October 19, 2020
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Senate Bill 2270

Senate Bill sb2270c1

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    Florida Senate - 2004                           CS for SB 2270

    By the Committee on Banking and Insurance





    311-2440-04

  1                      A bill to be entitled

  2         An act relating to workers' compensation;

  3         amending s. 627.311, F.S.; revising standards

  4         for coverage in subplans "A," "C," and "D" of

  5         the plan; providing surcharges and other

  6         incentives for depopulation from subplan "D";

  7         providing for an administration fee; providing

  8         minimum standards for issuance of a policy;

  9         providing for assessments against policyholders

10         to fund deficits in subplan "D"; exempting the

11         plan from specified premium tax and

12         assessments; appropriating moneys from the

13         Workers' Compensation Administration Trust Fund

14         to fund subplan "D"; providing legislative

15         intent to create a state workers' compensation

16         mutual fund under certain conditions;

17         establishing the Workers' Compensation

18         Insurance Market Evaluation Committee;

19         providing for appointment of members; requiring

20         the committee to monitor and report; requiring

21         the Office of Insurance Regulation and workers'

22         compensation insurers to report certain

23         information; specifying meeting dates and

24         interim reports for the committee; providing

25         for reimbursement for travel and per diem;

26         providing legislative intent as to the type of

27         mutual fund it intends to create; prohibiting

28         insurers from providing coverage to any person

29         who is an affiliated person of a person who is

30         delinquent in the payment of premiums,

31  

                                  1

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    Florida Senate - 2004                           CS for SB 2270
    311-2440-04




 1         assessments, penalties, or surcharges owed to

 2         the plan; providing an effective date.

 3  

 4  Be It Enacted by the Legislature of the State of Florida:

 5  

 6         Section 1.  Subsection (5) of section 627.311, Florida

 7  Statutes, is amended to read:

 8         627.311  Joint underwriters and joint reinsurers;

 9  public records and public meetings exemptions.--

10         (5)(a)  The office shall, after consultation with

11  insurers, approve a joint underwriting plan of insurers which

12  shall operate as a nonprofit entity. For the purposes of this

13  subsection, the term "insurer" includes group self-insurance

14  funds authorized by s. 624.4621, commercial self-insurance

15  funds authorized by s. 624.462, assessable mutual insurers

16  authorized under s. 628.6011, and insurers licensed to write

17  workers' compensation and employer's liability insurance in

18  this state. The purpose of the plan is to provide workers'

19  compensation and employer's liability insurance to applicants

20  who are required by law to maintain workers' compensation and

21  employer's liability insurance and who are in good faith

22  entitled to but who are unable to purchase such insurance

23  through the voluntary market. The plan must have actuarially

24  sound rates that assure that the plan is self-supporting,

25  except as otherwise provided.

26         (b)  The operation of the plan is subject to the

27  supervision of a 9-member board of governors. The board of

28  governors shall be comprised of:

29         1.  Three members appointed by the Financial Services

30  Commission. Each member appointed by the commission shall

31  serve at the pleasure of the commission;

                                  2

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    Florida Senate - 2004                           CS for SB 2270
    311-2440-04




 1         2.  Two of the 20 domestic insurers, as defined in s.

 2  624.06(1), having the largest voluntary direct premiums

 3  written in this state for workers' compensation and employer's

 4  liability insurance, which shall be elected by those 20

 5  domestic insurers;

 6         3.  Two of the 20 foreign insurers as defined in s.

 7  624.06(2) having the largest voluntary direct premiums written

 8  in this state for workers' compensation and employer's

 9  liability insurance, which shall be elected by those 20

10  foreign insurers;

11         4.  One person appointed by the largest property and

12  casualty insurance agents' association in this state; and

13         5.  The consumer advocate appointed under s. 627.0613

14  or the consumer advocate's designee.

15  

16  Each board member shall serve a 4-year term and may serve

17  consecutive terms. A vacancy on the board shall be filled in

18  the same manner as the original appointment for the unexpired

19  portion of the term. The Financial Services Commission shall

20  designate a member of the board to serve as chair. No board

21  member shall be an insurer which provides services to the plan

22  or which has an affiliate which provides services to the plan

23  or which is serviced by a service company or third-party

24  administrator which provides services to the plan or which has

25  an affiliate which provides services to the plan. The minutes,

26  audits, and procedures of the board of governors are subject

27  to chapter 119.

