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    For a better Florida

    Reform deferred

    The workers' compensation system is broken, and other insurance rates are soaring. Fixes that de-emphasize costly litigation may help, but deeper reforms seem unlikely.

    By JEFF HARRINGTON, Times Staff Writer
    © St. Petersburg Times
    published March 2, 2003

    John Anson has endured his share of down business cycles the past 20 years as a food wholesaler supplying independent grocery stores along the west coast of Florida.

    This year, Anson started out with another stressor on top of the shaky economy: In January, he was dropped by the company providing workers' compensation insurance for his employees. Anson couldn't find a new carrier to cover his four drivers if they were injured, in part because drivers are a more risky job category. Ever since, he has been forced to pay an extra $600 a week to a Naples leasing company to effectively act as an employer issuing paychecks to his workers.

    "Why do we even have workers' comp if we can't get coverage?" Anson asked, adding that Gov. Jeb Bush "needs to do something."

    Not surprisingly, fixing the fractured workers' comp system is a top priority of Bush and the Republican-controlled state Legislature. Then again, so is tackling spiraling health care costs and reining in auto insurance premiums that are soaring due in part to a no-fault insurance program that insurers say is rampant with fraud.

    Indeed, as Florida's powerful insurance industry makes its annual trek to the Legislature, it is packing nearly as many crises as lobbyists. Its wish list, in addition to the above issues, includes barring additional insurance taxes and compelling hospitals to disclose their price lists for everything from lab tests to major surgery.

    The insured masses, meanwhile, are facing high auto and homeowners insurance bills that are squeezing family budgets. Many large auto insurers have raised rates 10 percent or more the past two years in a row, while homeowners rates are surging even more. State Farm, the largest homeowners insurer in the state, is raising rates as much as 85 percent in a two-year span.

    For many doctors, a high premium would be a preferred predicament; they can't even find carriers writing medical malpractice insurance and many are opting to go "bare," insurance lingo for taking a chance with no coverage.

    How will legislators tackle all these issues? Odds are, they won't.

    House Insurance Committee Chairwoman Kim Berfield, R-Clearwater, sets her priorities as follows: changes in workers' compensation, medical malpractice and health insurance; and legislation to discourage car insurance fraud.

    Panels commissioned by Gov. Bush have already outlined legislative proposals in those areas. For workers' comp, for instance, the state is considering putting more decisionmaking in the hands of doctors and medical peer review panels, de-emphasizing litigation and improving benefit plans.

    The hope is that such fixes, particularly preventing disputes from becoming costly lawsuits, would persuade more insurers to write policies in Florida, providing a resource for small business owners like food wholesaler Anson.

    As for the remaining issues, Tallahassee has a history of Scarlett O'Hara tendencies -- putting off for another day anything that can be put off.

    Insurance, like many industries in Florida, tends to be dominated by out-of-state players.

    Liberty Mutual is the biggest remaining insurer writing workers' compensation. Giants like State Farm and Allstate write nearly a third of the state's $7.5-billion in annual auto insurance premiums. State Farm likewise dominates the homeowners insurance market, writing nearly a fourth of the $2.5-billion in annual premiums. Fast-growing behind State Farm is the state-run windstorm association which insures anyone who cannot find coverage on the open market due to the state's signature threat of hurricanes.

    Florida's threatening weather is not the only way the state differs from the typical insurance market. It has the unwanted distinction of charging some of the highest workers' comp rates in the country while offering some of the lowest payouts in benefits.

    For every dollar they collect in premiums, workers' comp insurers across the country paid out $1.22 in losses and expenses in 2001. In Florida, insurers paid out $1.27 per $1 collected, a disparity that led to two of the biggest workers' comp underwriters to stop writing new policies in the state.

    Sam Miller, vice president of the Florida Insurance Council, which represents most insurance agencies in the state, largely agrees with Berfield's priority list of insurance crises although not necessarily with the remedies.

    But Miller said the industry's top priority in Tallahassee is not reform. His group wants to prevent legislators from tapping into $5-billion in reserves in the state's catastrophe fund. The money is supposed to help pay massive insurance claims in the event of a hurricane or other disaster, but large insurers fear it will be an easy antidote for politicians struggling to balance the budget.

    "We haven't seen any proposal to siphon off those assets, but $5-billion in cash sitting there has to be awfully tempting," said George Grawe, Florida counsel for Allstate Insurance Co., who advocates a constitutional amendment forbidding alternate uses of the catastrophe fund.

    The Legislature's overriding focus on cutting spending and surviving the prolonged economic downturn could shove insurance issues down the priority list.

    So could the fact that the state is still working through a major overhaul of its insurance regulatory system. Gone is the Florida Department of Insurance, which has merged with the state comptroller's office.

    Under the new setup, the state has an elected chief financial officer (former Insurance Department commissioner Tom Gallagher) overseeing banking and insurance.

    Last week, Gallagher released his agenda for the upcoming session. He wants:

    -- to overhaul the workers' comp system by simplifying administrative tasks, giving doctors more authority to make "medical decisions," and discouraging litigation.

    -- to stiffen penalities for lawyers, doctors and chiropractors who stage phony auto accidents for profit.

    -- to close loopholes that allow out-of-state group health insurance companies to charge predatory rates.

    -- and to repeal a state arbitration panel used by insurance companies to challenge his department's ratemaking decisions.

    Kevin McCarty, interim director of the new Office of Insurance Regulation under Gallagher, is in charge of licensing and regulating insurance companies. In his first couple months on the job, McCarty is getting an earful of suggestions -- from both insurance execs and consumer advocates -- to take to the Legislature.

    Dick Parrillo, president of United Automobile Insurance in Miami, wants the state to impose stricter penalties on fly-by-night clinics and drivers who feign auto accident injuries in order to collect personal injury protection insurance.

    "Right now, all the fraud we get is reduced to a misdemeanor or a slap on the hand of 20 hours of community service and they're right back in business," he said.

    For consumer advocate Mary Bailey, no issue looms as large as workers' compensation.

    Bailey, president of VOICES, an advocacy group for injured workers, followed a special governor's commission as it journeyed from city to city collecting testimony.

    She fears the resulting legislative package will be probusiness and only make it harder for injured employees to seek legal help and get back to work quickly. "There are four bills circulating (in the House) and I don't think any of them are in the best interest of injured workers," she said.

    Karen Woodall, a lobbyist for VOICES, several farmworkers' organizations and other consumer-oriented causes, opposes a scattershot approach to reform.

    Rather than capping attorneys' fees, she contends, the state should overhaul the way it regulates insurance for everything from auto to homeowners to workers' comp.

    "The state has to look at comprehensive insurance reform" to control spiraling premiums, she said. "They need to mandate a 20, 25 percent reduction in premiums across the board and freeze that for a year or two as they examine the whole ratemaking structure."

    Woodall has no illusions about such sweeping changes occurring this session, but she's encouraged that some Republicans are publicly talking about it.

    "I've been lobbying for 23 years on these issues and I've never even heard these discussions take place before," she said, "so I think there's hope."

    -- Jeff Harrington is a business reporter for the St. Petersburg Times.

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