Did Florida’s 2003 Reforms Reduce Workers’ Comp Attorney Involvement?

After Florida limited the fees paid to attorneys in workers’ compensation in 2003, attorney involvement in cases fell only slightly, according to new research.

A significant proportion of Florida workers injured at work were able to hire attorneys to represent them in workers’ compensation cases following the enactment in 2003 of reforms, even in many cases that would generate small attorney fees, a new study by the Workers Compensation Research Institute (WCRI) found.

The study is relevant to the decisions by the courts, Legislature and governor on legislation to reverse a Florida Supreme Court ruling in Emma Murray v. Mariner Health and Ace USA. In that case, the petitioners argued that the 2003 reforms made it very difficult for workers to hire attorneys, especially in cases that would generate small attorney fees. They argued that the reforms deprived injured workers of their right to access the courts, due process and equal protection of the law.

Since the 2003 legislative reforms, of which the attorneys’ fee cap was only one part, the state’s workers’ compensation marketplace has experienced an overall average rate decrease of more than 60 percent, according to the state.

After the court ruled in the plaintiff’s favor and invalidated the cap on attorneys’ fees, Insurance Commissioner Kevin McCarty said he had to raise workers’ compensation rates by an average of 6.4 percent to reflect the added costs.

The Legislature has since passed and last month Gov. Charlie Crist signed legislation reinstating the caps. McCarty quickly ordered a cut in rates.

The 2003 reforms limited the fees paid to attorneys to a contingent fee – a percentage of actual benefits that injured workers receive – in cases involving the payment of indemnity payments. In concept, the provision could have reduced incentives for attorneys to take cases, especially cases where the contingency fee was small. Prior to the reforms, attorneys could receive either a contingency fee or an hourly fee (or both) at the discretion of the judge.

The study by the Cambridge, Mass.-based WCRI addressed whether the Florida reforms reduced the ability of the average worker to retain an attorney and, in cases where the attorney fee is small, whether the reforms reduced the ability of workers to retain an attorney.

The study pointed out that while a significant proportion of workers were able to hire attorneys after the reforms, there was a small reduction in attorney involvement.

The study’s analysis of more than 47,000 cases where some income benefits were paid to the injured worker found that after the reforms (cases arising between October 2003 and September 2004) 38 percent of workers with indemnity claims had attorneys, compared with 43 percent before the reforms (cases arising from October 2002 to September 2003).

When the study controlled for changes in the characteristics of cases, it found that the proportion of workers who had attorneys after reforms was 3.6 percent lower than similar cases prior to the reforms.
That means that one in 12 workers who had an attorney prior to the reforms would not retain one after the reforms, the study observed.

According to the researchers, this reduction could be due to the limit on hourly fees for workers’ attorneys; however, it may be due to other reform provisions that changed benefit levels – hence the payments to both workers and their attorneys.

The study also reviewed some 9,300 cases with permanent partial disability and/or lump sum payments under $2,500, yielding an attorney fee of less than $500 (note the fee in Murray was $648). Here the study reported that a substantial proportion of workers were able to hire attorneys after the reforms.

For cases arising between October 2003 and 2004, 34 percent of workers with indemnity claims and PPD and/or lump sum payments of under $2,500 had attorneys (versus 37 percent of workers prior to the reforms). Even in cases where the claims payments were under $1,000, 21 percent of workers had attorneys after the reforms.

When the study controlled for changes in the characteristics of these cases, the evidence was mixed, but supports at most small impacts of the reform on the typical worker’s ability to hire an attorney.

Analyzing cases with PPD and/or lump sum payments under $1,000 and under $2,500, the study found a reduction of one percentage point in attorney involvement. This evidence suggests no decline or a small decline in the ability of workers to retain an attorney.

However, when analyzing cases under $1,500 and under $2,000, the study reported a small, but statistically significant effect of the reforms on attorney involvement (with retention of attorneys lower by 2.5 to 3.4 percentage points).

The study concluded that the evidence is mixed regarding the impact of the reforms on a worker’s ability to retain an attorney, if that worker had a case that would yield a small attorney fee in the post-reform period. However, the evidence is consistent that any change in attorney representation was likely to be small.

There were limitations to the study, noted WCRI. The study did not address the possibility that one effect of the reforms was that attorneys took cases, but invested fewer hours than necessary, reducing the quality of representation. Second, the study examined only the first year after the reforms. Some adjustment processes may take more that a year to reach their ultimate effect. Third, other reform provisions may have affected attorney incentives to take cases.

The WCRI is a nonpartisan, not-for-profit membership organization conducting public policy research on workers’ compensation, healthcare and disability issues. Its members include employers, insurers, insurance regulators and state administrative agencies in the U.S., Canada, Australia and New Zealand as well as several state labor organizations.