28         (c)  The operation of the plan shall be governed by a

29  plan of operation that is prepared at the direction of the

30  board of governors. The plan of operation may be changed at

31  any time by the board of governors or upon request of the

                                  3

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    Florida Senate - 2004                           CS for SB 2270
    311-2440-04




 1  office. The plan of operation and all changes thereto are

 2  subject to the approval of the office. The plan of operation

 3  shall:

 4         1.  Authorize the board to engage in the activities

 5  necessary to implement this subsection, including, but not

 6  limited to, borrowing money.

 7         2.  Develop criteria for eligibility for coverage by

 8  the plan, including, but not limited to, documented rejection

 9  by at least two insurers which reasonably assures that

10  insureds covered under the plan are unable to acquire coverage

11  in the voluntary market. Any insured may voluntarily elect to

12  accept coverage from an insurer for a premium equal to or

13  greater than the plan premium if the insurer writing the

14  coverage adheres to the provisions of s. 627.171.

15         3.  Require notice from the agent to the insured at the

16  time of the application for coverage that the application is

17  for coverage with the plan and that coverage may be available

18  through an insurer, group self-insurers' fund, commercial

19  self-insurance fund, or assessable mutual insurer through

20  another agent at a lower cost.

21         4.  Establish programs to encourage insurers to provide

22  coverage to applicants of the plan in the voluntary market and

23  to insureds of the plan, including, but not limited to:

24         a.  Establishing procedures for an insurer to use in

25  notifying the plan of the insurer's desire to provide coverage

26  to applicants to the plan or existing insureds of the plan and

27  in describing the types of risks in which the insurer is

28  interested. The description of the desired risks must be on a

29  form developed by the plan.

30         b.  Developing forms and procedures that provide an

31  insurer with the information necessary to determine whether

                                  4

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    Florida Senate - 2004                           CS for SB 2270
    311-2440-04




 1  the insurer wants to write particular applicants to the plan

 2  or insureds of the plan.

 3         c.  Developing procedures for notice to the plan and

 4  the applicant to the plan or insured of the plan that an

 5  insurer will insure the applicant or the insured of the plan,

 6  and notice of the cost of the coverage offered; and developing

 7  procedures for the selection of an insuring entity by the

 8  applicant or insured of the plan.

 9         d.  Provide for a market-assistance plan to assist in

10  the placement of employers. All applications for coverage in

11  the plan received 45 days before the effective date for

12  coverage shall be processed through the market-assistance

13  plan. A market-assistance plan specifically designed to serve

14  the needs of small, good policyholders as defined by the board

15  must be finalized by January 1, 1994.

16         5.  Provide for policy and claims services to the

17  insureds of the plan of the nature and quality provided for

18  insureds in the voluntary market.

19         6.  Provide for the review of applications for coverage

20  with the plan for reasonableness and accuracy, using any

21  available historic information regarding the insured.

22         7.  Provide for procedures for auditing insureds of the

23  plan which are based on reasonable business judgment and are

24  designed to maximize the likelihood that the plan will collect

25  the appropriate premiums.

26         8.  Authorize the plan to terminate the coverage of and

27  refuse future coverage for any insured that submits a

28  fraudulent application to the plan or provides fraudulent or

29  grossly erroneous records to the plan or to any service

30  provider of the plan in conjunction with the activities of the

31  plan.

                                  5

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    Florida Senate - 2004                           CS for SB 2270
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 1         9.  Establish service standards for agents who submit

 2  business to the plan.

 3         10.  Establish criteria and procedures to prohibit any

 4  agent who does not adhere to the established service standards

 5  from placing business with the plan or receiving, directly or

 6  indirectly, any commissions for business placed with the plan.

 7         11.  Provide for the establishment of reasonable safety

 8  programs for all insureds in the plan. All insureds of the

 9  plan must participate in the safety program.

10         12.  Authorize the plan to terminate the coverage of

11  and refuse future coverage to any insured who fails to pay

12  premiums or surcharges when due; who, at the time of

13  application, is delinquent in payments of workers'

14  compensation or employer's liability insurance premiums or

15  surcharges owed to an insurer, group self-insurers' fund,

16  commercial self-insurance fund, or assessable mutual insurer

17  licensed to write such coverage in this state; or who refuses

18  to substantially comply with any safety programs recommended

19  by the plan.

