Most Florida businesses must purchase workers’ compensation coverage for employees who are injured at work. Only a limited number of employers are exempt from that requirement. The most common exemption applies to businesses with fewer than four full- or part-time employees. However, construction businesses must cover all their employees, regardless of how many workers they employ. Unlike other businesses, construction businesses must also cover their contractors.
Most Florida businesses satisfy the requirement to provide workers’ compensation coverage by purchasing workers’ compensation insurance. However, the Florida Division of Workers’ Compensation (DWC) can authorize a business to self-insure rather than purchasing workers’ compensation insurance.
For the most part, only very large companies — those with a net worth of at least ten million dollars — are allowed to self-insure. Those companies must also post a $100,000 security deposit, contribute to an insolvency fund, and satisfy the DWC that they have the financial ability to pay current and future claims. Those conditions are sufficiently onerous that most businesses simply purchase insurance.
Why Workers’ Compensation Insurance Is Required
Workers’ compensation insurance provides vital protection to Florida employees. Workers’ compensation benefits assure that employees will not become impoverished simply because they were injured at work. With very limited exceptions, benefits are payable for all work-related injuries regardless of fault. An employee who strays into the path of a moving forklift will generally be covered even if the employee might have avoided the accident by being more careful.
Workers’ compensation benefits include medical treatment. Coverage includes office visits, surgical procedures, physical therapy, and prescription drugs. The expense of travel to obtain authorized treatment is also covered.
When an employee is unable to return to his or her regular employment while recovering from an injury, the employee will usually qualify for temporary disability benefits. Depending on the severity of the injury, an employee might receive temporary total disability or temporary partial disability benefits.
If the employee cannot perform any work, the employee will typically receive temporary total disability benefits. Those benefits equal two-thirds of the employee’s regular weekly wages, subject to a maximum and minimum benefit. If an employee can work but only at a job that pays a lower wage, the employee will typically receive temporary partial disability benefits. Those benefits equal two-thirds of the difference between the employee’s regular wage and the lower wage that the disabled employee is capable of earning.
Temporary disability benefits end after the employee recovers or reaches a stage where no further healing will occur. If the employee is totally or partially disabled at that point, the employee may qualify for permanent partial disability or permanent total disability benefits. Death benefits are also based on the deceased employee’s average weekly wage.
All of those benefits are paid and managed by the employer’s workers’ compensation carrier. Since insurance companies take every opportunity to avoid paying claims, it is essential to cooperate with the insurance company and attend every doctor’s appointment. If an insurance company resists paying benefits, the employee can ask for advice from a Florida workers’ compensation lawyer.
Cost of Workers’ Compensation Insurance
Insurance companies base workers’ comp premiums on four primary factors. The first is the number of employees on the company’s payroll. Not surprisingly, companies that must cover a larger number of employees pay a higher premium than companies that cover a smaller number of employees.
Risk is the second factor. Risk is a function of the kind of work that employees perform. Sedentary office workers are rarely injured at work. Insurance companies assess the risk of paying benefits for those workers as low. On the other hand, construction and manufacturing are industries that insurance companies traditionally regard as high risk.
A particular company’s claims history is the third factor. Even if the risk of injury is high within a particular industry, some companies offer a safer work environment than others. Companies that reduce the risk of injury have fewer claims than comparable companies that are less concerned about workplace safety. Insurance companies reward companies that have fewer claims by charging a lower premium.
The most significant factor, however, is the base rate that all Florida workers’ compensation insurers must charge. That rate is established by a rating agency, the National Council on Compensation Insurance. Rates are based on nearly 800 classification codes that reflect the risk associated with the job duties in each job classification.
Given that different companies have different risk assessments and claims histories, premiums vary. The average premium in Florida is about $1.30 for every $100 in payroll. According to one insurer, however, workers’ comp insurance in Florida costs about 26 cents per $100 in payroll for employees in low-risk jobs and $19.40 for every $100 in payroll for workers in high-risk jobs.
Some companies offer reduced premiums when employers meet certain standards. For example, drug testing programs that attempt to assure a drug-free workplace and safety training programs might entitle an employer to a discount.
Are Premiums Unusually High in Florida?
On a regular basis, insurance companies tell Florida’s legislature that workers’ compensation insurance claims are out of control. They urge changes in the law that will reduce benefits and make it harder for injury victims to make workers’ comp claims. The insurance industry’s agenda is to increase profits at the expense of injured workers. Unfortunately, Florida’s legislature has been extraordinarily receptive to arguments made by insurance lobbyists.
The argument that premiums are too high is illusory. A 2018 study ranked Florida 21st in the country in average workers’ compensation insurance premiums. The study found that Florida premiums are moderate compared to the premiums charged in many states. In fact, rates decreased in 2018 and again in 2020.
Claims dropped drastically during the pandemic, reflecting job losses. As employees return to work, claims can be expected to increase. The insurance industry will likely blame the rise in claims on an epidemic of fraudulent claims. In fact, lower unemployment rates always result in more claims. Business that do not manage risk by assuring that their workplace is safe have only themselves to blame for high premiums.