A bill to allow workers' compensation insurance companies to keep about $25 million a year instead of returning the profit to the businesses that pay the premiums passed a House committee on Monday with the support of two of the state's biggest business advocates.
By a party-line vote, the House Insurance and Banking Subcommittee approved a measure, HB 4169, that would repeal a law that's been on the books since 1979 that requires workers' compensation insurance companies to refund premiums to policyholders if their profits consistently exceed the allowable rate of return. Since 2003, the figure has exceeded $200 million.
Backing the bill was Associated Industries of Florida and the Florida Chamber of Commerce.
The business groups' endorsement took some committee members by surprise,
"This bill is going to take money away from a lot of your members," said Rep. Evan Jenne, D-Dania Beach. "Outside of the philosophical arguments, in practical terms, why would AIF support a bill that would do that?"
AIF general counsel Tamela Perdue told members the group supports the repeal because the provision, which survived a massive workers' comp rewrite in 2003, represents an unnecessary level of regulation that is inhibiting competition.
"This is in line with what we have done over the past several years -- finding areas where there are laws that are overburdensome on companies, regardless of what their industry is," Perdue said. "Today it happens to be insurance, but in the past it's been several other industries."
Others said the debate has less ideological underpinnings.
"This is about who gets the excess profits," said Paul Anderson, a workers' compensation attorney and treasurer for the Florida Justice Association, a trial lawyers' group. "Do they stay with the insurance company that charges the premium or do they go back to the small business?"
Workers' compensation rates in Florida are set by the Office of Insurance Regulation based on a proposal submitted by the National Council on Compensation Insurance. Companies that exceed their allotted profit margins by more than 5 percent for each of the last three years must return the excess to their customers.
Since 2003, the insurance industry has returned about $200 million. The figure represents less than 1 percent of the premiums paid by businesses to workers' compensation insurance carriers.
Sponsored by Rep. Dan Davis, R-Jacksonville, the bill has no Senate companion.
Teye Reeves, lobbyist for the Florida Chamber, said after the meeting that the chamber opposed the excess-profits statute because it acts as a disincentive for workers' compensation insurers to find efficiencies because they cannot keep all the savings.
Consequently the lack of profit potential keeps companies away.
"Florida, in this case, is one of four states that has an arcane excess-profits statute," Reeves said. "That makes a difference to a business and whether they are going to come to Florida."
Bill Herrle, executive director of the National Federation of Independent Business, said the business group chose not to oppose the bill, saying it has confidence in the OIR's ability to keep rates down and regulate the market.
"We have confidence that (Insurance Commissioner Kevin) McCarty and OIR are capable of adequately regulating the market."