20         13.  Authorize the board of governors to provide the

21  services required by the plan through staff employed by the

22  plan, through reasonably compensated service providers who

23  contract with the plan to provide services as specified by the

24  board of governors, or through a combination of employees and

25  service providers.

26         14.  Provide for service standards for service

27  providers, methods of determining adherence to those service

28  standards, incentives and disincentives for service, and

29  procedures for terminating contracts for service providers

30  that fail to adhere to service standards.

31  

                                  6

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    Florida Senate - 2004                           CS for SB 2270
    311-2440-04




 1         15.  Provide procedures for selecting service providers

 2  and standards for qualification as a service provider that

 3  reasonably assure that any service provider selected will

 4  continue to operate as an ongoing concern and is capable of

 5  providing the specified services in the manner required.

 6         16.  Provide for reasonable accounting and

 7  data-reporting practices.

 8         17.  Provide for annual review of costs associated with

 9  the administration and servicing of the policies issued by the

10  plan to determine alternatives by which costs can be reduced.

11         18.  Authorize the acquisition of such excess insurance

12  or reinsurance as is consistent with the purposes of the plan.

13         19.  Provide for an annual report to the office on a

14  date specified by the office and containing such information

15  as the office reasonably requires.

16         20.  Establish multiple rating plans for various

17  classifications of risk which reflect risk of loss, hazard

18  grade, actual losses, size of premium, and compliance with

19  loss control. At least one of such plans must be a

20  preferred-rating plan to accommodate small-premium

21  policyholders with good experience as defined in

22  sub-subparagraph 22.a.

23         21.  Establish agent commission schedules.

24         22.  Establish four subplans as follows:

25         a.  Subplan "A" must include those insureds whose

26  annual premium does not exceed $2,500 and who have neither

27  incurred any lost-time claims nor incurred medical-only claims

28  exceeding 50 percent of their premium for the immediately

29  preceding immediate 2 years or any indemnity claims for the

30  immediately preceding 2 years.

31  

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    Florida Senate - 2004                           CS for SB 2270
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 1         b.  Subplan "B" must include insureds that are

 2  employers identified by the board of governors as high-risk

 3  employers due solely to the nature of the operations being

 4  performed by those insureds and for whom no market exists in

 5  the voluntary market, and whose experience modifications are

 6  less than 1.00.

 7         c.  Subplan "C" must include all insureds within the

 8  plan that are not eligible for or elect not to be covered in

 9  subplan "A," subplan "B," or subplan "D."

10         d.(I)  Subplan "D" must include any insured employer,

11  regardless of the length of time for which it has conducted

12  business operations, which has an experience modification

13  factor of 1.10 or less and either employs 15 or fewer

14  employees or is an organization that is exempt from federal

15  income tax pursuant to s. 501(c)(3) of the Internal Revenue

16  Code and receives more than 50 percent of its funding from

17  gifts, grants, endowments, or federal or state contracts.

18         (II)  The rate plan for subplan "D" shall be the same

19  rate plan as the plan approved under ss. 627.091-627.151, and

20  each participant in subplan "D" shall pay the premium

21  determined under such rate plan, plus a surcharge determined

22  by the board to be sufficient to ensure that the plan does not

23  compete with the voluntary market rate for any participant,

24  but not to exceed maximum limits specified in

25  sub-sub-subparagraph (III) 25 percent.

26         (III)  For the insured's first 3 years of coverage,

27  whether continuous or not, under subplan "D," the surcharge

28  shall not exceed 25 percent. However, the surcharge for the

29  first 3 years of coverage shall not exceed 10 percent for an

30  organization that is exempt from federal income tax pursuant

31  to s. 501(c)(3) of the Internal Revenue Code. As a means of

                                  8

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    Florida Senate - 2004                           CS for SB 2270
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 1  encouraging depopulation, the board shall apply higher

 2  surcharges upon renewal of any insured in subplan "D" as

 3  follows:

 4         (A)  Upon the insured's fourth renewal in subplan "D,"

 5  the surcharge may not exceed 40 percent.

 6         (B)  Upon the insured's fifth renewal in subplan "D,"

 7  the surcharge may not exceed 60 percent.

 8         (C)  Upon the insured's sixth renewal in subplan "D,"

 9  the surcharge not not exceed 80 percent.

10         (D)  Upon the insured's seventh or subsequent renewal

11  in subplan "D," the surcharge may not exceed 100 percent.

