DEPARTMENT OF FINANCIAL SERVICES
FINAL REPORT
COMPLIANCE ECONOMIC REVIEW OF RULES FOR 2012
“GROUP 1 RULES”
PURSUANT TO SECTION 120.745, FLORIDA STATUTES
Submitted by the Department of Financial Services
Prior to December 1, 2012
1
OVERVIEW
By May 1, 2012, section 120.745(5), F.S. required each agency to perform compliance economic
reviews for all rules listed under Group 1 in the Enhanced Biennial Review of Rules. The
Department of Financial Services (“DFS”) completed this task. It identified 8 rules or rule
groupings that required a Compliance Economic Review:
•
•
•
•
•
•
•
•
69A-21
69C-3.007
69K-5.003
69K-8.003
69K-20.001
69L-5 (5.204, .206, .208, .210, .218, .219, .225)
69L-5 (5.229 and .230)
69L-24.005
Subparagraph 120.745(5)(d) requires each agency to publish a final report of its compliance
economic reviews for Group 1 rules by December 1, 2012. The following items are required to
be included in the report:
•
•
•
•
•
•
The text of the rule
The compliance economic review for the rule
All lower regulatory cost alternatives received by the agency
The agency’s written explanation for rejecting those submitted lower regulatory cost
alternatives
The agency’s justification to repeal or amend the rule or to retain the rule without
amendment
The written certification of the agency head to JAPC verifying completion of the
review and reporting required under s. 120.745(5).
The notice of the completion of this report and the written certification of the Chief Financial
Officer will be published on the DFS website.
DSF received no lower regulatory cost alternatives and therefore has not rejected any of
those alternatives. The eight rules are being retained without amendment. Because the rules
are either mandated by statute or are essential to the agency’s business, no amendments
have been made to the rules.
2
1. 69A-21.102(12) - FIRE EXTINGUISHERS AND PRE-ENGINEERED SYSTEMS
A. Rule Text:
69A-21.102 Dealer License.
(12) Equipment requirements.
(a) Each licensed business location shall be required to possess, at a minimum, the required equipment listed
below, the equipment shall be demonstrated at the time of any inspection, to be functional to perform service as
indicated by the license. All facilities must be in possession of a retester’s identification number and certification in
compliance with the portions of 49 Code of Federal Regulations, Parts 100-177 which are referenced in
Compressed Gas Association CGA C-1-1996, Methods for Hydrostatic Testing of Compressed Gas Cylinders,
Compressed Gas Association CGA C-6-1993, Standards for Visual Inspection of Steel Compressed Gas Cylinders,
Seventh Edition, Reaffirmed 1995, Compressed Gas Association CGA C-6.1-1995, Standards for Visual Inspection of
High Pressure Aluminum Compressed Gas Cylinders, and Compressed Gas Association CGA C-6.3-1999 Guidelines
for Visual Inspection and Requalification of Low Pressure Aluminum Compressed Gas Cylinders, Second Edition, as
adopted in Rule Chapter 69A-3, F.A.C.
(b) Minimum Equipment and Facilities Requirements.
MINIMUM EQUIPMENT AND FACILITIES REQUIRED PER CLASS OF LICENSE
1. Hydrostatic test equipment for high pressure testing and calibrated cylinder A
maintained in compliance with the requirements of Compressed Gas Association, Inc.,
publication CGA C-1, the edition as adopted in Rule Chapter 69A-3, F.A.C. DOT
certification letter posted on or near the test apparatus identifying a current retester
identification number issued to the facility.
2. Equipment for test dating United States Department of Transportation specification A
cylinders. Die stamps for Class A and D facilities must be a minimum of 1/4 inch and
include the retester identification number issued to the facility.
B
C
D
3. Clock with sweep second hand or digital clock with second increments on or close to A
hydrostatic test apparatus.
B
C
D
4. CO2 receiver bulk, liquid, or cascade system for proper filling of CO2 extinguishers.
A
B
5. Conductivity tester and tags as required by NFPA 10, as adopted in Rule Chapter 69A- A
3, F.A.C.
B
C
6. Drying method which does not exceed 150 degrees Fahrenheit for high and low A
pressure cylinders in accordance with NFPA 10, as adopted in Rule Chapter 69A-3,
F.A.C., and the manufacturer’s specifications.
B
C
D
7. Proper wrenches with non-serrated jaws or valve puller, hydraulic or electric.
A
B
C
D
8. Appropriate inspection light.
A
B
C
D
9. Low pressure test apparatus for the licenses held, with gauges certified accurate in A
compliance with the requirements of Compressed Gas Association, Inc., publication
B
C
D
3
CGA-C1, the edition as adopted in Rule Chapter 69A-3, F.A.C., and maintained in
accordance with the requirements of the said CGA-C1. United States Department of
Transportation certification letter posted on or near the test apparatus identifying the
current retester identification number issued to the facility.
10. All record tags, service, hydrotest, 6 year maintenance, as required by Chapter 69A- A
21, F.A.C., as adopted in Rule Chapter 69A-3, F.A.C., and the portions of 49 Code of
Federal Regulations, Parts 100-177 which are referenced in Compressed Gas Association
CGA C-1-1996, Methods for Hydrostatic Testing of Compressed Gas Cylinders,
Compressed Gas Association CGA C-6-1993, Standards for Visual Inspection of Steel
Compressed Gas Cylinders, Seventh Edition, Reaffirmed 1995, Compressed Gas
Association CGA C-6.1-1995, Standards for Visual Inspection of High Pressure Aluminum
Compressed Gas Cylinders, and Compressed Gas Association CGA C-6.3-1999 Guidelines
for Visual Inspection and Requalification of Low Pressure Aluminum Compressed Gas
Cylinders, Second Edition, and which pertain to low pressure and high pressure
cylinders, as adopted in Rule Chapter 69A-3, F.A.C.
B
C
D
11. Scales with division of not more than 1/4 ounce with adequate weighing capacity for A
weighing CO2 cartridges, must be certified annually or tested for accuracy annually by a
service agency in accordance with the provisions of Chapter 531, F.S.
B
C
D
12. Scales with adequate weighing capacity for extinguisher inspection and filling must A
be certified annually or tested for accuracy annually by a service agency in accordance
with the provisions of Chapter 531, F.S.
B
C
D
13. Vise, 6 inch minimum (chain or bench).
A
B
C
D
14. Supply of chemicals in accordance with manufacturer’s specifications in proper A
storage for all extinguishers and systems being serviced.
B
C
D
15. Facilities for leak testing of pressurized extinguishers and preengineered system A
cylinders in accordance with the manufacturer’s specifications.
B
C
D
16. Pressure gauges shall be calibrated in accordance with Section 4-5.4.2, NFPA 10, as A
adopted in Rule Chapter 69A-3, F.A.C.
B
C
D
17. Adapters, fittings and equipment for properly servicing and/or recharging all A
extinguishers and preengineered systems cylinders being serviced and recharged.
B
C
D
18. Safety cage or barrier for hydrostatic testing of low pressure cylinders.
A
B
C
D
19. Scales with divisions of not more than 1/2 pound and minimum 150 pounds for A
weighing chemical recharging. Must be certified annually or tested for accuracy annually
in accordance with the provisions of Chapter 531, F.S.
B
C
D
20. Cable crimping tool (where required) for preengineered systems being installed and
serviced in accordance with the manufacturer’s specifications.
D
21. Cocking lever (where required) for preengineered systems being installed and
serviced in accordance with the manufacturer’s specifications.
D
22. Pipe vise, dies, reamer, etc., for preengineered systems being installed and serviced
D
4
in accordance with the manufacturer’s specifications.
23. Stock of supplies for extinguishers and/or preengineered systems being installed and A
serviced in accordance with the manufacturer’s specifications.
B
C
D
24. Installation, maintenance and recharge manuals for
preengineered systems being inspected, serviced and installed.
extinguishers and A
B
C
D
25. Closed recovery system for reusing dry chemical in accordance with NFPA 10, as A
adopted in Rule Chapter 69A-3, F.A.C.
B
C
D
26. NFPA 10 and NFPA 96, as adopted in Rule Chapter 69A-3, F.A.C., Compressed Gas A
Association CGA C-1-1996, Methods for Hydrostatic Testing of Compressed Gas
Cylinders, Compressed Gas Association CGA C-6-1993, Standards for Visual Inspection of
Steel Compressed Gas Cylinders, Seventh Edition, Reaffirmed 1995, Compressed Gas
Association CGA C-6.1-1995, Standards for Visual Inspection of High Pressure Aluminum
Compressed Gas Cylinders, and Compressed Gas Association CGA C-6.3-1999 Guidelines
for Visual Inspection and Requalification of Low Pressure Aluminum Compressed Gas
Cylinders, Second Edition, and the portions of 49 Code of Federal Regulations, Parts 100177 which are referenced in Compressed Gas Association CGA C-1-1996, Methods for
Hydrostatic Testing of Compressed Gas Cylinders, Compressed Gas Association CGA C-61993, Standards for Visual Inspection of Steel Compressed Gas Cylinders, Seventh
Edition, Reaffirmed 1995, Compressed Gas Association CGA C-6.1-1995, Standards for
Visual Inspection of High Pressure Aluminum Compressed Gas Cylinders, and
Compressed Gas Association CGA C-6.3-1999 Guidelines for Visual Inspection and
Requalification of Low Pressure Aluminum Compressed Gas Cylinders, Second Edition,
as adopted in Rule Chapter 69A-3, F.A.C., and the portions of 29 Code of Federal
Regulations 1900-1910 which are referenced in Compressed Gas Association CGA C-11996, Methods for Hydrostatic Testing of Compressed Gas Cylinders, Compressed Gas
Association CGA C-6-1993, Standards for Visual Inspection of Steel Compressed Gas
Cylinders, Seventh Edition, Reaffirmed 1995, Compressed Gas Association CGA C-6.11995, Standards for Visual Inspection of High Pressure Aluminum Compressed Gas
Cylinders, and Compressed Gas Association CGA C-6.3-1999 Guidelines for Visual
Inspection and Requalification of Low Pressure Aluminum Compressed Gas Cylinders,
Second Edition, all as adopted in Rule Chapter 69A-3, F.A.C.
B
C
27. NFPA 12, 12A, 34, 17, 17A, 96, 2001, CGA C-1, C-6, C-6.1, C-6.3, and the portions of
49 Code of Federal Regulations, Parts 100-177 which are referenced in Compressed Gas
Association CGA C-1-1996, Methods for Hydrostatic Testing of Compressed Gas
Cylinders, Compressed Gas Association CGA C-6-1993, Standards for Visual Inspection of
Steel Compressed Gas Cylinders, Seventh Edition, Reaffirmed 1995, Compressed Gas
Association CGA C-6.1-1995, Standards for Visual Inspection of High Pressure Aluminum
Compressed Gas Cylinders, and Compressed Gas Association CGA C-6.3-1999 Guidelines
for Visual Inspection and Requalification of Low Pressure Aluminum Compressed Gas
Cylinders, Second Edition, and which pertain to low pressure and high pressure
cylinders, and the portions of 29 Code of Federal Regulations 1900-1910 which are
referenced in Compressed Gas Association CGA C-1-1996, Methods for Hydrostatic
Testing of Compressed Gas Cylinders, Compressed Gas Association CGA C-6-1993,
Standards for Visual Inspection of Steel Compressed Gas Cylinders, Seventh Edition,
Reaffirmed 1995, Compressed Gas Association CGA C-6.1-1995, Standards for Visual
Inspection of High Pressure Aluminum Compressed Gas Cylinders, and Compressed Gas
D
5
Association CGA C-6.3-1999 Guidelines for Visual Inspection and Requalification of Low
Pressure Aluminum Compressed Gas Cylinders, Second Edition, all as adopted in Rule
Chapter 69A-3, F.A.C.
28. Closed recovery system for removal and recharge of halon as required in NFPA 10, as
adopted in Rule Chapter 69A-3, F.A.C., or an exemption from the State Fire Marshal, as
provided in Section 633.061(3), F.S.
29. Printed invoices completed in compliance with Rule 69A-21.251, F.A.C.
A
B
C
D
30. System inspection reports.
D
Rulemaking Authority 633.01 FS. Law Implemented 633.01, 633.065(1)(b), 633.071(2), 633.083(2) FS. History–New 2-7-89,
Amended 10-20-93, Formerly 4A-21.403.
B. Compliance Economic Review:
COMPLIANCE ECONOMIC REVIEW
Pursuant to Section 120.745(5), Florida Statute
RULE 69A-21.102(12) FLORIDA ADMINISTRATIVE CODE
Fire Equipment Dealer Licenses, Equipment Requirements
DEPARTMENT OF FINANCIAL SERVICES
DIVISION OF STATE FIRE MARSHAL
MARCH 23, 2012
6
JUSTIFICATION FOR THE RULE
Section 633.061(4)(c)-, Florida Statutes, mandates that “A license of any class shall not
be issued or renewed by the State Fire Marshal and a license of any class shall not remain
operative unless… (2) the State Fire Marshal or his or her designee has by inspection
determined that the applicant possesses the equipment required for the class of license
sought...”
This rule has been adopted to comply with this legislative mandate regarding the
inspection of a fire equipment dealer licensee’s facility.
The benefits of this rule relate directly to the health and safety of the public, as well as
the protection of property. Inspection of a fire equipment dealer’s facility ensures that each
licensee maintains all equipment necessary in order to service, inspect, recharge, repair,
hydrotest, or install fire extinguishers and pre-engineered fire suppression systems in the state
of Florida. Proper inspection, service, maintenance, and installation of these vital life safety
systems is essential to ensuring these systems and extinguishers will operate as intended when
they are activated. The prevention or early suppression of fire achieved by successful operation
of extinguishers and suppression systems helps to prevent property damage and protect lives
from the spread of fire.
STATEMENT OF ESTIMATED REGULATORY COSTS
1. Direct or indirect economic impact
This Rule is applicable to any individual or business entity wishing to obtain a license to service
fire extinguishers or pre-engineered fire suppression systems in Florida. It directly impacts
those individuals seeking to obtain or maintain a fire equipment dealer license, by requiring
thirty items to be in the licensee’s possession in order to operate. The thirty items would be all
those necessary for a licensee holding both a Class A and Class D license, who is not exempt
from servicing halon extinguishers and systems (the highest classes of licenses available to fire
equipment dealers). The rule also indirectly impacts other people in Florida by ensuring that all
licensees possess the equipment necessary to conduct all work within the scope of each license
in a way that protects life and property.
2. Cost to the Division and other state or local governments to implement the rule and
enforce the rule
Cost to the division – There is no cost to the Division due to the implementation of this rule as
the inspection is required by statute and the rule merely outlines the equipment necessary to
be present at the time of inspection.
7
Cost to other state or local governments– Enforcement of the rule is no cost to other state
agencies or local governments because the rule does not impose an inspection duty on other
state agencies or local governments.
