December 15, 2001 Gary Blankenship Senior Editor Regular News Senate committee takes up workers’ comp issues Senate committee takes up workers’ comp issues Senior Editor If a workers’ compensation plaintiff lawyer turns down an offer from an employer or insurance carrier made before the lawyer took the case and then fails to win more benefits for the client, that lawyer should not be paid any fees.That’s the recommendation of a state legislative report prepared by the staff of the Senate Banking and Insurance Committee. The study also makes two other recommendations on attorney’s fees among its 13 final recommendations.The report, according to the chair of the Bar’s Workers’ Compensation Section, focused mainly on fraud in the workers’ compensation system, both on the plaintiff and defense sides.The two other lawyer provisions were establishing a per accident cap on discretionary hourly attorneys’ fees award rate and allowing fees to attach 30 days after the receipt of a petition by an employer or carrier rather than the current 44 days. Both of those provisions were contained in SB 1188, which passed the Senate last year but failed to be adopted after the House and Senate were unable to work out differences of drastically diverging workers’ compensation bills.The Senate Banking and Insurance Committee ordered the report to look into claims that Florida has some of the highest workers’ compensation rates in the country, but does not have correspondingly high benefits or medical cost payments.The report earned high praise from Rafael Gonzalez, chair of the Bar’s Workers’ Compensation Section.“The Senate Banking and Insurance Committee is focusing on fraud; fraud on both the claimants’ side and the employer/carriers’ side,” he said. “We think as a Bar organization representing both sides of the fence that’s a wonderful thing. If there’s fraud, it ought to be dealt with harshly and immediately.”The report echoes a study last year that showed there is $1 billion or more of unpaid workers’ compensation premiums, mainly in the construction industry. That, Gonzalez said, goes a long way to explain why Florida has both high rates and low benefits compared to the rest of the country.Closing those loopholes “makes so much sense from a mathematical standpoint because if the pool is smaller [because of fraud], those folks who are in the pool pay a much larger premium,” he said.The report was based on studies, both national and Florida specific, conducted by the Workers’ Compensation Research Institute (WCRI) and the National Council on Compensation Insurance (NCCI).Findings included that Florida consistently has the highest or second highest workers’ compensation rates in the country, even following some steep rate cuts in the 1990s. At the same time, payouts are comparable with other large or nearby states, being about the same as in Connecticut, 26 to 35 percent higher than in Texas, 13 to 20 percent higher than in Wisconsin, 25 to 38 percent lower than in Georgia, and 12 to 23 percent lower than California.Part of the report looked at attorneys’ fees in workers’ compensation cases and the impact of attorneys on claims. It noted in cases where attorneys are not involved, the average Florida payout is $10,424, only slightly higher than the national average of $9,753. But in cases where attorneys are hired by the claimant, the average payout in Florida was $41,584, compared to the national average of $30,227.Although a 1993 change to Florida’s workers’ compensation law cut attorneys’ fees, litigation rates have risen, as measured by defense attorney participation. One study found that defense attorney participation doubled from 1994 to 1998, and state figures showed that attorneys are involved in over 95 percent of the filings for the informal dispute resolution process.Another study found that defense attorneys were involved in 30 percent of the cases in Florida, compared to 19 percent nationally.The report said that some observers attribute higher attorney participation to workers being uninformed of their rights, dissatisfied with their medical care, and unhappy over the size and lateness of benefits. One study also suggested the trend was caused by workers being allowed to get permanent impairment benefits while also returning to work, and “settlements allowing the washout or closure of future medical benefits.”The state did not, according to the report, maintain information showing the “cost drivers” affecting attorneys’ fees or allowing fees paid to be compared with the statutory fee schedule.Most of the report, however, dealt with nonlawyer facts about the workers’ compensation system. Findings included:• The state continues to have a major fraud problem in the construction industry, which caused an estimated $1.3 billion in premiums – up to 30 percent of which may have been legal exemptions – to go unpaid last year. That compares to the total $2.5 million premiums collected, of which $912 million came from the construction industry. Among the problems cited were the failure of the former Department of Labor to cite employers who clearly had insufficient coverage, although the department said it was following the law. Another problem is employees and subcontractors may need workers’ comp coverage for one job one day but not need it for a different task the next day. The report also said there is confusion about who can and can’t get a coverage exemption.• Although Florida has some of the lowest reimbursement rates for medical costs in the country, those expenses make up 64.9 percent of the payouts in Florida, compared to 55.8 percent nationally. The report noted that a WCRI study found payments to Florida hospitals were the highest of eight other large or nearby states and those hospital fees were as much as five times the amount authorized to non-hospital providers of the same service.• The number of cases claiming permanent total disability in Florida is three times the national average. And while statutory benefits in Florida for permanent impairment claims are among the lowest in the country, payouts are in line with that of other states. The report cited one study which concluded that impairment payments “may actually include an implicit payment for settling a permanent total disability claim.”• Indemnity benefits appear to be increasing, having been paid out on 18 percent of the claims in 1996 and 20 percent in 1998.• Payouts for medical benefits increased at 5.4 percent a year from 1994 through 1998.• The cost of delivering benefits has rapidly escalated, from $964 per claim (or 18 percent of the total cost) to $1,577 (39 percent) from 1996 to 1998. The report attributed that increase to the mandated delivery of medical services by managed care arrangements.Aside from the provisions affecting attorneys’ fees, the report made several recommendations, including:• Making it easier to assess penalties up to $5,000 per employee on contractors who carry insufficient coverage by dropping the requirement to show intent to carry inadequate coverage.• Requiring mandatory coverage for all construction workers below the subcontractor level, as well as for all persons contracting with a subcontractor.• Clarifying state law that employers carrying inadequate insurance are not in compliance with state law.• Revising the standard for permanent total disability to exclude reference for injuries that would qualify the worker for Social Security disability or supplemental income.• Increasing the permanent impairment benefits from 33 to 66.67 percent of the temporary total benefits.• Adopting fee schedules to help contain medical costs, similar to several other states.• Giving the state better oversight to protect against overutilization and improper billing by providers. The eight-page summary report can be found at: http://www.leg.state.fl.us/data/Publications/2002/Senate/reports/interim_reports/pdf/2002-117bi.pdf. The 35-page long report can be found at: http://www.leg.state.fl.us/data/Publications/2002/Senate/reports/interim_reports/pdf/2002-117bilong.pdf.
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