12         (E)  This paragraph shall not be construed to limit the

13  policyholder's selection of the subplan in which the

14  policyholder chooses to be placed if the policyholder

15  qualifies for acceptance into more than one subplan.

16         (IV)  A subplan "D" policyholder that, during any

17  2-year period, incurred two or more indemnity or medical

18  claims and incurred losses greater than $5,000 is not eligible

19  for continuation or renewal of coverage in subplan "D" and

20  remains ineligible until it has 3 years of loss history with

21  no indemnity and no medical claims exceeding 50 percent of

22  premium. The policyholder may be placed in another subplan

23  other than subplan "D," provided that the policyholder meets

24  eligibility criteria for such other subplan.

25         23.  Provide for a depopulation program to reduce the

26  number of insureds in subplan "D." If an employer insured

27  through subplan "D" is offered coverage from a voluntary

28  market carrier:

29         a.  During the first 30 days of coverage under the

30  subplan;

31         b.  Before a policy is issued under the subplan;

                                  9

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    Florida Senate - 2004                           CS for SB 2270
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 1         c.  By issuance of a policy upon expiration or

 2  cancellation of the policy under the subplan; or

 3         d.  By assumption of the subplan's obligation with

 4  respect to an in-force policy,

 5  

 6  that employer is no longer eligible for coverage through the

 7  plan. The premium for risks assumed by the voluntary market

 8  carrier must be the same premium plus, for the first 2 years,

 9  the surcharge as determined in sub-subparagraph 22.d. A

10  premium under this subparagraph, including surcharge, is

11  deemed approved and is not an excess premium for purposes of

12  s. 627.171.

13         24.  Require that policies issued under subplan "D" and

14  applications for such policies must include a notice that the

15  policy issued under subplan "D" could be replaced by a policy

16  issued from a voluntary market carrier and that, if an offer

17  of coverage is obtained from a voluntary market carrier, the

18  policyholder is no longer eligible for coverage through

19  subplan "D." The notice must also specify that acceptance of

20  coverage under subplan "D" creates a conclusive presumption

21  that the applicant or policyholder is aware of this potential.

22         25.  Require that each application for coverage and

23  each renewal premium be accompanied by a nonrefundable fee of

24  $475 to cover costs of administration and fraud prevention.

25  The board may, with the approval of the office, increase the

26  amount of the fee pursuant to a rate filing to reflect

27  increased costs of administration and fraud prevention. The

28  fee is not subject to commission and is fully earned upon

29  commencement of coverage.

30         26.  Not issue a subplan "D" policy to an employer

31  unless the employer has at least one nonexempt full-time

                                  10

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    Florida Senate - 2004                           CS for SB 2270
    311-2440-04




 1  employee in the governing class code and has payroll at least

 2  equal to the minimum wage hourly rate for one employee for 1

 3  year at 40 hours a week.

 4         (d)1.  The plan must be funded through actuarially

 5  sound premiums charged to insureds of the plan.

 6         2.  The plan may issue assessable policies only to

 7  those insureds in subplan subplans "C" and "D." Subject to

 8  verification by the department, the board may levy assessments

 9  against insureds in subplan "C" or subplan "D," on a pro rata

10  earned premium basis, to fund any deficits that exist in that

11  subplan those subplans. Assessments levied against subplan "C"

12  participants shall cover only the deficits attributable to

13  subplan "C," and assessments levied against subplan "D"

14  participants shall cover only the deficits attributable to

15  subplan "D." In no event may the plan levy assessments against

16  any person or entity, except as authorized by this paragraph.

17  Those assessable policies must be clearly identified as

18  assessable by containing, in contrasting color and in not less

19  than 10-point type, the following statements: "This is an

20  assessable policy. If the plan is unable to pay its

21  obligations, policyholders will be required to contribute on a

22  pro rata earned premium basis the money necessary to meet any

23  assessment levied."

24         3.  The plan may issue assessable policies with

25  differing terms and conditions to different groups within

26  subplan subplans "C" and "D" when a reasonable basis exists

27  for the differentiation.

28         4.  The plan may offer rating, dividend plans, and

29  other plans to encourage loss prevention programs.