3. Effect on state or local revenues
As the inspection fee is included within the application fee mandated by statute, there is no
effect on state or local revenues.
4. Transactional costs
There are no transactional costs identifiable by the Division of State Fire Marshal.
5. Impact on small business
Section 288.703 (6), Florida Statutes defines “Small business” to mean “an independently
owned and operated business concern that employs 200 or fewer permanent full-time
employees and that, together with its affiliates, has a net worth of not more than $5 million or
any firm based in this state which has a Small Business Administration 8(a) certification. As
applicable to sole proprietorships, the $5 million net worth requirement shall include both
personal and business investments.”
The Florida Fire Equipment Dealer’s Association indicated that the cost to any small business
seeking to obtain initial licensure as a fire equipment dealer, and thus required to procure the
equipment listed in this rule, is estimated at no more than $21,888 per facility. This cost is
estimated as the cost to obtain all the equipment required for an applicant wishing to procure a
Class A and Class D license with no halon exemption (thereby allowing them to service preengineered systems and extinguishers using halon as the extinguishing agent) and assumes that
the applicant will be procuring brand new equipment. These are the initial, start-up costs of
the business and are not costs which will be incurred by the applicant on a yearly basis. It
should also be noted that almost all the equipment required by this rule is the minimum
equipment that would be needed to safely conduct this business absent any regulations at all.
The 5-year cost as estimated by the Department, taking into account the cost per facility
provided by the Florida Fire Equipment Dealer’s Association is $7,879,680.
6. Impact on small counties and small cities
Section 120.52 (18), Florida Statutes defines “Small city” to mean “any municipality that has an
unincarcerated population of 10,000 or less according to the most recent decennial census.”
Section 120.52 (19), Florida Statutes defines “Small county” means ”any county that has an
unincarcerated population of 75,000 or less according to the most recent decennial census.”
There is no impact to small cities or counties as all inspections are completed by the Division of
State Fire Marshal and the equipment is procured by the applicants themselves.
8
METHODOLOGY
Below is the methodology used to calculate the cost of the enforcement of this rule to a small
business. From 2007-2010, an average of 72 applications were received for fire equipment
dealer licenses. Although the applications varied in class and halon exemption (as well as the
fact that one company may have submitted more than one application for different types of
licenses at the same facility), this analysis is done assuming all inspections were completed for a
Class A and Class D (the highest scope of work available, thus the most equipment required)
facility without an exemption from servicing halon. This calculation also assumes all
equipment purchased is brand new (although used extinguisher and system servicing
equipment is readily available). As indicated in previous sections, the approximate cost
estimated by the Florida Fire Equipment Dealers Association to procure all equipment listed in
the rule would be $21,888 per facility.
72 applicants per year x $21,888 per facility = $1,575,936 per year
$1,575,936 per year x 5 years = $7,879,680
*Note* These are the initial, start-up costs of the business and are not costs which will be
incurred by the applicant on a yearly basis. It should also be noted that almost all the
equipment included within this rule is the minimum equipment that would be needed to safely
conduct this business absent any regulations at all.
C. Lower Regulatory Cost Alternatives Received: None
D. Reason to Reject Lower Regulatory Cost Alternatives: N/A
E. Reason to Retain the Rule without Amendment: The State Fire Marshal has
determined that this is the minimum equipment needed to operate these
businesses to ensure the health and safety of citizens.
9
2. 69C-3.007 – Assessment for Investment Services
A. Rule Text:
69C-3.007 – Assessment for Investment Services. The Chief Financial Officer will assess that fee prescribed by
Section 17.61(4)(b), F.S., against the average daily balance of the investment account of each eligible fund. The
assessment will be made on a monthly basis and will be charged against the investment account of each fund.
Specific Authority 17.29 FS. Law Implemented 17.61, 17.65 FS. History–New 1-4-82, Formerly 4C-3.07, Amended 5-20-90,
Formerly 4C-3.007.
B. Compliance Economic Review:
COMPLIANCE ECONOMIC REVIEW
Pursuant to section 120.745(5), Florida Statutes
RULE 69C-3.007, FLORIDA ADMINISTRATIVE CODE
ADMINISTRATION OF CERTAIN STATE FUND INVESTMENTS: ASSESSMENT FOR INVESTMENT
SERVICES
DEPARTMENT OF FINANCIAL SERVICES
DIVISION OF TREASURY
March 29, 2012
10
JUSTIFICATION FOR THE RULE
Section 17.29, Florida Statutes, provides the Chief Financial Officer (CFO) the authority to adopt
rules to implement Chapter 17, Florida Statutes.
Section 215.535, Florida Statutes, created in 1981 and effective October 1, 1981, gave the State
Treasurer the power to invest all trust funds and agency funds formerly performed by the
Florida State Board of Administration. It also required the State Treasurer to make an annual
assessment of .00005 against the average daily balance of moneys made available pursuant to
section 215.535(3), Florida Statutes. The annual assessment was required to be used to cover
the cost of administration and to be deposited in the General Revenue Fund. At that time, the
estimated fiscal impact of the annual assessment of .00005 on state agencies/state funds was
an increase of $80,000 to General Revenue. The statute also provided that the State Treasurer
may adopt rules necessary to administer the section.
Currently, section 17.61(4)(b), Florida Statutes, mandates that the Chief Financial Officer make
an annual assessment of 0.12 percent against the average daily balance of those moneys made
available pursuant to section 17.61, Florida Statutes, and 0.2 percent against the average daily
balance of those funds requiring investment in a separate account. The Department rule
associated with this statutorily required annual assessment, 69C-3.007, F.A.C., describes how
and when the assessments (based upon statutory rates cited above) will be made against the
investment accounts. Citing section 17.61(4)(b), Florida Statutes, the rule provides that the
proceeds from this assessment shall be deposited in the Treasury Administrative and
Investment Trust Fund. As required by statute, the annual assessment is used to defray the
expense of the Chief Financial Officer’s office in the discharge of the administrative and
investment powers and duties, including supplies, equipment, other materials, salaries,
expenses of required personnel, and all other legitimate expenses related to the administrative
and investment powers and duties imposed upon and charged to the CFO under Chapter 17,
Florida Statutes. The unencumbered balance in the trust fund at the close of each quarter shall
not exceed $750,000. Any funds in excess of this amount shall be transferred unallocated to the
General Revenue Fund. However, fees received from deferred compensation participants
pursuant to section 112.215, Florida Statutes, shall not be transferred to the General Revenue
Funds and shall be used to operate the deferred compensation program.
Over the last five fiscal years, $71.8 million in administrative fees have been assessed. During
this time, $43 million was transferred unallocated to the General Revenue Fund for an average
annual contribution of $8.6 million to the General Revenue Funds.
11
STATEMENT OF ESTIMATED REGULATORY COSTS
1.
Direct or indirect economic impact:
Likelihood of the regulatory cost, including transactional costs, of more than $1
million cumulatively over five years.
For the past five fiscal years, the administrative fees assessed pursuant to this
rule averaged $14.4 million on an annual basis. It is almost a certainty that costs
will continue to exceed $1 million over the next five fiscal years. Based on
historical data, the final costs are expected to fall within a range of $14 - $16
million per fiscal year.
Over the last five fiscal years, $71.8 million in administrative fees have been
assessed, in aggregate. During this same period, $43 million was transferred
unallocated to the General Revenue Fund for an average annual contribution of
$8.6 million to the General Revenue Funds.
2.
Types and numbers of individuals or entities likely to be required to comply
with this rule:
State agencies and participants in the Division of Treasury’s Special Purpose
Investment Pool (SPIA) are required to pay the annual assessment. SPIA
participants may be any board, association, or entity created by the State
Constitution or by law, except for those excluded by statute. As of June 30, 2011,
there were 26 state agencies and 70 SPIA participants subject to the annual
assessment fee.
3.
Cost to the Division and other state or local governments to implement the
rule and enforce the rule:
This rule is implemented and enforced by two positions within the Division of
Treasury at an annual cost totaling approximately $32,000.
4.
Effect on state or local revenues:
For the past five fiscal years, the administrative fees assessed pursuant to this
12
rule averaged $14.4 million per fiscal year. Costs are expected to continue to
exceed $1 million for each of the next five fiscal years. Based on historical data,
the final costs over the next five fiscal years are expected to fall within a range of
$14 - $16 million per fiscal year.
Over the last five fiscal years, $71.8 million in administrative fees have been
assessed. During this time, $43 million was transferred as unallocated revenues
to the General Revenue Fund for an average of $8.6 million annual increase to
General Revenue Funds.
5.
Transactional costs:
There are no other costs other than those mentioned in 3 and 4 above.
6.
Impact on small business:
None.
7.
Impact on small counties and small cities:
An administrative fee is assessed to counties and cities participating in SPIA.
8.
Additional information:
There is no additional information. The positive impact of this rule is described in
the justification section of this document.
METHODOLOGY
The number of entities affected by this rule was determined using Treasury’s list of state
agencies and SPIA participants with investment balances at June 30, 2011. The cost to each
entity is calculated using the percentages in section 17.61(4)(b), Florida Statutes, and is
assessed on the entity’s average daily investment balance. The assessment is charged on a
monthly basis.
C. Lower Regulatory Cost Alternatives Received – None
D. Reasons to Reject Lower Regulatory Cost Alternatives – N/A
E. Reason to Retain the Rule without Amendment: The fees are mandated by
statute, s. 17.61(4)(b), F.S.
13
3. 69K-5.003 – Application for Registration of a Preneed Sales Agent
A. Text of the Rule:
69K-5.003 Application for Registration of a Preneed Sales Agent.
(1) Each person desiring to obtain registration as a preneed sales agent for a preneed licensee shall apply to
the Board by submitting the following by certified mail:
(a) A completed application for Registration of a Preneed Sales Agent, Form DFS-PNS-1, effective 4-25-94,
which is hereby incorporated by reference and available by mail from the Department of Financial Services,
200 East Gaines Street, Tallahassee, Florida 32399-0361. The registration must be completed and signed by an
authorized representative of the preneed licensee within thirty (30) days prior to receipt by the Department;
(b) Fees.
1. The fee for licensure and initial appointment as a preneed sales agent shall be $250.
2. The fee for each additional appointment shall be $250.
3. The fee for biennial renewal of a preneed sales agent appointment shall be $250.
The above fees shall be effective on the later of July 1, 2009, or this rule becoming effective.
(2) Request for Additional Information. Any request for additional information will be made by the
Department within thirty (30) days after receipt of the application by the Department. The additional
information must be received by the Department within forty-five (45) days from the date of request. Failure
to respond to the request for additional information within forty-five (45) days from the date of request shall
be construed by the Board to be grounds for denial of the application for failure to complete the application,
and the application shall be denied pursuant to Section 120.60(2), F.S.
(3) Amendment of Registration. An applicant may amend the registration as to those factors generally within
the control or selection of the applicant, once, as a matter of course, at any time within thirty (30) days from
its receipt for filing. Otherwise, the registration may be amended only with prior permission from the
Department. Any unapproved requests to make changes filed at any time after the registration has been
received shall be deemed by the Board to be grounds for denial, and a new registration, accompanied by the
appropriate fee, shall be required.
(4) Withdrawal of Registration. An applicant, or sponsoring preneed licensee, can request withdrawal of a
registration prior to a determination of the application being made by the Board of Funeral, Cemetery, and
Consumer Services by submitting a written request that the registration be withdrawn.
(5) Denial of Registration. The Department shall notify the applicant at the address of the sponsoring preneed
licensee of the Board’s intent to deny the application. Upon receipt of the notification, the applicant shall
cease conducting business as a preneed sales agent. Upon receipt of the notification, the preneed licensee will
use due diligence to stop the preneed sales agent from conducting business as a preneed sales agent on
behalf of the preneed licensee. If a request for a hearing has not been received within twenty-six (26) days of
the date of the notification, the application shall be denied.
(6) Refunds. If the registration is withdrawn or denied, the application fee is non-refundable.
(7) Upon approval of the application, a registration will be issued for the remainder of the biennial registration
period effective the later of the date the application was received or the date the last deficiency on the
application was resolved.
14
(8) A separate registration is required for each different preneed licensee represented by the applicant.
Rulemaking Authority 497.103, 497.466(2) FS. Law Implemented 497.466 FS. History–New 4-25-94, Formerly 3F-5.003,
Amended 6-22-09.
B. Compliance Economic Review:
Compliance Economic Review
Pursuant to section 120.745(5), Florida Statutes
Rule 69K-5.003, Florida Administrative Code
Application for Registration of a Preneed Sales Agent
Department of Financial Services
Board of Funeral, Cemetery, and Consumer Services
March 30, 2012
15
JUSTIFICATION FOR THE RULE
Section 497.466, Florida Statutes, requires the licensing of preneed sales agents. The statute
requires, among other things, submission of fingerprints and criminal background checks. The
statute requires that an application fee be imposed by rule, not to exceed $300. Rule 69K5.003 implements the statute in specifying forms, procedures, and the fees applicable to
licensing under the statute. The rule is in effect mandatory because the statute could not be
implemented without a rule specifying forms, procedures, and fees.
"Preneed sales" refers to the purchase by a person, before their death, of services and
merchandise to be used after the person dies, for the final disposition of the person's bodily
remains. For example, this might include funeral director services, embalming, viewing of
remains, casket, burial service, headstone or other grave marker, or alternatively, cremation
service.
One of the most important reasons for licensing preneed sales agents is that as part of the
application process, they are required to submit fingerprints and a criminal background check,
which is obtained by the Division. Applicants with criminal records may be denied licensure.
Preneed sales agents often deal with the elderly who are seeking to purchase a preneed
contract because they see the end of life approaching and want to protect their children from
the cost of final disposition. The preneed sales agents may on occasion even make sales calls at
the potential customer's home. Preneed sales agents are in a position to take advantage of the
elderly.
In addition, licensing preneed sales agents and requiring that they be appointed by the preneed
company provides a trail of accountability to lead back to the preneed company responsible for
honoring the preneed contract. Without this licensing structure, preneed companies would be
better situated to deny that the preneed sales agent had authority to represent the preneed
company, and thus the preneed company could deny responsibility to honor the preneed
contract.
Because preneed sales by their nature involve payment now in exchange for a promise by the
seller to perform years later, preneed sales have long been significantly regulated for the public
good. See, for example, the regulation of preneed sales in 1953, at Chapter 639, Florida
Statutes (1953). The Division estimates that approximately 95% of all states regulate preneed
sales, including preneed sales agents.
The regulatory scheme regarding preneed sales resembles in some regards the regulatory
scheme for insurance sales, in which insurance companies obtain a license as a insurance
company, and individuals obtain licensure as insurance agents, and are then "appointed" by the
16
insurance company to make sales for the company. Regarding preneed sales, businesses obtain
a license as a preneed company, and individuals obtain a preneed sales agent license and are
then appointed to make sales for the preneed company.
