We stumble through the "new normal" of the "post-COVID." We are perhaps of a mind that the pandemic has ended or that it never began. I have heard many prognostications on the challenges that we have faced. I am not at all certain that there was ever a valid reason for the panic that ensued regarding SARS-CoV-2. There will be studies, experiments, and more in years to come. I am certain, at a minimum, that we have much to learn about such viruses.
But, what we do know with some reasonable certainty is that the government's reaction to COVID was real. There were some marked variations across the country. Some states acted more strongly than others. Some took actions that perhaps were immediately harmful. Others took radical actions regarding laws.
Some workers' compensation adjudication systems shut down, ground to halt, and left the injured workers and employers waiting. I add here, yet again, how proud I am of the Florida OJCC team that pesevered throughout. There was no shut down, no closure, and not pause. To the benefit of employers, employees, attorneys, adjusters, physicians, nurses, and more, this system kept on ticking. I will never tire of congratulating the team that was so focused, dedicated, and purposeful.
Now, the virus is being discussed in the world of insurance. You see, in Florida workers' compensation there is an annual ritual that involves the National Council on Compensation Insurance (NCCI) applying a great deal of experience and mathematics to the question of insurance rates. It files a proposal each year with the Office of Insurance Regulation (OIR), and ultimately the OIR decides what next year's workers' compensation premiums will be. That is an oversimplification but work with me here.
Insurance News Net reports that in 2023 there is a proposal for "the largest workers’ compensation rate cut in (Florida) history." The NCCI proposal is for a 15.1% decrease in 2024. That is a big number in any setting. Imagine if you could lose 15.1% of your body weight, or earn 15.1% on your savings account? That is significant. However it is particularly significant in the realm of workers' compensation.
This might be expected to be greeted with unanimous approval and excitement. But, the story reports that there are concerns. For one, it notes that "Florida already enjoys some of the lowest workers’ compensation rates in the country." The cumulative effect, if this latest reduction is approved, will be "a more than 70% reduction in rates over" recent years.
There are employers that are arguing against this decrease. They are concerned about "experience" and "frequency." Frequency refers to how often injury is occurring. The evidence supports that frequency has been on the decline across the country for decades. We have been witnessing the cummulative effects of more safety focus, better medical treatment, and more logical workers' compensation laws. The decreasing frequency is a persistent driver of decreasing premiums.
Don't believe me? Hit a conference or two with the actuaries and you will hear this message. Or, study the latest NCCI report on the topic. Or delve into the conclusions about data provided by the Workers' Compensation Research Institute (WCRI). If you prefer, google "workers' compensation frequency in America" and look at any of the various exposes of the topic.
But we cannot forget the other side of the coin, the severity. How serious the injuries are can play a large role in the costs that they present. Frequency and severity have to go together in helping us to appreciate the experience that is resulting in any workers' compensation marketplace. And it is that experience this year that is largely releid upon to predict next year. The prediction of next year drives the premium discussion for next year.
Despite the first reaction of celebrating lower rates, and the potential for business to prosper and profit, there are those in the business world that are not cautiously optimistic, but instead optimistically cautious. They want to believe that rates could viably decrease as proposed. They harbor doubts though. They fear that the rates are being set with reference to the accident counts in that short pandemic era that spawned telecommuting, less vehicle use, less injury risk, and perhaps decreased injury rates.
We heard repeatedly during the pandemic that orthopedic injury was down. We heard that severity of physical injury was down. There were those who prognosticated that the volume of "accidents" reported remained significant, but many were reports of COVID as an "occupational disease" and perceptions that such claims were either denied, settled rapidly, or in many instances of minimal expense in terms of duration and medical care.
There were those who therefore appeared at the hearing on the NCCI proposal and argued that "data supporting a further rate cut was flawed." They expressed concerns of the unkown, and that any cut at this time failes to "take into account current trends." There is recognition of the current stability in Florida workers' compensation and the admirable availability of free-market coverage. But there is concern expressed that too little premium will be collected in reliance on the COVID years, and that will lead to challenges as experience, frequency, and severity perhaps increase back to pre-COVID experience.
This is noted as to increasing work, and the related potential for injury. It is being suggested that new hires in the post-COVID environment are less experienced, familiar, and prepared for some workplaces. There are suggestions made that some of those workers may face greater chances of mistake or accident, and thus injury. That sentiment is one that is periodically discussed in the world of workers' compensation.
The one encouragement is that we will soon know. The Office of Insurance Regulation will publish its order and we will know what the 2024 rates will be. Whether the experience and exposure in years to come justify that rate, whatever it is, will take many years to discern with certainty. It will be interesting to watch in any case, as will be the coming studies, reports, and research on the SARS-CoV-2 virus that spawned the pandemic, panic, or disruption (with all due respect to whichever perspective you have).