30         (e)  The plan shall establish and use its rates and

31  rating plans, and the plan may establish and use changes in

                                  11

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    Florida Senate - 2004                           CS for SB 2270
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 1  rating plans at any time, but no more frequently than two

 2  times per any rating class for any calendar year. By December

 3  1, 1993, and December 1 of each year thereafter, the board

 4  shall establish and use actuarially sound rates for use by the

 5  plan to assure that the plan is self-funding while those rates

 6  are in effect. Such rates and rating plans must be filed with

 7  the office within 30 calendar days after their effective

 8  dates, and shall be considered a "use and file" filing. Any

 9  disapproval by the office must have an effective date that is

10  at least 60 days from the date of disapproval of the rates and

11  rating plan and must have prospective effect only. The plan

12  may not be subject to any order by the office to return to

13  policyholders any portion of the rates disapproved by the

14  office. The office may not disapprove any rates or rating

15  plans unless it demonstrates that such rates and rating plans

16  are excessive, inadequate, or unfairly discriminatory.

17         (f)  No later than June 1 of each year, the plan shall

18  obtain an independent actuarial certification of the results

19  of the operations of the plan for prior years, and shall

20  furnish a copy of the certification to the office. If, after

21  the effective date of the plan, the projected ultimate

22  incurred losses and expenses and dividends for prior years

23  exceed collected premiums, accrued net investment income, and

24  prior assessments for prior years, the certification is

25  subject to review and approval by the office before it becomes

26  final.

27         (g)1.  Whenever a deficit exists, the plan shall,

28  within 90 days, provide the office with a program to eliminate

29  the deficit within a reasonable time. The deficit may be

30  funded through increased premiums charged to insureds of the

31  plan for subsequent years, through the use of policyholder

                                  12

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    Florida Senate - 2004                           CS for SB 2270
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 1  surplus attributable to any year, and through assessments on

 2  insureds in the plan if the plan uses assessable policies.

 3         2.  Whenever a deficit exists for subplan "D" for any

 4  calendar year, the board shall request the Office Of Insurance

 5  Regulation to levy, by order, after verification by the

 6  office, assessments against direct premiums paid by insureds

 7  to insurers, as defined in s. 631.904(5). The amount of the

 8  deficit assessment shall be a uniform percentage not to exceed

 9  1 percent of net direct workers' compensation premiums written

10  in the state by all workers' compensation insurers.

11  Assessments shall be remitted to and administered by the board

12  in the manner specified by the order. The assessments shall be

13  collected by insurers upon issuance and renewal of policies

14  for the 1 year following the effective date of the assessment.

15  Assessments collected shall be transferred directly to the

16  plan on a periodic basis as specified by the order.

17  Assessments are not premiums and are not subject to the

18  premium tax, to the surplus lines, to any fees, or to any

19  commissions. An insurer is liable for all assessments that it

20  collects and must treat the failure of an insured to pay an

21  assessment as a failure to pay the premium. An insurer is not

22  liable for uncollectable assessments.

23         (h)  Any premium or assessments collected by the plan

24  in excess of the amount necessary to fund projected ultimate

25  incurred losses and expenses of the plan and not paid to

26  insureds of the plan in conjunction with loss prevention or

27  dividend programs shall be retained by the plan for future

28  use.

29         (i)  The decisions of the board of governors do not

30  constitute final agency action and are not subject to chapter

31  120.

                                  13

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    Florida Senate - 2004                           CS for SB 2270
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 1         (j)  Policies for insureds shall be issued by the plan.

 2         (k)  The plan created under this subsection is liable

 3  only for payment for losses arising under policies issued by

 4  the plan with dates of accidents occurring on or after January

 5  1, 1994.

 6         (l)  Except as otherwise provided, plan losses are the

 7  sole and exclusive responsibility of the plan, and payment for

 8  such losses must be funded in accordance with this subsection

 9  and must not come, directly or indirectly, from insurers or

10  any guaranty association for such insurers.

11         (m)  Effective July 1, 2004, the plan is exempt from

12  the premium tax under s. 624.509 and any assessments under ss.

13  440.49 and 440.51.

14         (n)(m)  Each joint underwriting plan or association

15  created under this section is not a state agency, board, or

16  commission. However, for the purposes of s. 199.183(1) only,

17  the joint underwriting plan is a political subdivision of the

18  state and is exempt from the corporate income tax.

19         (o)(n)  Each joint underwriting plan or association may

20  elect to pay premium taxes on the premiums received on its

21  behalf or may elect to have the member insurers to whom the

22  premiums are allocated pay the premium taxes if the member

23  insurer had written the policy. The joint underwriting plan or

24  association shall notify the member insurers and the

25  Department of Revenue by January 15 of each year of its

26  election for the same year. As used in this paragraph, the

27  term "premiums received" means the consideration for

28  insurance, by whatever name called, but does not include any

29  policy assessment or surcharge received by the joint

30  underwriting association as a result of apportioning losses or

31  deficits of the association pursuant to this section.