The applicable statute specifies that a licensed funeral director may sell preneed without
obtaining additional licensure as a preneed sales agent. Some preneed companies sell their
preneed exclusively or primarily through licensed funeral directors they employ. However,
many preneed companies desire a sales volume in excess of that which can be achieved by
relying solely on funeral directors they employ. These preneed companies employ the preneed
sales agents who obtain licensure under the rule.
STATEMENT OF ESTIMATED REGULATORY COSTS
ECONOMIC ANALYSIS
In calendar year 2011, approximately 821 new preneed sales agent licenses were issued. That
number is typical for recent years. Under rule 69K-5.003, the fee for each preneed sales agent
license application is $250. This is the direct cost to the applicant. It is estimated that it will
take .75 hours for an applicant to fill out the application and deposit it in a mail box to be
delivered to the Division. The value of the applicant's time is estimated at $12 per hour,
resulting in a cost of $9 to fill out the application and deposit it in a mailbox. It is estimated that
postage and the cost of an envelope add $1.00 to the cost. Therefore, the total estimated cost
per year is $260 ($250 + $9 + $1) per applicant. The cost per applicant is multiplied by 821
applicants, equals $213,460 per year, times five years equals $1,067,300 in aggregate over five
years.
Direct or Indirect Economic Impacts
Is this rule likely to have an adverse impact on economic growth, private sector job creation or
employment, or private sector investment in excess of $1 million in the aggregate within five
years after the implementation of the rule?
The Division answers this question in the negative. The number of preneed contracts sold in
Florida has been rising in recent years:
2009
92,247
2010
95,986
2011
100,889
The number of preneed sales agents licensed in 2011 (821) was 8% higher than the number
licensed in 2010 (760). The growth in the number of preneed contracts sold, and the number of
preneed sales agents licensed, indicates a healthy preneed industry in Florida, especially
considering the severe recession over the last three years.
17
Is the rule likely to have an adverse impact on business competitiveness, including the ability of
persons doing business in the state to compete with persons doing business in other states or
domestic markets, productivity, or innovation in excess of $1 million in the aggregate within
five years after the implementation of the rule?
The Division answers this question in the negative. Any persons coming into Florida to sell
preneed must comply with Florida's preneed licensing laws, including licensing of preneed sales
agents. Conversely, if Florida based sellers of preneed contracts want to sell preneed contracts
in another state, they must comply with the law in that other state, not Florida law (if the other
state does not require use of licensed preneed sales agents, the Florida based seller does not
need to use a licensed preneed sales agent in the other state).
Market forces tend to make preneed sales a "local" business. Competition is typically limited to
establishments and cemeteries in the buyer's county of residence and contiguous counties. It is
simply in the nature of things that a person arranging their funeral and burial on a preneed
basis will usually want to use a near-by funeral home and cemetery. The funeral home and
cemetery need to be fairly convenient to their loved ones who will be involved in the funeral
service and cemetery interment. The idea of having their remains shipped long distances to
some remote and unknown funeral establishment and cemetery, simply for a price advantage,
is not typically attractive to buyers of preneed contracts. If the person already has a spouse,
child, parent, etc., buried in a particular cemetery, that will usually drive the choice of the
cemetery. If a person has had a good experience in a particular funeral home regarding the
funeral services of another person, particularly a family member, that will typically have a very
strong influence on the purchase of a preneed contract. Although cremation tends to be
somewhat less of a "local" business, even regarding preneed contracts for cremation, there is
typically significant consumer resistance to having their remains shipped long distances to
unknown facilities for cremation. Thus, generally speaking, preneed sales tend to be a "local"
business.
Sales of preneed contracts to Florida residents over the internet by sellers outside Florida have
not to date been a significant component of preneed sales in Florida. Any increase of such
internet sales by out-of-state sellers is expected to be slow, because the preneed sales tend to
be a "local" business (see discussion above).
Is the rule likely to increase regulatory costs, including any transactional costs, in excess of $1
million in the aggregate within five years after the implementation of the rule?
18
The Division answers this question in the negative. The fees and transactional costs identified
in this Compliance Economic Review have been in place for years, so no additional cost will
result. The continued enforcement of the rule will result in estimated aggregate regulatory
costs over five years of $1,067,300. See economic analysis, supra.
NUMBER AND TYPES OF INDIVIDUALS AFFECTED
Approximately 821 persons applied for a preneed sales agent license in 2011. Division data
regarding the individuals issued a preneed sales agent license in calendar year 2011, indicates
the median year of birth was 1961 (age 51); approximately 313 of the preneed sales agent
licenses issued were issued to females; 295 were issued to males; and the remainder of the
applicants failed to indicate their gender. The Division considers the 2011 data to be typical for
recent years.
COST TO THE AGENCY, AND TO ANY OTHER STATE AND LOCAL GOVERNMENT ENTITIES, OF
IMPLEMENTING AND ENFORCING THE PROPOSED RULE, AND ANY ANTICIPATED EFFECT ON STATE
OR LOCAL REVENUES
There will be no additional costs to the Division to enforce the rule. The rule has been in
effect since 2007 and all staff and resources needed to implement the rule are in place. The
Division estimates that it takes on average approximately 30 minutes for Division staff to
process an application under the rule. If the value of staff time is estimated at $15 per hour,
the cost to the Division to process the 821 applications received in 2011 is $6,157 for calendar
year 2011, and in aggregate $30,787 for a five-year period.
TRANSACTIONAL COSTS
Under rule 69K-5.003, the application fee for each preneed sales agent license application is
$250. This is the direct cost to the applicant. It is estimated that it will take .75 hours for an
applicant to fill out the application and deposit it in a mailbox to be delivered to the Division.
The value of the applicant's time is estimated at $12 per hour, resulting in a cost of $9 to fill out
the application and deposit it in a mailbox. It is estimated that postage and the cost of an
envelope add $1.00 to the cost. Therefore, the total estimated cost per year is $260 ($250 + $9
+ $1) per applicant. The cost per applicant is multiplied by 821 applicants, equals $213,460 per
year, times five years equals $1,067,300 in aggregate over five years.
ANALYSIS OF THE IMPACT ON SMALL BUSINESSES
The applicants for preneed sales agent licenses under the rule are not small businesses, and are
instead individuals who will be employees, not employers. Many of the persons licensed as
preneed sales agents are subsequently employed by a small business, but the small business is
not required by the statute or rule to pay the preneed sales agent application fee or other
transactional costs of the individual in obtaining the preneed sales agent license. However, the
Division estimates that small businesses pay the preneed sales agent license application fee for
approximately 90% of the preneed sales agents who will be employed by them. The small
19
business does this voluntarily, as a business decision, and not due to a regulatory requirement.
Therefore, the Division does not believe that such costs incurred by the small business are
properly attributable to the rule. However, if such costs are attributed to the rule, the total
aggregate five-year costs to all affected small businesses is estimated at $923,625 (90% times
821 = 739; times $250 application fee = $184,725 per year; times five years = $923,625).
ANY ADDITIONAL INFORMATION THAT THE AGENCY DETERMINES MAY BE USEFUL
The Division of Funeral, Cemetery, and Consumer Services is not aware of any additional
information that may be useful in evaluating this matter.
REGULATORY ALTERNATIVES SUBMITTED
No regulatory alternatives have been submitted.
EXPLANATION OF THE METHODOLOGY USED TO CONDUCT THE ANALYSIS
The Division maintains a database from which it has extracted reliable data as to number of
licenses issued per year, date of birth of applicant, and other pertinent data. The Division has
staff who have extensive experience in deathcare industry regulation and, to a significant
extent, the economics and empirical characteristics of deathcare industry businesses,
particularly deathcare industry licensees. The Division has informally queried deathcare
industry members for their input on issues or questions pertinent herein. The Division has
diligently collated and applied all of said data to produce the good faith estimates of regulatory
costs presented herein.
C. Lower Regulatory Cost Alternatives Received: None
D. Reasons to Reject Lower Regulatory Cost Alternatives: N/A
E. Reason to Retain the Rule without Amendment: Section 497.466 requires the
licensing and fee; therefore, this rule is required.
20
4. 69K-8.003 – Cancellation of Preneed Contracts
A. Text of the Rule:
69K-8.003 Cancellation of Preneed Contracts; Reasonable Time Defined.
For purposes of Section 497.459(2)(b)1., F.S., a reasonable time for delivering merchandise consisting of “caskets”
as defined by Section 497.005(10), F.S., and “outer burial containers” as defined by Section 497.005(48), F.S., shall
be 24 hours from the time the purchaser or agent requests that the preneed licensee deliver the merchandise. The
preneed licensee shall record the date and time that the request for delivery is received from the purchaser or
agent in a log kept for that purpose. In the event a preneed licensee fails to maintain such log and record a request
for delivery, then the date and time of such request shall be the date and time designated by the purchaser or
agent.
Specific Authority 497.103 FS. Law Implemented 497.459(2)(b)1. FS. History–New 4-25-94, Amended 3-5-01, Formerly 3F-8.003.
B. Compliance Economic Review:
Compliance Economic Review
Pursuant to section 120.745(5), Florida Statutes
Rule 69K-8.003, Florida Administrative Code
Cancellation of Preneed Contracts; Reasonable Time Defined
Department of Financial Services
Board of Funeral, Cemetery, and Consumer Services
March 30, 2012
21
JUSTIFICATION FOR THE RULE
Rule 69K-8.003 implements section 497.459(2)(b)1., Florida Statutes, in establishing a uniform
standard for how quickly a preneed seller must deliver a casket or outer burial vault after
request for same under a preneed contract previously entered into. Typically, the request for
delivery of the casket or outer burial vault is made at the time of death of the person whose
remains will be placed in the casket and outer burial vault.
An outer burial vault is typically a concrete box, with a removal lid, which is placed in the grave,
and the casket is then placed in the outer burial vault. Outer burial vaults are required in most
licensed cemeteries. The outer burial vault prevents the formation of a depression in the
ground as the casket deteriorates over time and the earth settles. Such depressions are
deemed unsightly by most cemetery customers and cemeteries.
The rule is applicable to preneed licensees. There are approximately 340 preneed licensees.
The rule relates only to caskets and outer burial vaults sold on a preneed basis. "Preneed sales"
refers to the purchase by a person, before their death (often years before their death), of
services and merchandise to be used at the time of their death, for the final disposition of the
person's bodily remains. For example, this might include funeral director services, embalming,
viewing of remains, casket, outer burial vault, burial service, headstone or other grave marker,
or alternatively, cremation service.
At time of death, it is essential that the casket and outer burial vault be delivered quickly. For
emotional reasons, the family of the deceased will typically not want the funeral to be delayed
to wait for the delivery of the casket or outer burial vault.
Delay in delivery of the casket and/or outer burial vault can also result in significant adverse
financial impact to the family. This can occur where the family, faced with apparent delay in
delivery of the casket or outer burial vault, purchases another casket or outer burial vault, in
order to facilitate a timely funeral and burial. In such instances, the family would often not,
absent the standard in this rule, have a right to a refund of the price paid for the original casket
or outer burial vault. Instead, the preneed seller may simply tender delivery of the original
casket or outer burial vault. The rule addresses this situation by providing a standard of 24
hours for delivery. If the preneed seller does not deliver the original casket and/or outer burial
vault within 24 hours of request, the family can buy from another source and get a cash refund
of amounts paid for the original casket and outer burial vault.
The rule has been in effect since approximately 1994. The rule has been approved by the
regulatory Board under chapter 497, Florida Statutes. A majority of the members of the Board
are themselves regulated members of the deathcare industry. The rule has not been a source
of controversy within the industry that is subject to the rule.
22
STATEMENT OF ESTIMATED REGULATORY COSTS
ECONOMIC ANALYSIS
The cost of the rule to affected businesses occurs primarily in the context of those occasions
when the preneed seller fails to deliver the casket and vault within the required 24 hours. In
those situations, the rule has the effect of requiring a refund of the full amount paid to the
preneed company for the casket and vault. The cost to the preneed seller is thus their gross
profit on the casket and vault (the difference between the wholesale price the preneed seller
pays for the casket and vault and the retail price the customer paid).
The Division estimates that approximately 85,000 preneed contracts are called on for
fulfillment in a typical year in Florida. The Division estimates that half of those, or on average
42,500 contracts, involve the sale of a casket and vault. The Division estimates that on average
one quarter of a percent (.0025) (106) of those 42,500 preneed contracts are the subject of a
late delivery of the casket and vault. The Division estimates the typical casket in these
contracts was sold at retail for $2,500, and cost to the preneed seller averaged $1,800. The
Division estimates that the average vault in such contracts was sold for a retail price of $1,500,
with a cost to the preneed seller averaging $1,000. Where the preneed seller must refund the
price paid, the cost to the preneed seller is the difference between the wholesale price the
preneed seller would pay and the retail price the customer paid. Based on the estimated
average figures given herein, the cost of the rule is $1,200 ($500 + $700). The $1,200 cost per
late delivery, times 106 late deliveries per year, results in costs of $127,200 per year. When
multiplied by five years, it indicates a five-year cost of $636,000.
Notwithstanding the above analysis, it is in the Division's opinion that it is not economically
justifiable to attribute the entire $636,000 cost to the rule. In the event of late delivery, if the
customer sued the preneed seller, the Division believes most courts would rule in the
customer's behalf, because it is inherently unreasonable for the preneed seller to deliver the
casket and vault too late to be used for a funeral service to be held within normal time frames.
Stated differently, in such cases the late delivery prevents the customer from having the benefit
of what they bargained for, as regards the casket and outer burial vault. The effect of the rule
is essentially to save the consumer from the trouble and expense of suing over such an
emotionally troubling subject matter.
Is this rule likely to have an adverse impact on economic growth, private sector job creation or
employment, or private sector investment in excess of $1 million in the aggregate within five
years after the implementation of the rule?
23
The Division answers this question in the negative. The number of preneed contracts sold in
Florida has been rising in recent years:
2009
92,247
2010
95,986
2011
100,889
The number of preneed sales agents licensed in 2011 (821) was 8% higher than were licensed in
2010 (760).
The growth in the number of preneed contracts sold, and the number of preneed sales agents
licensed, indicates a healthy preneed industry in Florida, especially considering the severe
recession over the last three years.
Is the rule likely to have an adverse impact on business competitiveness, including the ability of
persons doing business in the state to compete with persons doing business in other states or
domestic markets, productivity, or innovation in excess of $1 million in the aggregate within
five years after the implementation of the rule?
The Division answers this question in the negative. Any persons coming into Florida to sell
preneed must comply with Florida's preneed licensing laws, including licensing of preneed sales
agents. Conversely, if a Florida based seller of preneed contracts wants to sell preneed
contracts in another state, they must comply with the law in that other state, not Florida law (if
the other state does not require use of licensed preneed sales agents, the Florida based seller
does not need to use a licensed preneed sales agent in the other state).
