for a different tier within the plan,
321at which time the voluntary market carrier may charge the
322employer the premium determined in subparagraph 22. for the tier
323in which the employer qualifies. Such premium change shall occur
324upon renewal, but in no event more than once annually sub-
325subparagraph 22.d. A premium under this subparagraph, including
326surcharge, is deemed approved and is not an excess premium for
327purposes of s. 627.171.
328     24.  Require that policies issued under subplan "D" and
329applications for such policies must include a notice that the
330policy issued under subplan "D" could be replaced by a policy
331issued from a voluntary market carrier and that, if an offer of
332coverage is obtained from a voluntary market carrier, the
333policyholder is no longer eligible for coverage through the plan
334subplan "D." The notice must also specify that acceptance of
335coverage under the plan subplan "D" creates a conclusive
336presumption that the applicant or policyholder is aware of this
337potential.
338     25.  Require that each application for coverage and each
339renewal premium be accompanied by a nonrefundable fee of $475 to
340cover costs of administration and fraud prevention. The board
341may, with the approval of the office, increase the amount of the
342fee pursuant to a rate filing to reflect increased costs of
343administration and fraud prevention. The fee is not subject to
344commission and is fully earned upon commencement of coverage.
345     (d)1.  The funding of the plan shall include premiums as
346provided in subparagraph (c)22. and assessments as provided in
347this paragraph. For the 2004-2005 fiscal year, a one-time
348capital contribution is appropriated from the Workers'


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