                                  14

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 1         (p)(o)  Neither the plan nor any member of the board of

 2  governors is liable for monetary damages to any person for any

 3  statement, vote, decision, or failure to act, regarding the

 4  management or policies of the plan, unless:

 5         1.  The member breached or failed to perform her or his

 6  duties as a member; and

 7         2.  The member's breach of, or failure to perform,

 8  duties constitutes:

 9         a.  A violation of the criminal law, unless the member

10  had reasonable cause to believe her or his conduct was not

11  unlawful. A judgment or other final adjudication against a

12  member in any criminal proceeding for violation of the

13  criminal law estops that member from contesting the fact that

14  her or his breach, or failure to perform, constitutes a

15  violation of the criminal law; but does not estop the member

16  from establishing that she or he had reasonable cause to

17  believe that her or his conduct was lawful or had no

18  reasonable cause to believe that her or his conduct was

19  unlawful;

20         b.  A transaction from which the member derived an

21  improper personal benefit, either directly or indirectly; or

22         c.  Recklessness or any act or omission that was

23  committed in bad faith or with malicious purpose or in a

24  manner exhibiting wanton and willful disregard of human

25  rights, safety, or property. For purposes of this

26  sub-subparagraph, the term "recklessness" means the acting, or

27  omission to act, in conscious disregard of a risk:

28         (I)  Known, or so obvious that it should have been

29  known, to the member; and

30  

31  

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 1         (II)  Known to the member, or so obvious that it should

 2  have been known, to be so great as to make it highly probable

 3  that harm would follow from such act or omission.

 4         (q)(p)  No insurer shall provide workers' compensation

 5  and employer's liability insurance to any person who is

 6  delinquent in the payment of premiums, assessments, penalties,

 7  or surcharges owed to the plan or to any person who is an

 8  affiliated person of a person who is delinquent in the payment

 9  of premiums, assessments, penalties, or surcharges owed to the

10  plan. For the purposes of this paragraph, the term "affiliated

11  person" of another person means:

12         1.  The spouse of such other natural person;

13         2.  Any person who directly or indirectly owns or

14  controls, or holds with the power to vote, 5 percent or more

15  of the outstanding voting securities of such other person;

16         3.  Any person who directly or indirectly owns 5

17  percent or more of the outstanding voting securities that are

18  directly or indirectly owned or controlled, or held with the

19  power to vote, by such other person;

20         4.  Any person or group of persons who directly or

21  indirectly control, are controlled by, or are under common

22  control with such other person;

23         5.  Any officer, director, trustee, partner, owner,

24  manager, joint venturer, or employee, or other person

25  performing duties similar to persons in those positions, of

26  such other person; or

27         6.  Any person who has an officer, director, trustee,

28  partner, or joint venturer in common with such other person.

29         Section 2.  Notwithstanding the provisions of sections

30  440.50 and 440.51, Florida Statutes, for the 2004-2005 fiscal

31  year the sum of $35 million is appropriated from the Workers'

                                  16

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






    Florida Senate - 2004                           CS for SB 2270
    311-2440-04




 1  Compensation Administration Trust Fund in the Department of

 2  Financial Services for transfer to the workers' compensation

 3  joint underwriting plan provided in section 627.311(5),

 4  Florida Statutes, to be used exclusively for funding subplan

 5  "D" of the plan, as established in section 627.311(5)(c)22.d.,

 6  Florida Statutes. The Chief Financial Officer shall transfer

 7  such funds to the plan no later than July 31, 2004.

 8         Section 3.  (1)  The Legislature intends to create a

 9  state workers' compensation mutual fund if workers'

10  compensation coverage is not generally available and

11  affordable to small employers in Florida by October 1, 2005.