Market forces tend to make preneed sales a "local" business. Competition is typically limited to
establishments and cemeteries in the buyer's county of residence and contiguous counties. It is
simply in the nature of things that a person arranging their funeral and burial on a preneed
basis will usually want to use a fairly near-by funeral home and cemetery. The funeral home
and cemetery need to be fairly convenient to their loved ones who will be involved in the
funeral service and cemetery interment. The idea of having their remains shipped long
distances to some remote and unknown funeral establishment and cemetery, simply for a price
advantage, is not typically attractive to buyers of preneed contracts. If the person already has a
spouse, child, parent, etc., buried in a particular cemetery, that will usually drive the choice of
the cemetery. If a person has had a good experience in a particular funeral home regarding the
funeral services of another person, particularly a family member, that will typically have a very
strong influence on the purchase of a preneed contract. Although cremation tends to be
somewhat less of a "local" business, even regarding preneed contracts for cremation there is
24
typically significant consumer resistance to having their remains shipped long distances to
unknown facilities for cremation. Thus, generally speaking, preneed sales tend to be a "local"
business.
Sales of preneed contracts to Florida residents over the internet by sellers outside Florida have
not to date been a significant component of preneed sales in Florida. Any increase of such
internet sales by out-of-state sellers is expected to be slow, because the preneed sales tend to
be a "local" business (see discussion above).
Is the rule likely to increase regulatory costs, including any transactional costs, in excess of $1
million in the aggregate within five years after the implementation of the rule?
The Division answers this question in the negative. The transactional costs identified in this
Compliance Economic Review have been in place for years, so no additional cost will result. It is
estimated that the continued enforcement of the rule will result in estimated aggregate
regulatory costs over five years of $636,000. See economic analysis, supra. Because of the
uncertainty in estimating the numbers of both yearly non-compliance and percent of small
businesses involved in non-compliance, this compliance economic review is being completed
and published.
NUMBER AND TYPES OF INDIVIDUALS AFFECTED
There are approximately 340 businesses affected by the rule. These businesses sell preneed
contracts.
The 340 affected businesses are also either a licensed cemetery, a funeral home, or a direct
disposal establishment. In size, the 340 entities range from a few very large multi-state firms,
to small funeral homes operated by a family with only two to four full time staff. The average
net worth of the preneed licensees was approximately $3.342 million.
COST TO THE AGENCY, AND TO ANY OTHER STATE AND LOCAL GOVERNMENT ENTITIES, OF
IMPLEMENTING AND ENFORCING THE PROPOSED RULE, AND ANY ANTICIPATED EFFECT ON STATE
OR LOCAL REVENUES
The great majority of the affected businesses comply with the rule without any compulsion
required. The Division estimates that approximately once every five years the Division will
encounter a case where the affected business will not comply with the rule, and disciplinary
action by the Division and the regulatory board is required. The costs to the Division of such a
case are estimated at $1,500 in Division staff time, and $2,500 in agency legal staff time, for a
total cost of $4,000, which on an annualized basis is $800.
There are no costs to other state or local government agencies related to the rule.
25
The rule has no impact on state or local revenue.
TRANSACTIONAL COSTS
The Division estimates that approximately 85,000 preneed contracts are called on for
fulfillment in a typical year in Florida. The Division estimates that half of those, or on average
42,500 contracts, involve the sale of a casket and vault. The Division estimates that on average
one quarter of a percent (.0025) (106) of those 42,500 preneed contracts are the subject of a
late delivery of the casket and vault. The Division estimates the typical casket in these
contracts was sold at retail for $2,500, and cost to the preneed seller averaged $1,800. The
Division estimates that the average vault in such contracts was sold for a retail price of $1,500,
with a cost to the preneed seller averaging $1,000. Where the preneed seller must refund the
price paid, the cost to the preneed seller is the difference between the wholesale price the
preneed seller would pay and the retail price the customer paid. Based on the estimated
average figures given herein, the cost of the rule per late delivery is $1,200 ($500 + $700). The
$1,200 cost per late delivery, times 106 late deliveries per year, results in costs of $127,200 per
year. When multiplied by five years, it indicates a five-year cost of $636,000.
ANALYSIS OF THE IMPACT ON SMALL BUSINESSES
The Division estimates that 304 of the approximately 340 (89%) affected businesses are small
businesses within the definition at section 288.703(6), Florida Statutes. The average net worth
of those 304 affected businesses was approximately $438,450 in 2010. The majority of the
affected small businesses were funeral homes.
Sales and fulfillments of preneed contracts are not distributed ratably among the approximately
340 preneed sellers. The 20 largest preneed sellers sell and fulfill approximately 74% of all
preneed contracts sold, and the remaining 320 preneed sellers sell and fulfill approximately
26% of the preneed contracts sold. The Division estimates that the small businesses affected
by the rule account for approximately 28 (106 x .26) of the preneed contracts that are the
subject of late deliveries. At the estimated cost to the affected business of $1, 200 per late
delivery, the estimated total aggregate cost to all affected small businesses is $33,600 per year
(28 x 1200), or $111 per affected small business (33,600/304).
ANY ADDITIONAL INFORMATION THAT THE AGENCY DETERMINES MAY BE USEFUL
The agency has no other additional information that the agency has determined may be useful.
REGULATORY ALTERNATIVES SUBMITTED
No regulatory alternatives were submitted.
EXPLANATION OF THE METHODOLOGY USED TO CONDUCT THE ANALYSIS
26
The Division maintains a database from which it has extracted reliable data as to number of
licenses issued per year, date of birth of applicant, and other pertinent data. The Division has
staff that has extensive experience in deathcare industry regulation and, to a significant extent,
the economics and empirical characteristics of deathcare industry businesses, particularly
deathcare industry licensees. The Division has informally queried deathcare industry members
for their input on issues or questions pertinent herein. The Division has diligently collated and
applied all of said data to produce the good faith estimates of regulatory costs presented
herein.
C. Lower Regulatory Cost Alternatives Received: None
D. Reasons to Reject Lower Regulatory Cost Alternatives: N/A
E. Reason to Retain Rule without Amendment: This standard has been in effect,
without controversy from the regulated industry, since 1994 and protects the
public. It was approved by the Regulatory Board, with the majority of members
being part of the regulated industry.
5. 69K-20.001 – Report of Cases Embalmed or Bodies Handled
A. Text of the Rule:
69K-20.001 Report of Cases Embalmed or Bodies Handled.
(1) Each funeral establishment licensed pursuant to Chapter 497, F.S., on a monthly basis shall submit reports
to the Department which shall contain the following information:
(a) The number of bodies handled;
(b) The name of each deceased person;
(c) The date and county of death;
(d) Date embalmed and name of embalmer, if applicable;
(e) Method of disposal;
(f) Name, location and license number of cinerator facility, if method of disposal was by cremation;
(g) The names, license numbers and signatures of the licensees responsible for final disposition, including the
funeral director in charge;
(h) The burial transit number;
(i) The name, location and license number of facility where bodies are refrigerated;
(j) The name, location and license number of facility where bodies are embalmed; and
(k) The name, location and registrant number of the removal service.
(2) Each direct disposal facility licensed pursuant to Chapter 497, F.S., on a monthly basis shall submit reports
to the Department which shall contain the following information:
(a) The name of each person cremated;
(b) The date and county of death;
(c) Date of cremation;
(d) License number of cinerator facility;
(e) The names, license numbers, and signatures of the licensees responsible for final disposition, including the
registered direct disposer in charge;
(f) The name, location and registrant number of the removal service; and
27
(g) The name, location and license number of the facility where bodies are refrigerated.
(3) Each cinerator facility licensed pursuant to Chapter 497, F.S., on a monthly basis shall submit reports to the
Department which shall contain the following information:
(a) The name of each person cremated;
(b) Date and county of death;
(c) Type of container used to hold the body during cremation;
(d) The name of each person supervising each cremation;
(e) The date of cremation;
(f) The funeral home or direct disposal facility from which the deceased was received;
(g) The burial transit number;
(h) The names, license numbers and signatures of the licensees responsible for final disposition including the
registered direct disposer or licensed funeral director;
(i) The name, location and license number of the facility where bodies were cremated; and
(j) The name, location and registrant number of the removal service.
(4) Failure to keep or timely furnish such reports to the Department by the 10th day of the subsequent month
shall subject the licensee or registrant to disciplinary action.
Specific Authority 497.103, 497.382, 497.606 FS. Law Implemented 497.382, 497.606 FS. History–New 11-11-79, Formerly 21J20.01, 21J-20.001, Amended 3-2-95, 10-12-98, Formerly 61G8-20.001.
B. Compliance Economic Review:
Compliance Economic Review
Pursuant to section 120.745(5), Florida Statutes
Rule 69K-20.001, Florida Administrative Code
Report of Cases Embalmed or Bodies Handled
Department of Financial Services
Board of Funeral, Cemetery, and Consumer Services
March 30, 2012
28
JUSTIFICATION FOR THE RULE
Rule 69K-20.001 is mandatory pursuant to sections 497.382 and 497.606, Florida Statutes.
Rule 69K-20.001 implements statutory requirements that each month each licensed funeral
establishment, cinerator facility, centralized embalming facility, and direct disposal
establishment, file with the Division of Funeral, Cemetery, and Consumer Services a report
providing the name and other specified information on every decedent whose remains passed
through that establishment or facility in that month.
The requirement for these monthly reports has been in the statutes since 1979. This rule or
prior versions of same have likewise been in effect since approximately 1979. The rule has
never been controversial within the deathcare industry.
It is believed that the legislative rationale for requiring these reports was to establish a
minimum standard of recordkeeping by funeral homes, etc., as to where particular human
remains were received and processed, and which licensed professional in that facility was
responsible for the handling and treatment and work regarding the remains, in the event of
complaint by family members and/or a dispute as to the responsible entity and licensed
professional.
STATEMENT OF ESTIMATED REGULATORY COSTS
ECONOMIC ANALYSIS
There are approximately 1,104 businesses subject to the rule, composed of 865 funeral
establishments, 169 cinerator facilities, and 70 direct disposal establishments.
The Division estimates that approximately 25% (276) of the affected businesses that file the
reports use a consolidated computer software program or a suite of related programs to run
their business. Where this is the case, the affected business enters information concerning the
deceased into the system for invoicing, accounts receivable, and other business purposes, and
the information, once entered, is available and used to produce these monthly reports. These
software programs have a function (a button) to produce these monthly reports. For affected
businesses using such software, there is no significant additional cost to produce the reports.
The Division estimates that production of the report by affected businesses in this category
takes ten minutes per month. If the value of the business' staff time is set at $15 per hour, the
report costs $2.50 to produce. The business must then have each licensed professional staff
member (funeral directors and embalmers) review and sign the report. Affected businesses in
this category tend to be the larger affected businesses and may have four to six professionals
who must review and sign the monthly report. The Division estimates that it takes two minutes
for each professional to review and sign the form. If the professional's time is valued at $30 per
hour, the cost per professional is $1 per month. If the affected business has five professionals
who must review the report, the amount of $5 is added to the cost. The majority of affected
29
businesses mail the report to the Division, and this adds an estimated $1 for paper, envelope
and postage. Combining the above costs, the total estimated cost per affected business in this
category is $8.50 per month. The total cost per month for all affected businesses in this
category is $2,346, times 12 months equals $28,152 per year, aggregate of all 276 affected
businesses in this group. It is unknown if any business incurred computer programming costs to
enable production of this report or if new businesses would need to program their computers
to produce this report, because other business needs may necessitate the production of this
data.
The remaining 828 affected businesses manually fill out the monthly report from a review of
their records. The Division estimates that it takes these affected businesses approximately .5
hours to prepare the monthly report. If the value of the business' staff time is set at $15 per
hour, the report costs $7.50 to produce. The business must then have each licensed
professional staff member (funeral directors and embalmers) review and sign the report.
Affected businesses in this category tend to be the smaller affected businesses and may have
one or two professionals who must review and sign the monthly report. The Division estimates
that it takes two minutes for each professional to review and sign the form. If the
professional's time is valued at $30 per hour, the cost per professional is $1 per month. If the
affected business has on average 1.5 professionals who must review the report, the amount of
$1.50 is added to the cost. The majority of affected businesses mail the report to the Division,
and this adds an estimated $1 for paper, envelope and postage. Combining the above costs,
the total estimated cost per affected business in this category is $10.00 per month. The total
cost per month for all affected businesses in this category is $8,280, times 12 months equals
$99,360 per year, aggregate of all 828 affected businesses in this group.
Combining the two groups indicates an aggregate cost per year to affected businesses of
$127,512 (28,152 + 99,360). When multiplying this by five years, it indicates a five-year cost of
$637,560. In addition, there may have been one-time programming costs for the computerized
group.
Is this rule likely to have an adverse impact on economic growth, private sector job creation or
employment, or private sector investment in excess of $1 million in the aggregate within five
years after the implementation of the rule?
The Division answers this question in the negative. The rule has been in effect since
approximately 1979. It is not at all controversial in the deathcare industry.
Is the rule likely to have an adverse impact on business competitiveness, including the ability of
persons doing business in the state to compete with persons doing business in other states or
domestic markets, productivity, or innovation in excess of $1 million in the aggregate within
five years after the implementation of the rule?
30
The Division answers this question in the negative. Due to the nature of the business, there is
relatively little interstate competition among funeral establishments, direct disposal
establishments, and cinerator facilities. It is simply in the nature of things that a person or
family arranging a funeral and burial will usually want to use a fairly near-by funeral home and
cemetery. The funeral home needs to be fairly convenient to their loved ones who will be
involved in the funeral service and cemetery interment. The idea of having their loved one's
remains shipped long distances to some remote and unknown funeral establishment and
cemetery, simply for a price advantage, is not typically attractive to families arranging funeral
services. If the person already has a spouse, child, parent, etc., buried in a particular cemetery,
that will usually drive the choice of the cemetery. If a person has had a good experience in a
particular funeral home regarding the funeral services of another person, particularly a family
member, that will typically have a very strong influence on the selection of a funeral home.
Although cremation tends to be somewhat less of a "local" business, even regarding cremation
there is typically significant consumer resistance to having their remains shipped long distances
to unknown facilities for cremation.
Is the rule likely to increase regulatory costs, including any transactional costs, in excess of $1
million in the aggregate within five years after the implementation of the rule?
The Division answers this question in the negative. The transactional costs identified in this
Compliance Economic Review have been in place for years, so no additional cost will result. The
continued enforcement of the rule will result in estimated aggregate regulatory costs over five
years of $637,560. See economic analysis, supra. Because of the uncertainty of past or future
programming costs, this compliance economic review is being filed.
NUMBER AND TYPES OF INDIVIDUALS AFFECTED
There are 1,104 businesses subject to the rule, composed of 865 funeral establishments, 169
cinerator facilities, and 70 direct disposal establishments. Each of these is typically a
corporation or a limited liability company. They range in size from as large as staffs of 20-30
persons, to establishments having only two to four employees.
