Florida turns the tide.

Legislators and the governor together rescued a $3 billion workers' comp system that was spinning out of control.

Dubbed by Governor Lawton Chiles as "one of the most important economic development initiatives the state has undertaken," Florida's new workers' compensation reform reduces premiums by 10.6 percent, saving businesses $334 million a year.

Hammered out in a special session called by the governor in November, Florida's new reforms pick up where a major reform bill in 1990 left off. The 1990 legislation reduced wage-loss benefits, but failed to put the brakes on attorney involvement and escalating medical costs. Senator Toni Jennings and Representative Fred Lippman, sponsors of the 1993 legislation, hope that this time the reforms are structural and long-lasting, not superficial and short-lived.

Lawmakers applauded the 10.6 percent reduction.

"I think that's good news, but it's going to do nothing but get better over the next two or three years," says Senator Rick Dantzler. "The dispute resolution stuff we put in place and some of the other reforms are going to realize reductions and then should stabilize. I think the net result is going to be the person who hires a lawyer is the person who really needs one. I think we've ended the reflex action we've seen in claimants hiring attorneys.

"No question about it. It's going to really turn the tide."

Governor Pushed Reform

Like many states, Florida has struggled with workers' compensation rates and a system whose costs were running rampant. Doctors and lawyers profited while employers struggled to pay spiraling premiums, and injured workers ricocheted from courtrooms to doctor's offices and back. Chiles brought lawmakers into special session with the goal of cutting premiums by 20 percent. He proposed doing that by reducing litigation, eliminating doctor-shopping by claimants and insurers, curbing the use of chiropractors, scaling back wage-loss payments, and promoting the rehiring of injured workers.

Chiles traveled the state in a three-month crusade to call attention to the problem and rally support for changes. Support by business was broad, but the reform faced resistance from powerful interests feeding off the system. Insurers, health-care providers and lawyers all have a stake in the no-fault system to treat on-the-job injuries and provide wages during recovery. Although intended to serve employees and employers, Chiles and leading legislators said workers' comp was serving everyone but them.

Before the session began, the governor's office, House and Senate crafted bills. "We started back in April when (then Senate President) Ander Crenshaw appointed a select committee," said Senator W.D. Childers, chairman of the Senate Commerce Committee. "The governor went all over the state, and the House held hearings. So all of us worked together and pulled in different directions." After legislators had crafted a compromise bill, Chiles made an unusual appearance before the conference committee and laid out a series of objections. He said the bill had not gone far enough in setting up managed care, streamlining dispute resolution and lowering costs in the assigned risk pool. He forced lawmakers into overtime on a Friday, and they came back and finished the bill the following Wednesday.

When all sides were close to an agreement, fine-tuning was up to Jennings and Lippman.

"I'll Get a New Committee"

"The evening before we finally passed this damn thing, it fell apart," Childers said. "I'm sitting there between Fred Lippman and Toni and the governor is calling everybody every 15 minutes and it looks like it doesn't have a chance of passing."

Childers said Pat Thomas, the new Senate president, finally got fed up and burst out: "'Go pass that bill or I'll get me a new committee.' And we passed the bill."

If Chiles and legislators disagreed on the details of a solution, they recognized that the $3 billion-a-year system had grown far to costly for everyone.

Florida businesses paid an average of $6.37 per $100 payroll in workers' comp premiums, but high-risk businesses and the construction trades were suffocating under premiums of more than $50. The insurance industry had already filed a request for a 13.7 percent increase for the commercial companies and a 58 percent increase for the pool for businesses that couldn't obtain coverage in the private market.

Meanwhile, costs of litigation were climbing. In 1983, attorneys were involved in 6 percent of all claims; by 1992, they were involved in 25 percent. Attorney fees had risen to $137 million by 1992. Florida ranked fourth in the nation in total premiums paid. And residential contractors said workers' compensation costs added 10 percent to the cost of a new home.

Business in Jeopardy

House sponsor Representative Lippman said many of Florida's small businesses were in "dramatic jeopardy" because of the nearly 300-plus percent increase in rates over the last eight years. "This reverses that trend, but the bill also has items in it that will mature to much greater savings." Those include a managed care portion and streamlined dispute resolution and appellate court changes designed to strengthen the law.

Experts say the reform should turn out to be the best long-term fix enacted in Florida since a 1979 overhaul stabilized rates for seven years. Among the major changes:

* Eligibility. The bill tightened the legal definition of covered losses. Some injuries suffered at the workplace, but not related to the workers' job, may not be covered. Claims for injuries while traveling to and from work were eliminated.

* Medical costs. The centerpiece of the medical savings is managed care that will give insurers greater say in the use of doctors for injured workers. A gatekeeper physician is supposed to look after the injured workers' care and limit referrals. Chiropractic services are limited to 18 visits or eight weeks, whichever comes first, except for catastrophic injuries.

* Wage loss. The duration of wage-loss payments for a temporary total disability was reduced from 260 weeks to 104 weeks. Eligibility for permanent total disability was tightened to include only such catastrophic injuries as loss of a limb, blindness or severe head injury. To encourage return to work, injured employees would be eligible for lump sum disability payments even when they go back on the job.

* Dispute resolution. The bill sets up an ombudsman office in the Department of Labor to assist and inform injured workers and informally mediate disputes before a claim is filed. Filing of a claim before a workers' comp judge triggers mandatory mediation. The law reduces the number of medical opinions admissible in workers' comp disputes.

* Attorney fees. The fee schedule was cut by 5 percent, and attorneys are limited in the number of years on which they can base their fees.

* Litigation. The bill gives the governor more authority to hire and fire workers' comp judges, taking the process away from what critics said were insiders. The Legislature asked the state appellate court to assign a panel of judges to specialize in workers' comp law for more uniform decisions.

Do-it-Yourself Kit

Employers can help themselves, too. The bill mandates a 10 percent discount for steering workers' comp cases into managed care, 5 percent for implementing drug-free workplace rules and 2 percent for improved safety.

"There's a big do-it-yourself kit for business," said Bill Herrle, Florida director of the National Federation of Independent Business. "Small businesses have had a feeling of complete helplessness in the workers' comp system. This gets them directly involved in bringing their rates down."

While the reform has won praise from business leaders, labor officials said the Legislature had unfairly taken most of the savings from workers' benefits. After cutting wage loss benefits by 30 percent in 1990, the new law further reduces the wage-loss payments and eligibility.

"The 20 percent savings is coming out of the hides of workers despite the sentiments expressed by some legislators," said Marilyn Lenard, president of the AFL-CIO of Florida.

Reformers acknowledge that workers took a hit, but they argued that this time so did the other more powerful interests feeding off the system. If the bill works as planned, lawyers and health-care providers will profit less.

"It tries to return the law back to employees and employers instead of all those making money off it," said Jon Shebel, president of Associated Industries of Florida, the state's most influential business lobby.

Left undone is a long-term fix for the state's assigned risk pool. The Legislature created a joint underwriting association (JUA) to provide coverage for those in the pool. Small business that found themselves included because of their size and not their safety records will pay lower premiums than the high-risk businesses in the pool. But the Legislature refused to impose an assessment on the state's group self-insurers to cover the JUA's expected losses.

"Eventually you're going to have to spread the risk to everybody who buys an insurance policy," Shebel said. "That's where it's going to have to end up."