12  In order to make this determination, there is established the

13  Workers' Compensation Insurance Market Evaluation Committee

14  which shall consist of one member appointed by the Governor,

15  who shall serve as chair; two members appointed by the

16  President of the Senate; and two members appointed by the

17  Speaker of the House of Representatives. The committee shall

18  monitor and report on the number of insurers actively writing

19  workers' compensation insurance in this state for small

20  employers, the number of policies issued, premium volume

21  written, types of underwriting restrictions utilized, and the

22  extent to which actual premiums charged vary from standard

23  rates, such as the use of excess rates pursuant to section

24  627.171, Florida Statutes, and rate deviations pursuant to

25  section 627.211, Florida Statutes. The Office of Insurance

26  Regulation shall provide such related information to the

27  committee as is requested, and workers' compensation insurers

28  shall report such information to the office in the manner and

29  format specified by the office.

30         (2)  The committee shall meet once each month,

31  beginning in August 2004, and shall provide interim reports to

                                  17

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    Florida Senate - 2004                           CS for SB 2270
    311-2440-04




 1  the appointing officers on October 1, 2004, December 1, 2004,

 2  and March 1, 2005, and at such additional times as the

 3  President of the Senate and the Speaker of the House of

 4  Representatives jointly require. Members of the committee

 5  shall be entitled to reimbursement for travel and per diem

 6  pursuant to section 112.061, Florida Statutes.

 7         (3)  If the Legislature determines that workers'

 8  compensation coverage is not generally available and

 9  affordable to small employers in Florida, the Legislature

10  intends to create a state mutual fund as a nonprofit entity

11  for the benefit of its small employer policyholders. The state

12  mutual fund would compete with private carriers and would be

13  charged with the public mission of customer service, quality

14  loss prevention, timely claims management, active fighting of

15  fraud, and compassionate care for injured workers, at the

16  lowest cost consistent with actuarial sound rates. The fund

17  should primarily rely on an in-house staff of professional

18  employees, rather than contracting with servicing carriers. It

19  is further intended that the state appropriate adequate

20  initial capitalization for the fund and that the fund be

21  subject to the same financial and other requirements as apply

22  to an authorized insurer.

23         Section 4.  This act shall take effect upon becoming a

24  law.

25  

26  

27  

28  

29  

30  

31  

                                  18

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    Florida Senate - 2004                           CS for SB 2270
    311-2440-04




 1          STATEMENT OF SUBSTANTIAL CHANGES CONTAINED IN
                       COMMITTEE SUBSTITUTE FOR
 2                         Senate Bill 2270

 3                                 

 4  
    1.   Appropriates $35 million from the Workers' Compensation
 5       Administration Trust Fund in the Department of Financial
         Services to the Workers' Compensation Joint Underwriting
 6       Association (JUA) to provide funding for the deficit in
         subplan D.
 7  
    2.   Exempts the JUA from premium tax under s. 624.509, F.S.,
 8       and assessments for the Workers' Compensation
         Administration Trust Fund and the Special Disability
 9       Trust Fund under ss. 440.51 and 440.491, F.S.,
         respectively.
10  
    3.   Requires the JUA to charge policyholders in subplan D an
11       annual $475 fee to cover costs of administration and
         fraud prevention.
12  
    4.   Prohibits the JUA from issuing a subplan D policy to an
13       employer unless the employer has at least one non-exempt
         employee in the governing class code and has payroll at
14       least equal to the minimum hourly wage for one year at 40
         hours per week.
15  
    5.   Provides that a policyholder is no longer eligible for
16       subplan D if during any 2-year period, it incurs two or
         more indemnity or medical claims and incurred losses
17       greater than $5,000. The employer remains ineligible for
         subplan D until it has 3 years of loss history with no
18       indemnity and no medical claims exceeding 50 percent of
         premium.
19  
    6.   Maintains the current caps on subplan D surcharges over
20       voluntary market premium for the first three years an
         employer is in subplan D. However, the surcharge is
21       increased for subsequent renewals.

22  7.   Provides that an employer may elect coverage in any
         subplan of the JUA for which the employer is eligible.
23  
    8.   Provides that in the event a deficit occurs in Subplan D,
24       subplan D policyholders would not be subject to
         assessment for an additional premium. Any deficit would
25       be funded through an assessment, not to exceed 1 percent
         of workers' compensation premium written in Florida.
26  
    9.   Provides that an affiliated person of any person who is
27       delinquent in the payment of premiums, assessments,
         penalties, or surcharges to the JUA is ineligible for
28       coverage in the voluntary market.

29  10.  Provides legislative intent to create a state workers'
         compensation mutual fund if workers' compensation
30       coverage is not generally available and affordable to
         small employers by October 1, 2005. This establishes the
31       Workers' Compensation Insurance Market Evaluation
         Committee.
                                  19

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

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