COST TO THE AGENCY, AND TO ANY OTHER STATE AND LOCAL GOVERNMENT ENTITIES, OF
IMPLEMENTING AND ENFORCING THE PROPOSED RULE, AND ANY ANTICIPATED EFFECT ON STATE
OR LOCAL REVENUES
The Division records the receipt of each monthly report, and scans the reports into Division
records. The Division estimates that it takes on average two minutes per report for the Division
to record and scan each report. The value of Division staff doing this work is $10 per hour, so
each report costs $.33 to process. At 1,104 reports per month, the time cost to the Division is
estimated at $368 per month. The Division uses its general purpose scanner/copier to scan the
31
reports, and scans them to space on the Division's server hard drives; this equipment is used for
a large number of Division business processes, and the Division estimates that the attributable
cost of equipment used is $20 per month. The total monthly cost to the Division is thus $388.
For the sixty months of the 5 year period, the cost to the Division is $23,280.
TRANSACTIONAL COSTS
Transactional costs are primarily the time it takes the affected businesses to fill out the reports.
The Division estimates that 25% (276) of the affected businesses that file the reports use a
consolidated computer software program or a suite of related programs to run their business.
Where this is the case, the affected business enters the deceased information into the system
for invoicing and accounts receivable purposes, and the information, once entered, is available
and used to produce these monthly reports. These software programs have a function (a
button) to produce these monthly reports. For affected businesses using such software, there
is no significant additional cost to produce the reports. The Division estimates that production
of the report by affected businesses in this category takes ten minutes. If the value of the
business' staff time is set at $15 per hour, the report costs $2.50 to produce the report. The
business must then have each licensed professional staff (funeral directors and embalmers) on
staff review and sign the report. Affected businesses in this category tend to be the larger
affected businesses and may have four to six professionals who must review and sign the
monthly report. The Division estimates that it takes two minutes for each professional to
review and sign the form. If the professional's time is valued at $30 per hour, the cost per
professional is $1 per month. If the affected business has five professionals who must review
the report, the amount of $5 is added to the cost. The majority of affected businesses mail the
report to the Division, and this adds an estimated $1 for paper, envelope and postage.
Combining the above costs, the total estimated cost per affected business in this category is
$8.50 per month. The total cost per month for all affected businesses in this category is $2,346,
times 12 months equals $28,152 per year, aggregate of all 276 affected businesses in this
group.
The remaining 828 affected businesses manually fill out the monthly report from a review of
their records. The Division estimates that it takes these affected businesses approximately .5
hours to prepare the monthly report. If the value of the business' staff time is set at $15 per
hour, it costs $7.50 to produce the report. The business must then have each licensed
professional staff (funeral directors and embalmers) on staff review and sign the report.
Affected businesses in this category tend to be the smaller affected businesses and may have
one or two professionals who must review and sign the monthly report. The Division estimates
that it takes two minutes for each professional to review and sign the form. If the
professional's time is valued at $30 per hour, the cost per professional is $1 per month. If the
affected business has on average 1.5 professionals who must review the report, the amount of
32
$1.50 is added to the cost. The majority of affected businesses mail the report to the Division,
and this adds an estimated $1 for paper, envelope and postage. Combining the above costs,
the total estimated cost per affected business in this category is $10.00 per month. The total
cost per month for all affected businesses in this category is $8,280, times 12 months equals
$99,360 per year, aggregate of all 828 affected businesses in this group.
ANALYSIS OF THE IMPACT ON SMALL BUSINESSES
The Division estimates that 900 of the approximately 1,104 affected businesses are small
businesses. The Division estimates that it takes these affected small businesses approximately
.5 hours to prepare the monthly report. If the value of the small business' staff time is set at
$15 per hour, it costs $7.50 to produce the report. The small business must then have each
licensed professional staff (funeral directors and embalmers) on staff review and sign the
report. Affected small businesses in this category are estimated to have one or two
professionals who must review and sign the monthly report. The Division estimates that it
takes two minutes for each professional to review and sign the form. If the professional's time
is valued at $30 per hour, the cost per professional is $1 per month. If the affected business
has on average 1.5 professionals who must review the report, the amount of $1.50 is added to
the cost. The majority of affected businesses mail the report to the Division, and this adds an
estimated $1 for paper, envelope and postage. Combining the above costs, the total estimated
cost per affected small business in this category is $10.00 per month, times 12 months equals
$120 per year per small business.
ANY ADDITIONAL INFORMATION THAT THE AGENCY DETERMINES MAY BE USEFUL
The agency has no other additional information that the agency has determined may be useful.
REGULATORY ALTERNATIVES SUBMITTED
No regulatory alternatives were submitted.
EXPLANATION OF THE METHODOLOGY USED TO CONDUCT THE ANALYSIS
The Division maintains a database from which it has extracted reliable data as to number of
licenses issued per year, date of birth of applicant, and other pertinent data. The Division has
staff that have extensive experience in deathcare industry regulation and, to a significant
extent, the economics and empirical characteristics of deathcare industry businesses,
particularly deathcare industry licensees. The Division has informally queried deathcare
industry members for their input on issues or questions pertinent herein. The Division has
diligently collated and applied all of said data to produce the good faith estimates of regulatory
costs presented herein.
33
C. Lower Regulatory Cost Alternatives Received: None
D. Reasons for Rejecting Lower Regulatory Cost Alternatives: N/A
E. Reason to Retain the Rule without Amendment: Sections 497.382 and 497.606,
F.S., require reporting by the regulated industry. This rule has been in effect
without controversy since 1979 and provides protection to the public.
6. 69L-5 (5.204, 5.206, 5.208, 5.210, 5.218, 5.219, 5.225) – [Rules for Self-Insurers of
Workers Compensation] These rules are grouped together because the basic
information in the Compliance Economic Review is the same. The economic impact of
each rule is addressed separately in the Compliance Economic Review.
A. Text of the Rules:
69L-5.204 Maintenance of Payroll Records, Review and Audit.
(1) The payroll records of all Current Self-Insurers and Former Self-Insurers shall be open for inspection and audit
by the Department, or its Authorized Representative, during regular business hours. Self-insurers are required to
maintain payroll records that reflect a true and accurate division by the classification codes contained in the
SCOPES of Basic Manual Classifications and the NCCI Basic Manual for Workers’ Compensation and Employers
Liability Insurance so the proper classification code for each employee may be determined. The SCOPES of Basic
Manual Classifications effective June 1, 2008 is hereby incorporated by reference. A copy of the SCOPES of Basic
Manual Classifications may be obtained from the National Council on Compensation Insurance, Inc., Customer
Service Center, 901 Peninsula Corporate Circle, Boca Raton, FL 33487, telephone 1(800)622-4123. A copy of the
manual is also available for viewing at the Division of Workers’ Compensation, Bureau of Monitoring and Audit,
Self-Insurance Section, 2012 Capital Circle, S.E., Hartman Building, Tallahassee, FL 32399-4224. The NCCI Basic
Manual for Workers’ Compensation and Employers Liability Insurance, 2001 Edition, including updates through
June 1, 2009, is previously incorporated by reference into Rule 69L-5.201, F.A.C. If such records are not
maintained, then the entire payroll shall be presumed to be within the classification code to which the highest
manual rate is applicable. To ensure their availability for audit purposes, the records shall be retained for five (5)
years from the end of the payroll period. The location of these records shall be provided to the Department upon
submission of the application for self-insurance and updated within fifteen (15) days of any relocation.
(2) At the conclusion of the audit conducted by the Department or its Authorized Representative, a preliminary
report shall be prepared and sent to the self-insurer. The preliminary report shall identify any payroll or
classification deficiencies. The self-insurer shall have thirty (30) days from the date of receipt to review and
respond to the Department’s preliminary report. The Department shall review the response and issue a final
report.
Rulemaking Authority 440.38(1), (2), (3), 440.385(6), 440.525(2), 440.591 FS. Law Implemented 440.38(1), (2), (3), 440.385(1),
(3), (6), 440.525 FS. History–New 3-9-10.
69L-5.206 Maintenance of Loss Data Records, Review and Audit.
(1) All records supporting the submitted Form DFS-F2-SI-17 (Unit Statistical Report), effective 08/09, as previously
incorporated by reference in Rule 69L-5.205, F.A.C., or its electronic equivalent shall be open for inspection and
audit by the Department or its Authorized Representative, during regular business hours. Copies of this form are
available at the Division of Workers’ Compensation, Bureau of Monitoring and Audit, Self-Insurance Section, 2012
34
Capital Circle, S.E., Hartman Building, Tallahassee, FL 32399-4224. Self-insurers are required to maintain loss
records that reflect a true and accurate division by the classification codes, status type, and injury codes contained
in the NCCI Workers’ Compensation Statistical Plan Manual and the NCCI Basic Manual for Workers’ Compensation
and Employers Liability Insurance so the proper classification code, status type, and injury code for each accident
may be determined. The Workers’ Compensation Statistical Plan Manual, 2008 Edition, including updates through
April 1, 2009 is hereby incorporated by reference. A copy of the Manual may be obtained from the National
Council on Compensation Insurance, Inc., Customer Service Center, 901 Peninsula Corporate Circle, Boca Raton, FL
33487, telephone 1(800)622-4123. A copy of the manual is also available for viewing at the Division of Workers’
Compensation, Bureau of Monitoring and Audit, Self-Insurance Section, 2012 Capital Circle, S.E., Hartman Building,
Tallahassee, FL 32399-4224. The NCCI Basic Manual for Workers’ Compensation and Employers Liability Insurance,
2001 Edition, including updates through June 1, 2009, is previously incorporated by reference into Rule 69L-5.201,
F.A.C.
To ensure their availability for audit purposes, the records shall be retained for five (5) years from the last date the
claims data was used for calculation of the experience modification. The location of these records shall be
provided to the Department upon submission of the application for self-insurance and updated within fifteen (15)
days of any relocation.
(2) At the conclusion of the audit conducted by the Department or its Authorized Representative, a preliminary
report shall be prepared and sent to the self-insurer. The preliminary report shall identify any payroll, loss, or
classification deficiencies. The self-insurer shall have thirty (30) days from the date of receipt to review and
respond to the Department’s preliminary report. The Department shall review the response and issue a final
report.
Rulemaking Authority 440.38(1), (2), (3), 440.385(6), 440.525(2), 440.591 FS. Law Implemented 440.38(1), (2), (3), 440.385(1),
(3), (6), 440.525 FS. History–New 3-9-10.
69L-5.208 Maintenance of Outstanding Liabilities Records, Review and Audit.
(1) All records supporting Form DFS-F2-SI-20, (Report of Outstanding Workers’ Compensation Liabilities), effective
08/09, shall be open for inspection and audit by the Department, the Association, or their Authorized
Representative, during regular business hours. Each self-insurer is required to maintain all records supporting Form
DFS-F2-SI-20 (Report of Outstanding Workers’ Compensation Liabilities), effective 08/09. To ensure their
availability for audit purposes, the records shall be retained for five (5) years after closing of a claims file.
(2) The location of these records shall be provided to the Department or Association upon submission of the
application for self-insurance and updated within fifteen (15) days of any relocation.
Rulemaking Authority 440.38(1), (2), (3), 440.385(6), 440.525(2), 440.591 FS. Law Implemented 440.38(1), (2), (3), 440.385(1),
(3), (6), 440.525 FS. History–New 3-9-10.
69L-5.210 Actuarial Reports.
(1) Current Self-Insurers and Former Self-Insurers, other than Governmental Entities, that do not have Investment
Grade Credit Ratings shall be required to submit Actuarial Reports within 120 days after the end of their fiscal year
or within 90 days of the date requested by the Department or the Association.
(a) Actuarial Reports shall have a valuation date not more than 180 days prior to the date submitted to the
Department or the Association.
(b) If requested by the Department or the Association in order to determine the value of the current loss reserves,
any Current Self-Insurer or Former Self-Insurer, other than a Governmental Entity, shall be required to submit an
Actuarial Report.
35
(2) The Department or the Association shall require that the Actuarial Report include a forecast of loss reserves to
a future date for Current Self-Insurers.
(3) FSIGA Members shall submit Actuarial Reports to the:
Florida Self-Insurers Guaranty Association, Inc.
1427 E. Piedmont Dr., 2nd Floor
Tallahassee, Florida 32308
Rulemaking Authority 440.38(1), (2), (3), 440.385(6), 440.591 FS. Law Implemented 440.38(1), (2), (3), 440.385(1), (3), (6) FS.
History–New 3-9-10.
69L-5.218 Security Deposits.
(1) Current Self-Insurers and Former Self-Insurers, other than Governmental Entities, that have a current
Investment Grade Credit Rating shall maintain a minimum Security Deposit of $100,000.
(2) Current Self-Insurers, other than Governmental Entities, that do not have a current Investment Grade Credit
Rating shall provide a Security Deposit in an amount equal to the greater of the actuarially determined outstanding
loss reserves discounted to present value, using a four percent (4%) discount rate, or the actuarially determined
outstanding loss reserves forecasted to a date one year in the future, discounted to such forecasted date using a
four percent (4%) discount rate, as calculated in its Actuarial Report. In no case, shall the amount of the Security
Deposit be less than $100,000.
(3) Former Self-Insurers, other than Governmental Entities, that do not have an Investment Grade Credit Rating
shall provide a Security Deposit equal to the actuarially determined outstanding loss reserves discounted to
present value at a four percent (4%) discount rate. In no case shall the amount of the Security Deposit be less than
$100,000.
(4) In the event that a Current Self-Insurer or Former Self-Insurer does not have a current published Credit Rating,
the Association or the Department shall determine an equivalent rating by performing an analysis of the Financial
Statements provided in accordance with Rule 69L-5.209, F.A.C., and the amount of the Security Deposit shall be
determined using the equivalent rating as the Credit Rating. A Current Self-Insurer or Former Self-Insurer that
disagrees with the equivalent rating may provide a current Credit Rating. If the Current Self-Insurer or Former SelfInsurer provides a current Credit Rating, the security deposit requirement will be determined using the current
Credit Rating instead of the equivalent rating and any excess security deposit will be released.
(5) As of the effective date of this rule, Current Self-Insurers and Former Self-Insurers that do not have an
Investment Grade Credit Rating, or an equivalent rating at least equal to an Investment Grade Credit Rating as
determined by the Association, shall provide the required security deposit increase amount in accordance with
subsection (2) or (3) above, as applicable, within twelve (12) months of the effective date of this rule. However,
within this twelve (12) month period, any Current Self-Insurer or Former Self-Insurer who experiences a
deterioration in its Credit Rating or equivalent rating as determined by the Association to a Credit Rating that is
less than an Investment Grade Credit Rating shall be required to provide an Actuarial Report and to post the
security increase amount as determined by subsection (2) or (3) above, as applicable, immediately upon request by
the Department. The provisions of this subparagraph expire twelve (12) months after the effective date of this
rule.
(6) The Security Deposit shall be maintained until the authorization holder is a Former Self-Insurer who has
demonstrated that there is no remaining value to its self-insured workers’ compensation claims and the statute of
limitations has run on closed claims. Prior to the release of the Security Deposit, the Former Self-Insurer and its
36
Qualified Servicing Entity(ies) shall provide signed affidavits stating that all self-insured workers’ compensation
claims have been settled or the statute of limitations has run on closed claims.
(7) If the self-insurer is a FSIGA Member, the Security Deposit must be submitted to and executed in favor of the
Association. The Security Deposit shall be held by the Association or the Department exclusively for the benefit of
workers’ compensation claimants. The Security Deposit shall not be subject to assignment, execution, attachment,
or any legal process whatsoever, except as necessary to guarantee the payment of workers’ compensation benefits
under Chapter 440, F.S.
For FSIGA Members, security deposit forms DFS-F2-SI-4F (Self-Insurer’s Surety Bond for FSIGA Member) and Form
DFS-F2-SI-6 (Self-Insurer’s Irrevocable Letter of Credit) can be obtained from and shall be submitted to the:
Florida Self-Insurers Guaranty Association, Inc.
1427 E. Piedmont Dr., 2nd Floor
Tallahassee, Florida 32308
(8) A Security Deposit shall consist of, at the option of the employer:
(a) A surety bond on Form DFS-F2-SI-4F (Self-Insurer’s Surety Bond for FSIGA Member), effective 08/09, as
incorporated by reference, which shall be issued by a corporation surety authorized to transact surety business by
the Florida Department of Financial Services, Office of Insurance Regulation, and whose financial strength and size
ratings from A. M. Best Company are not less than “A” and “V” respectively, or
(b) An irrevocable letter of credit on Form DFS-F2-SI-6 (Self-Insurer’s Irrevocable Letter of Credit), effective 08/09,
as incorporated by reference, which shall be issued by a financial institution located within the State of Florida and
the deposits of which are insured through the Federal Deposit Insurance Corporation.
(9) No surety bond shall be terminated and no irrevocable letter of credit shall be allowed to expire, without ninety
(90) days prior written notice and a deposit by the self-insurer of some other Security Deposit of equal value within
ten (10) business days after such notice. Failure to provide such written notice or failure to timely provide a
replacement Security Deposit after such notice shall constitute grounds for the Association or Division to call or
sue upon the surety bond or to exercise its rights under the letter of credit. For Former Self-Insurers, a surety bond
may be terminated without replacement, but shall not be released until such time as the Former Self-Insurer has
demonstrated that there is no remaining value to its self-insured workers’ compensation claims, the statute of
limitations has run on closed claims, and the Former Self-Insurer has submitted the signed affidavits in accordance
with these rules. Notice shall be submitted to:
For FSIGA Members,
Florida Self-Insurers Guaranty Association, Inc.
1427 E. Piedmont Dr., 2nd Floor
Tallahassee, Florida 32308
Rulemaking Authority 440.38(1), (2), (3), 440.385(6), 440.591 FS. Law Implemented 440.38(1), (2), (3), 440.385(1), (3), (6) FS.
History–New 3-9-10.
69L-5.219 Excess Insurance.
(1) Current Self-Insurers, other than Governmental Entities, shall maintain a Specific Excess Insurance Policy. Such
policy shall have a workers’ compensation limit of not less than $50,000,000.
(a) The self-insured retention of Specific Excess Insurance Policies shall be as follows:
37
1. The self-insurer’s per occurrence retention shall be no more than $500,000 or 1% of the self-insurer’s Net Worth
as shown on the self-insurer’s latest audited Financial Statements, whichever is greater. The self-insured retention
shall be rounded to the nearest $50,000.
2. A higher self-insured retention shall be allowed, if approved by the Department. The Department shall consider
the Current Self-Insurer’s financial strength in its review of the requested self-insured retention.
(b) Specific Excess Insurance Policies for Current Self-Insurers shall be written by insurance companies licensed in
Florida pursuant to Chapter 624, 628 or 629, F.S., and shall be subject to the protection afforded by the Florida
Workers’ Compensation Insurance Guaranty Association Act (Chapter 631, Part V, F.S.).
(c) If coverage is not available from a company identified above, the Department may accept policies issued
without the protection of the Florida Workers’ Compensation Insurance Guaranty Association Act issued by
insurance companies who have current financial strength and size ratings from A.M. Best Company of not less than
“A-” and “VII” respectively.
(d) The Division shall reject any Specific Excess Insurance Policy written by an insurance company which:
1. Does not pay its claims when due; or,
2. Is not in compliance with any requirement of Chapter 624, F.S.
(e) The Specific Excess Insurance Policy shall meet the following requirements:
1. Shall be issued by an insurance company conforming to these rules and shall name the Department as an
additional insured for the purpose of notification.
2. Shall not be cancelled except upon sixty (60) days written notice by certified mail to the other party to the policy
and to the Department.
(f) Shall be automatically renewable at the expiration of the policy period unless written notice by certified mail is
given to the other party to the policy and to the Department sixty (60) days prior to such expiration by the party
desiring to cancel or not renew the policy.
(g) Shall provide that any commutation affected under the policy shall not relieve the underwriter of further
liability in respect to claims and expenses unknown at the time of such commutation. The underwriter shall not be
relieved in regard to closed claims, which may be subsequently revived by or through a competent authority. In
the event the underwriter proposes to redeem any future payments as compensation for accidents occurring
during the term of the policy, not less than sixty (60) days prior notice of such commutation shall be given to the
Department by certified mail by the underwriter or its agent.
(h) Provides that, in the event any commutation is effected, the Department shall have the right to direct that such
sum either be placed in trust for the benefit of the injured employee or employees entitled to such future
payments of compensation or be invested in approved securities and deposited with the Department to insure
such future payments of compensation to the employee or employees entitled thereto. Said commutation must
contain a provision that the Department may order that the monies due under the terms of the Specific Excess
Insurance Policy be paid directly to the injured employee or a trustee appointed by the Department. Such an
action shall be ordered only if the Department determines that it is necessary to ensure continued benefits to the
injured employee.
(i) Contains the provision that in the event of the insolvency of a FSIGA Member, the policy shall reimburse the
Association for any monies expended on behalf of the self-insured. Any reimbursement shall be subject to the
terms of the contract between the FSIGA Member and the insurance company.
38
(j) The Specific Excess Insurance Policy shall have no more than one named insured. The named insured shall be
the FSIGA Member and its subsidiaries. In the case of an Affiliated Self-Insurer, the named insured shall be all
affiliated entities and their subsidiaries.
(k) Contains the provision that coverage under the Specific Excess Insurance Policy extends to all Florida, majority
owned, self-insured subsidiaries of the principal named insured.
(2) A binder, providing for at least ninety (90) days coverage, or a certificate of insurance issued by the insurance
company or its authorized agent and specifying the terms of the policy, shall be filed within thirty (30) days after
the effective date of the policy, provided that this proof of specific excess insurance is not being submitted in
support of an application for self-insurance. Excess renewal endorsements specifying the terms of the policy
submitted to the Association within thirty (30) days after the renewal date satisfies this requirement. In the event
of cancellation or non-renewal of the Specific Excess Insurance Policy, it shall be necessary for the Current SelfInsurer to file proof of replacement specific excess insurance coverage prior to the cancellation or non-renewal
date. Copies of all Specific Excess Insurance Policies, complete with all endorsements in the name of the insured,
shall be filed within ninety (90) days of the effective date of the policy.
(3) FSIGA Members shall submit Specific Excess Insurance Policies and all related documents and notices to the:
Florida Self-Insurers Guaranty Association, Inc.
1427 E. Piedmont Dr., 2nd Floor
Tallahassee, Florida 32308
(4) If requested by the Association or the Division to verify compliance with these rules or to evaluate a selfinsurers financial condition, self-insurers shall provide copies of excess insurance policies to support estimated
excess insurance recoveries included in their Actuarial Reports provided to the Association or the Division.
Rulemaking Authority 440.38(1), (2), (3), 440.385(6), 440.591 FS. Law Implemented 440.38(1), (2), (3), 440.385(1), (3), (6) FS.
History–New 3-9-10.
SELF-INSURANCE PROCESS FOR FSIGA MEMBERS
69L-5.225 Requirements.
An entity applying for a self-insurance authorization pursuant to Section 440.38(1)(b), F.S., shall meet the following
requirements and shall submit a completed application package at least ninety (90) days prior to the desired
effective date of the self-insurance authorization:
(1) Net Worth – The applicant’s most recent audited Financial Statements shall show a Net Worth of the greater of
$10,000,000 U.S. or three (3) times Standard Premium.
(2) Financial Strength – A current Credit Rating of not less than “Ba3”, “BB-”, or “BB-” issued by Moody’s Investors
Services, Standard & Poor’s or Fitch Ratings, respectively. In the event an applicant does not have a current
published Credit Rating, the Association shall determine an equivalent rating by performing an analysis of the
Financial Statements provided in accordance with Rules 69L-5.209 and 69L-5.225, F.A.C., the foregoing financial
strength requirement shall be based on the equivalent rating as the Credit Rating. An applicant that disagrees with
the equivalent rating may provide a current Credit Rating. If the applicant provides a current Credit Rating, the
financial strength requirement shall be based on the current Credit Rating instead of the equivalent rating.
(3) Financial Statements – An applicant shall have at least three (3) years of Financial Statements in the name of
the applicant. The Financial Statements for the most recent year shall be audited in accordance with Generally
Accepted Auditing Standards. If the Financial Statements for the two (2) years prior to the most recent year have
39
been audited in accordance with Generally Accepted Auditing Standards, the audit reports(s) on these Financial
Statements shall also be submitted.
(4) An applicant that does not have three (3) years of Financial Statements in its own name due to a recent
purchase or merger, may use the Financial Statements of its predecessor(s), provided there has been no change to
the structure of the entity or the line of business which would adversely affect the applicant’s financial condition.
(5) Security Deposit – The applicant shall provide a Security Deposit that conforms to the requirements of Rule 69L5.218, F.A.C. In the event the applicant meets the above financial strength requirement, but does not have an
Investment Grade Credit Rating, the applicant shall provide a Security Deposit in an amount equal to the
actuarially determined outstanding loss reserves forecasted to a date one year in the future, discounted to such
forecasted date using a four percent (4%) discount rate, as calculated in its Actuarial Report. In no case, shall the
amount of the Security Deposit be less than $100,000.
(6) Specific Excess Insurance Policy Requirements – The applicant shall provide proof of a Specific Excess Insurance
Policy that conforms to the requirements of Rule 69L-5.219, F.A.C.
(7) Provision of Benefits and a Safe Working Environment – The applicant shall provide a completed Form DFS-F2SI-19 (Certification of Servicing for Self-Insurers), effective 08/09, as previously incorporated by reference in Rule
69L-5.216, F.A.C., detailing the proposed servicing arrangements and accompanying documentation that conforms
to the requirements of Rule 69L-5.216, F.A.C.
(8) In order for an application to be considered complete, all required documents must be submitted, including the
Security Deposit, proof of Specific Excess Insurance Policy, and Certification of Servicing for Self-Insurers.
Rulemaking Authority 440.38(1), (2), (3), 440.385(6), 440.591 FS. Law Implemented 440.38(1), (2), (3), 440.385(1), (3), (6) FS.
History–New 3-9-10.
B. Compliance Economic Review:
COMPLIANCE ECONOMIC REVIEW
Pursuant to section 120.745(5), Florida Statutes
RULES 69L-5.204, 69L-5.206, 69L-5.208, 69L-5.210,
69L-5.218, 69L-5.219 and 69L-5.225, FLORIDA ADMINISTRATIVE CODE
RULES FOR SELF-INSURERS UNDER THE WORKERS’ COMPENSATION ACT
40
DEPARTMENT OF FINANCIAL SERVICES
DIVISION OF WORKERS’ COMPENSATION
April 11, 2012
JUSTIFICATION FOR THE RULES
Section 440.38, Florida Statutes, mandates that the Division adopt rules to allow employers to
obtain workers’ compensation coverage under the self-insurance program. The Division cannot
meet its statutory obligations without establishing rules to describe the procedures by which
employers can self-insure and the obligations for maintaining their self-insurance privilege.
Furthermore, specific requirements are necessary to make certain that entities electing to selfinsure are financially capable to fund their present and future workers’ compensation liabilities.
STATEMENT OF ESTIMATED REGULATORY COSTS
Direct or indirect economic impact:
a.
Adverse impact on economic growth, private sector job creation or employment,
or private sector investment, which is more than $1 million over five years;
b.
Adverse impact on business competitiveness, including the ability of persons doing
business in Florida to compete with persons in other states or domestic markets, which is
cumulatively more than $1 million over five years;
c.
Likelihood of the regulatory cost, including transactional costs, of more than
$1 million cumulatively over five years.
BACKGROUND:
Rule Chapter 69L-5, F.A.C., entitled "Rules for Self-Insurers Under the Workers' Compensation
Act,” interprets and implements provisions of Chapter 440, Florida Statutes, for employers selfinsuring the payment of compensation for Florida employees. Section 440.38(1)(b), Florida
Statutes, authorizes employers to self-insure the payment of compensation by providing proof
to the Florida Self-Insurers Guaranty Association, Inc. ("Association") that they have the
financial strength necessary to ensure timely payment of all current and future claims and
receiving authorization from the Department to pay such compensation directly. The
Association is a private, non-profit corporation established by section 440.385, Florida Statutes,
responsible for guaranteeing that injured workers of insolvent self-insurers who are members
of the Association continue to receive workers' compensation benefits after insolvency. All
current self-insurers, other than government entities and public utilities, are required to be
members of the Association. Section 440.385, Florida Statutes, along with section 440.38(1)(b),
Florida Statutes, establish regulatory requirements for the self-insurers and set guidelines for
the relationship between the Department and the Association.
41
Rule 69L-5.204 – Maintenance of Payroll Records, Review and Audit.
Purpose and Effect: The purpose of the rule is to outline requirements by which self-insurers
are required to maintain payroll records, which must be accurately divided by the classification
codes designated by the National Council on Compensation Insurance (“NCCI”). The records
must be retained for five (5) years from the end of the payroll period, and the Department may
audit the records for accuracy.
Economic Analysis: The estimated cost for maintenance of payroll data cannot be ascertained
due to diverse models of business operations, although the Division made several inquiries to
private self-insured entities to obtain this information. During fiscal year 2010-2011, there
were 413 approved individual self-insured employers in Florida. During fiscal year 2010-2011,
the Division audited payroll records of 27 self-insurers and 59,758 payroll records (see Exhibit
1); however, all 413 approved individual self-insured employers were required to maintain
payroll records. The Division estimates that a typical data collection software license and
maintenance containing financial modules that can maintain payroll data will costs in excess of
$2,400 per year. On this basis, the Division estimates that on average payroll data can exceed
$1 million in cost for 413 self-insured employers in Florida over a five-year period. An
estimated cost is $2400/year x 413 employers x 5 years = $4,956,000.
Rule 69L-5.206 – Maintenance of Loss Data Records, Review and Audit.
Purpose and Effect: The purpose of the rule is to ensure claims reports are available for
inspection and audit. The rule requires self-insurers to maintain all loss records supporting their
Unit Statistical Report due to the Division annually, and to be available to the Division for audit
purposes for five (5) years from the last date the claims data was used. The Division estimates
that it audits these records every three to five years to identify any payroll, loss, or classification
deficiencies.
Economic Analysis: The estimated cost for maintenance of loss data records cannot be
ascertained due to diverse models of business operations, although the Division made inquiries
to two (2) Qualified Servicing Entities to obtain this information. Due to the volume of claims
handled by self-insurers and qualified servicing entities which the Department estimates will
exceed 15,000 in a given year, it is very likely that the cost could exceed $1 million cumulatively
over five years.
Rule 69L-5.208 – Maintenance of Outstanding Liabilities Records, Review and Audit.
Purpose and Effect: The purpose of the rule is to ensure that supporting documentation is
maintained for inspection and audit by the Department, the Association, or an Authorized
Representative. The rule requires self insurers to maintain all records supporting the Report of
42
Outstanding Workers’ Compensation Liabilities, which shall be available for inspection and
audit for five (5) years after closing a claims file.
Economic Analysis: The estimated cost for maintenance of outstanding liabilities records
cannot be ascertained due to diverse models of business operations, although the Division
made several inquiries to private self-insurers to obtain this information. Due to the volume of
claims handled by self-insurers which the Department estimates will exceed 15,000 in a given
year, it is very likely that the cost could exceed $1 million cumulatively over five years.
Rule 69L-5.210 – Actuarial Reports.
Purpose and Effect: The purpose of the rule is to ensure current and former self-insurers have
the financial strength to pay worker’ compensation claims. Self-Insurers, other than
governmental entities, that do not have investment grade credit ratings are required to submit
actuarial reports yearly or within 90 days of the date requested. Actuarial reports must include
current and future loss reserves.
Economic Analysis: The estimated cost associated with providing actuarial reports to the
Florida Self-Insurers Guaranty Association (“FSIGA”) and/or the Division is estimated at $7,500
per report. Furthermore, the Division estimates that the costs of the actuarial reports for selfinsurers over a five-year period could exceed $37,500 per self-insurer. Thus, it is likely that the
cost could exceed $1 million cumulatively over five years. According to the Florida Self-Insurers
Guaranty Association, there were ten self-insurers that were downgraded from investment
grade credit ratings in FY 2010-11 and are required to provide actuarial reports. (See Exhibit 4).
$37,500/report/year x 10 self-insurers x 5 years = $1,875,000.
69L-5.218 – Security Deposits.
Purpose and Effect: Private self-insurers are required to maintain a minimum $100,000 security
deposit in the form of a surety bond or letter of credit. These security deposits protect injured
employees with existing claims in the event a self-insured becomes insolvent. Currently, there
are approximately 305 private self-insurers with security deposits posted with the FSIGA. The
self-insurers are to maintain the security deposit until there is no remaining value to its selfinsured workers’ compensation claims.
Economic Analysis: Under the rule, the security deposit is tied to the company's credit rating.
Companies with an investment grade credit rating must maintain a $100,000 security deposit.
Some regulated entities in the industry have asserted that companies that do not have an
investment grade credit rating must maintain a security deposit in an amount equal to the
greater of the actuarially determined outstanding loss reserves discounted to present value,
using a four percent (4%) discount rate, or the actuarially determined outstanding loss reserves
forecasted to a date one year in the future, discounted to such forecast date using a four
43
percent (4%) discount rate, as calculated in its Actuarial Report. Some regulated self-insurers in
the industry have asserted that this standard added to the rule in 2010 resulted in a much
higher security deposit for some companies including current self-insurers that have not had an
issue with the timely payments of claims. According to the Florida Self-Insurers Guaranty
Association, there are ten self-insurers that do not have investment grade credit ratings and are
required to provide a security deposit greater than or equal to the actuarially determined
outstanding loss reserves. (See Exhibit 4). Security deposits posted for private self-insurers in
the calendar year 2012, as of February 23, 2012, total $186,440,363. There are 305 private selfinsurers with security deposits posted.
Rule 69L-5.219- Excess Insurance.
Purpose and Effect: Private self-insurers are required to maintain an excess insurance policy of
$50 million dollars.
Economic Analysis: The cost for securing an excess policy (with retention of $500,000 or 1% of
the self-insurer’s net worth) is determined based on the review of each self-insurer’s financial
statements. There are approximately 305 private self-insurers with security deposits posted.
The Division was unable to obtain the cost of excess policies because the cost is usually
determined by the deductible amount selected by the self-insurer for high exposure risks. The
risks vary based on the type of industry.
69L-5.225- Requirements for Self-Insurance Process for Florida Self Insurers Guaranty
Association Members.
Purpose and Effect: In order to apply for self-insurance, entities must show a financial capacity
to pay their claims either through a surety bond or letter of credit. The value of the surety
bond/letter of credit must be $100,000.
Economic Analysis: The cost to obtain a surety bond is estimated at 1 – 5% of the bond’s value.
(See Exhibit 2). The cost to obtain a letter of credit is estimated at 2 – 3% of the letter’s value.
(See Exhibit 3). There are 413 approved self-insured employers in Florida. The Division
estimates there are 302 bonds or letters of credit posted for private self-insurers in the
calendar year 2012, as of February 23, 2012, totaling $186,440,363.
Types and numbers of individuals or entities likely to be required to comply with these rules:
There are currently 413 active self-insurers that are required to comply with these rules.
During fiscal year 2010-2011, the Division approved four new self-insurance entities. (See
Exhibit 1.) The Division estimates that the number of self-insurers that are required to comply
with these rules could increase to 430 in the five year period beginning July 1, 2011.
44
Cost to the Division and other state or local governments to implement and enforce the
rules: To implement and enforce the rules, the Division currently has five staff employees.
Those employees consist of one Administrator, two Auditors, a Governmental Analyst and one
support staff employee. Annual salaries for positions listed total approximately $167,398. The
Division also contracts with the FSIGA to receive, monitor and review forms, reports and
documents for private self-insurers. Annual cost to the Division for these services is $230,569.
A five year cost for these two expenses is $1,989,835.
Effect on state or local revenues: These rules have no known impact on state or local
revenues.
Transactional costs for 69L-5.218: Estimated transactional costs for security deposits currently
on file for private self-insurers total $5,593,210. Attempts were made to contact small
governmental entities that are self-insured to determine transactional costs for administration
of their self-insurance programs. We were unsuccessful in obtaining this information.
Security deposits posted for private self-insurers in the calendar year 2012, as of February 23rd,
total $186,440,363. The average cost is between 1 – 5% of the cost of the surety bond or letter
of credit.
Impact on small businesses: There is no impact to small businesses due to the
minimum net worth requirements for being a private self-insurer.
Impact on small counties and small cities:
There is a minimal impact on governmental entities. The transactional cost for small
governmental self-insurers consists of salary for staffing and payment into the
Division’s Trust Funds. Small governmental entities are not exempt from Rule 69L5.204 and 69L-5.206, F.A.C.
Additional information:
The Division is responsible for ensuring that private self-insurers maintain the
financial strength to pay workers’ compensation claims for injured employees. The
decision to self-insure is a choice made by an employer. Pursuant to section
440.38(6), Florida Statutes, governmental agencies and other political subdivisions
are deemed to be self-insured unless they purchase a workers’ compensation
insurance policy. If governmental agencies purchase a workers’ compensation
insurance policy, the reasonable assumption is that the governmental agency would
pay higher premiums for total payroll reported for workers’ compensation coverage
versus a percentage of that premium for payroll under the self-insurance program.
45
REGULATORY ALTERNATIVES SUBMITTED
No regulatory alternatives were submitted.
METHODOLOGY
The average cost for private self-insurers to maintain payroll records (Rule 69L-5.204, F.A.C.),
loss records (Rule 69L-5.206, F.A.C.), and records supporting the Report of Outstanding
Workers’ Compensation Liabilities (Rule 69L-5.208, F.A.C.), was estimated based on the
Division’s contact with qualified servicing entities, private self-insurers and the Florida SelfInsurers Guaranty Association. The average cost for private self-insurers to obtain actuarial
reports (Rule 69L-5.210, F.A.C.) and security deposits (Rule 69L-5.218, F.A.C.) was provided by
the Florida Self-Insurers Guaranty Association. This average cost is based on the 305 private
self-insurers with security deposits on file with FSIGA. The average cost for private self-insurers
to maintain insurance (Rule 69L-5.219, F.A.C.) and a surety bond or letter of credit (Rule 69L5.225, F.A.C.) was based on data provided by the Florida Self-Insurers Guaranty Association.
The average cost to the Division for staffing is $13,950 per month to implement and enforce the
self-insurance rules and statutes. The Division currently has five staff members that monitor the
self-insurance program. The annual cost for staff is approximately $167,398. The cost to the
Division for services provided by the FSIGA is estimated at $230,569 annually.
EXHIBIT LIST
Exhibit 1 – Division of Workers' Compensation Fiscal Year 2010/2011 Accomplishments
(attached)
Exhibit 2 - websites for cost of surety bonds - http://www.buysurety.com/surety-bond-cost/
and www.suretybonds.com.states/florida.html.
Exhibit 3 – www.creditmanagementworld.com and click on Standby letters of credit
Exhibit 4 – Email correspondence from FSIGA regarding self insurers with investment grade
ratings. (attached)
46
Exhibit 1
47
Exhibit 4
From: Renn Vickers [mailto:RennVickers@fsiga.org]
Sent: Monday, April 09, 2012 10:35 AM
To: Dwayne Manning
Cc: Brian Gee
Subject: RE: Phone Message
Dwayne,
Here is the information that you requested:
•
•
Total number of current or former members with an investment grade credit rating –
195
Number of members that were downgraded from investment grade to non-investment
grade during the FY 2010-2011 – 10
Renn Vickers
Florida Self-Insurers Guaranty Association
1427 E. Piedmont Dr., 2nd Floor
Tallahassee, FL 32308
(850) 222-1882
(850) 222-2926 Fax
rennvickers@fsiga.org
C. Lower Regulatory Cost Alternatives Received: None
D. Reasons to Reject Lower Regulatory Cost Alternatives: N/A
E. Reasons to Retain the Rules without Amendment: Section 440.38(1)(b), F.S.,
authorizes employers to self-insure by providing proof to the Florida SelfInsurers Guaranty Association, Inc. that they have the financial strength to pay
all current and future claims for injured employees. These rules have been
developed to maintain records and procedures to do this. No amendments were
considered to be necessary for these rules.
48
7. 69L-5.229 and 69L-5.230 - QUALIFIED SERVICING ENTITIES
A. Text of the Rules:
69L-5.229 Application Process.
(1) Application to become a Qualified Servicing Entity shall be made on Form DFS-F2-SI-22 (Qualified Servicing
Entity Application), effective 08/09, incorporated by reference. Entities may apply to become a Qualified Servicing
Entity in any or all of the following: claims-adjusting, loss control or safety engineering. The application shall be
submitted to the Division at least ninety (90) days prior to the desired effective date. The application may be
obtained at:
Department of Financial Services
Division of Workers’ Compensation
Bureau of Monitoring and Audit/Self-Insurance
200 East Gaines Street
Tallahassee, FL 32399-4224
(a) Entities that are not insurance companies licensed to write workers’ compensation insurance by the Florida
Office of Insurance Regulation shall include the following in the application package:
1. A completed Form DFS-F2-SI-22 (Qualified Servicing Entity Application), effective 08/09, as incorporated by
reference.
2. Proof that the management and ownership of the Qualified Servicing Entity is competent, trustworthy and
possesses managerial experience that would make the proposed operation beneficial to the workers covered. In
determining competency the Department shall consider the applicant’s claims-handling history. If the applicant’s
history contains any of the following it shall be considered a demonstration of a lack of competency:
a. A repeated pattern or practice of questionable claims-handling techniques pursuant to Section 440.525 or
440.20, F.S.,
b. A repeated pattern or practice of unreasonably controverting claims,
c. A repeated pattern or practice of failing to pay compensation orders as required by statute; or,
d. A repeated pattern or practice of arbitrarily or unreasonably disallowing or reducing payments to healthcare
providers pursuant to Section 440.13(7)(f), F.S.
(b) A completed Form DFS-F2-SI-27 (Biographical Statement and Affidavit), effective 08/09, as incorporated by
reference, for each owner and member of management, along with a brief resume. Copies of this form are
available at the Division of Workers’ Compensation, Bureau of Monitoring and Audit, Self-Insurance Section, 2012
Capital Circle, S.E., Hartman Building, Tallahassee, FL 32399-4224.
(c) Independent background investigation reports on the owners and management performed by a company
approved by the National Association of Insurance Commissioners (NAIC).
(d) Proof that the applicant has a sufficient number of workers’ compensation claims adjusters licensed by the
State of Florida and loss control and safety engineering personnel employed on a full-time basis to meet the needs
of all self-insurers with which it intends to contract. The following information shall be submitted for each
employee:
1. A copy of their Florida Adjusters License, for the adjusters.
2. A copy of a current resume for loss control and safety engineering personnel.
49
(e) Proof of a physical location within the State of Florida separate from the client’s location. If the Qualified
Servicing Entity is a subsidiary of the self-insurer that it services, then the physical location may be the same as
that of the self-insurer.
(f) Proof that they have within the State of Florida, an insurance professional qualified in the field of workers’
compensation and authorized to act in all matters concerning the company’s claims-handling,
(g) A statement signed by an officer of the company that the Qualified Servicing Entity utilizes only authorized
rehabilitation services pursuant to Section 440.491(7), F.S.,
(h) Two (2) letters of recommendation from prior or current customers,
(i) A statement detailing the record handling and maintenance practices, and,
(j) A copy of the standards and procedures used to develop safety programs for their clients if applicable.
(2) Entities that are insurance companies licensed to write workers’ compensation insurance by the Florida Office
of Insurance Regulation shall include the following in the application package:
(a) A completed Form DFS-F2-SI-22 (Qualified Servicing Entity Application), effective 08/09, and
(b) Proof of their certificate of authority.
(3) The entity submitting an application must have no outstanding penalties or fines owed.
(4) The entity submitting an application must be approved by the Department before engaging in business in
Florida as a Qualified Servicing Entity.
Rulemaking Authority 440.38(1), (2), (3), 440.385(6), 440.591 FS. Law Implemented 440.38(1), (2), (3), 440.385(1), (3), (6) FS.
History–New 3-9-10.
69L-5.230 Contracting with a Qualified Servicing Entity.
(1) Each Qualified Servicing Entity shall file Form DFS-F2-SI-19 (Certification of Servicing for Self-Insurers), effective
08/09, as previously incorporated by reference in Rule 69L-5.216, F.A.C., within thirty (30) days of entering into a
contract for servicing.
(a) For Governmental Entities, Form DFS-F2-SI-19 (Certification of Servicing for Self-Insurers), effective 08/09, shall
be obtained from and submitted to the:
Department of Financial Services
Division of Workers’ Compensation
Bureau of Monitoring and Audit/Self-Insurance
200 East Gaines Street
Tallahassee, FL 32399-4224
(b) For FSIGA Members, Form DFS-F2-SI-19 (Certification of Servicing for Self-Insurers), effective 08/09, shall be
obtained from and submitted to the:
Florida Self-Insurers Guaranty Association, Inc.
1427 E. Piedmont Drive, 2nd Floor
Tallahassee, FL 32308
50
(2) Each contract entered into by a Qualified Servicing Entity shall be open for inspection by the Division.
(3) Upon termination of a contract for servicing, the Qualified Servicing Entity agrees it shall continue to provide
claims adjusting services on all claims incurred during the contract period for ninety (90) days if requested to do so
by the self-insurer. The Qualified Servicing Entity shall be entitled to payment for its services at the rate agreed
upon by the parties in the contract.
(4) If a self-insurer fails to adequately fund claims or becomes insolvent, the Qualified Servicing Entity shall
immediately notify the Department or Association as appropriate. The Qualified Servicing Entity shall provide
claims adjusting services for up to ninety (90) days or until relieved of this responsibility by the Division or the
Association. The Qualified Servicing Entity shall not be required to pay claims or otherwise incur liabilities for
unpaid claims due to the self-insurer’s insolvency or failure to adequately fund claims if the Department or the
Association is promptly notified. The Qualified Servicing Entity shall be entitled to payment for its services at the
rate agreed upon by the self-insurer in the contract.
(5) When claims files and claims servicing responsibilities are transferred to a new Qualified Servicing Entity, the
previous Qualified Servicing Entity shall provide an accounting of all claims files and claims data sufficiently
detailed to permit the new Qualified Servicing Entity of the self-insurer to establish accurate claims, reserving, and
accounting data.
(6) Files containing the records of the self-insurer’s claims are the property of the self-insurer. Upon termination
of the contract, the files shall be transferred to the new Qualified Servicing Entity or to the self-insurer along with
the responsibility for handling them, and
(a) All files shall be transferred within thirty (30) days upon termination of the contract.
(b) Qualified Servicing Entities shall maintain in Florida, copies of all records relating to the self-insurer’s claims
that they service. The copies shall be sufficient in type and quantity to verify the accuracy and completeness of all
reports and documents submitted to the Division.
(7) The Division shall be notified within thirty (30) days of any change in the location of any records.
(8) Records shall be open for inspection by representatives of the Division or Association during regular business
hours. All records shall be retained for five (5) years.
(9) Qualified Servicing Entities may be audited by the Division without prior notice. If the Audit finds any of the
following it shall be considered good cause for revocation of the Qualified Servicing Entity’s authorization.
(a) A repeated pattern or practice of questionable claims-handling techniques pursuant to Sections 440.525 and
440.20, F.S.,
(b) A repeated pattern or practice of unreasonably controverting claims,
(c) A repeated pattern or practice of failing to pay compensation orders as required by statute, or
(d) A repeated pattern or practice of arbitrarily or unreasonably disallowing or reducing payments to health care
providers pursuant to Section 440.13(7)(f), F.S.
(10) Failure to comply with Chapter 69L-24, F.A.C., shall be considered good cause for revocation of the Qualified
Servicing Entity’s authorization.
(11) Each Qualified Servicing Entity shall file with the Division no later than March 1 of each year, Form DFS-F2-SI23 (Qualified Servicing Entity Annual Report Form), effective 08/09, as incorporated by reference. A copy of Form
DFS-F2-SI-23 (Qualified Servicing Entity Annual Report Form), effective 08/09, is available at the:
51
Department of Financial Services
Division of Workers’ Compensation
Bureau of Monitoring and Audit/Self-Insurance
200 East Gaines Street
Tallahassee, FL 32399-4224
(12) A finding by the Department of repeated questionable claims handling techniques, or a pattern or practice of
unreasonable delay in the handling of claims, or of repeated unreasonably controverting claims, or of a repeated
practice of failing to pay compensation orders as required by statute, or of a repeated practice of arbitrarily or
unreasonably disallowing or reducing payments to healthcare providers pursuant to Section 440.13(7)(f), F.S., shall
be considered good cause for the revocation of the Qualified Servicing Entity’s authorization.
(13) Failure to comply with these rules or orders within the time prescribed shall be considered good cause for
revocation of the Qualified Servicing Entity’s authorization.
Rulemaking Authority 440.38(1), (2), (3), 440.385(6), 440.525(2), 440.591 FS. Law Implemented 440.38(1), (2), (3), 440.385(1),
(3), (6), 440.525 FS. History–New 3-9-10.
B. Compliance Economic Review:
COMPLIANCE ECONOMIC REVIEW
Pursuant to section 120.745(5), Florida Statutes
RULES 69L-5.229 and 69L-5.230, FLORIDA ADMINISTRATIVE CODE
RULES FOR QUALIFIED SERVICING ENTITIES UNDER THE WORKERS’ COMPENSATION ACT
DEPARTMENT OF FINANCIAL SERVICES
DIVISION OF WORKERS’ COMPENSATION
April 11, 2012
52
JUSTIFICATION FOR THE RULE
Section 440.38, Florida Statutes, mandates that the Division adopt rules to allow employers to
obtain workers’ compensation coverage under the self-insurance program. The Division is also
required to adopt rules by which entities may become qualified to provide underwriting,
claims-adjusting, loss control and safety engineering services to self-insurers. Therefore, these
rules provide specific requirements on how entities may obtain approval to become a qualified
servicing entity (QSE), in addition to stating the provisions for entering contractual
arrangements with self-insurers after approval is granted.
STATEMENT OF ESTIMATED REGULATORY COSTS
Direct or indirect economic impact:
a. Adverse impact on economic growth, private sector job creation or employment, or
private sector investment, which is more than $1 million over five years;
b. Adverse impact on business competitiveness, including the ability of persons doing
business in Florida to compete with persons in other states or domestic markets, which
is cumulatively more than $1 million over five years;
c. Likelihood of the regulatory cost, including transactional costs, of more than $1 million
cumulatively over five years.
BACKGROUND:
Rule Chapter 69L-5, F.A.C., entitled "Rules for Self-Insurers Under the Workers' Compensation
Act," interprets and implements provisions of Chapter 440, Florida Statutes, for employers self
insuring the payment of compensation for Florida employees. Section 440.38(1)(b), Florida
Statutes, authorizes employers to self-insure the payment of compensation by providing proof
to the Florida Self-Insurers Guaranty Association, Inc. ("Association") that they have the
financial strength necessary to ensure timely payment of all current and future claims and by
then receiving authorization from the Department to pay such compensation directly. The
Association is a private, non-profit corporation established by Section 440.385, Florida Statutes,
responsible for guaranteeing that injured workers of insolvent self-insurers who are members
of the Association continue to receive workers' compensation benefits after insolvency. All
current self-insurers, other than government entities and public utilities, are required to be
members of the Association. Sections 440.38(1)(b), 440.385, and 440.525, Florida Statutes,
establish regulatory requirements for the self-insurers and their qualified servicing entities.
53
Rule 69L-5.229 – Application Process.
Purpose and Effect: This rule consists of reporting requirements for qualified servicing entities
requesting approval of applications to become a qualified servicing entity to provide claimsadjusting, loss control or safety engineering services for self-insurers. The requirements
stipulate that an entity must submit documentation to the Division for approval to act on behalf
of the self-insurer in reporting data to the Division. Such requirements include submission of
the following: application, background investigation of owners, biographical statements for
owners, claims adjusters’ licenses, proof of location in Florida, and letters of recommendation.
Economic Analysis: The Division estimates that the regulatory cost for submission of the
required application and supporting information is 48 man hours with an estimated $25.00
hourly rate, totaling $1,200 per business. This estimate is based on the hours and rate if the
activities listed above were performed by staff in the Division. A company approved by the
National Association of Insurance Commissioners (NAIC) has estimated that $185 to $220 per
person is the cost or value of the typical independent background investigation report on the
owners and management, for which NAIC must approve the investigation firm according to
Rule 69L-5.229(1)(c). There are currently 98 active qualified servicing entities in Florida. The
Division estimates that 70 to 75 qualified servicing entities have been in existence for more
than five years and thus the impact on the businesses predates the term under review (the fiveyear period beginning July 1, 2011). The Division estimates that only three to five companies
per year in the industry might enter the market in a given year. The regulatory cost for
submission of the required information is unlikely to exceed $1 million due to the fact that only
a one time approval is needed for authorization to provide services in the state of Florida.
Rule 69L-5.230 – Contracting with a Qualified Servicing Entity.
Purpose and Effect: The requirements of this rule consist of qualified servicing entities
reporting each contract with a self-insurer and maintaining the self-insurer’s claim files. The
claim files records must be of sufficient accuracy and completeness for the Department to audit
for repeated questionable claims handling techniques, or a pattern or practice of unreasonable
delay in the handling of claims, or of repeated unreasonably controverting claims, or of a
repeated practice of failing to pay compensation orders as required by statute, or of a repeated
practice of arbitrarily or unreasonably disallowing or reducing payments to healthcare providers
pursuant to section 440.13(7)(f), Florida Statutes.
Economic Analysis: Whether the rule is likely to have an adverse impact on business
competitiveness, including the ability of persons doing business in the state to compete with
persons doing business in other states or domestic markets, productivity, or innovation in
excess of $1 million in the aggregate within five years after July 1, 2011 is not clear. However,
due to the volume of claims handled by qualified servicing entities, which the Department
54
estimates will exceed over 51,000 claims in a given year, it is very likely that the cost could
exceed $1 million cumulatively over five years. The estimate is based on claims that include a
Qualified Servicing Entity Division ID number at the time of filing. The estimate does not include
any claim not required to be filed with the Division, such as medical only claims. Medical Only
Claims usually outnumber the number of claims that are required to be filled with the Division.
The estimate does not include filed claims that neglected to include the Qualified Servicing
Entities’ Division ID numbers. If it can be assumed each claim costs $5.00 to process, $1,000,000
over a five year time period will be exceeded. The impact threshold might be triggered just by
the qualified servicing entities’ time to input the data into their electronic systems over the
period that the rule requires. The Division estimates that the regulatory cost for submission of
the required form for reporting each contract entered into is 24 man hours with an estimated
$22.00 hourly rate, totaling $528.00 per business. This estimate is based on the hours and rate
if the activities listed above were performed by staff in the Division.
Types and numbers of individuals or entities likely to be required to comply with these rules:
There are currently 98 active qualified servicing entities that are required to comply with these
rules.
Cost to the Division and other state or local governments to implement and enforce the rules:
The Division currently has five employees to implement and enforce the rules. Those
employees consist of an Administrator, two Auditors, a Governmental Analyst and one support
staff employee. Annual salaries for the positions listed total $167,398.
The Division also contracts with the Florida Self-Insurers Guaranty Association to receive,
monitor and review forms, reports and documents for private self-insurers. Section 440.385(6),
Florida Statutes, requires the Department to contract with the Association for services which
may include processing applications from self-insurers, collecting and reviewing financial
statements, processing compliance documentation, and inspecting and auditing payroll records
of individual self-insurers. The cost to the Division for these services is $230, 569 annually.
Effect on state or local revenues: All self-insurers are required to report claims data to the
Division. This can be done by in-house staff of the self-insurer or by contracting with a qualified
servicing entity. This rule has no known impact on state or local revenues.
TRANSACTIONAL COSTS: Transactional costs for qualified servicing entities contracting with
self-insurers are determined by the following: claims volume of the self-insurer, license
adjusters (salary/benefits), administrative cost, case management staff (salary/benefits), Florida
location, etc. Contact by the Division was made with several qualified servicing entities that are
currently servicing claims for self-insurers; however, the cost for these services could not be
ascertained due to the diverse models of the business operations.
55
Impact on small businesses: There is no impact to small businesses due to the minimum net
worth requirements for being a private self-insurer.
Impact on small counties and small cities: There is a minimal impact on governmental entities.
The transactional costs for small governmental self-insurers consist of having competent staff
to process claims in-house or contracting with a qualified servicing entity.
Additional information:
The National Association of Insurance Commissioners (NAIC) must approve the contractor
performing a background investigation of prospective qualified servicing entities.
REGULATORY ALTERNATIVES SUBMITTED
No regulatory alternatives were submitted.
METHODOLOGY
The average cost for qualified servicing entities to comply with record maintenance could not
be ascertained due to the diverse models of business operations. The Division contacted several
qualified servicing entities and learned that the cost for record maintenance is separate and
distinct based on the company’s business model, and is not negatively impacted by this rule
requirement. There are currently 98 active qualified servicing entities providing services for
insurers and self-insurers.
The Division currently has five staff members monitoring the self-insurance program.
Consequently, the cost to implement and enforce the self insurance rules and statutes averages
$13, 949 per month. Total annual cost is approximately $167,398. In addition, the Division’s
cost for services provided by the Florida Self-Insurers Guaranty Association is estimated at
$230,569 annually. The five year total for these two expenses is $1,989,835.
C. Lower Regulatory Cost Alternatives Received: None
D. Reasons to Reject Lower Regulatory Cost Alternatives: N/A
E. Reason to Retain the Rules without Amendments: Section 440.38, F.S., required
DFS to adopt rules by which entities may become qualified to provide underwriting,
claims adjusting, loss control and safety engineering services to self-insured
companies under the Workers Compensation program. These two rules meet that
statutory mandate and no amendments are needed.
56
8. 69L-24.005 – Maintaining and Providing Records.
A. Text of the Rule:
69L-24.005 Maintaining and Providing Records.
(1) Pursuant to Section 440.525(1), F.S., the Department may examine and investigate regulated
entities as often as is warranted to ensure that they are fulfilling their obligations under Chapter
440, F.S. The Department shall have the power to conduct onsite inspections of claims records and
documentation of an insurer, third-party administrator, servicing agent, or other claims-handling
entity, and conduct interviews, both sworn and un-sworn, of claims-handling personnel. Insurers,
third-party administrators, servicing agents, and other claims-handling entities shall make all claims
records, documentation, communication, and correspondence available to Department personnel
during regular business hours, pursuant to Section 440.525(3), F.S. All regulated entities shall
provide to the Department all information and documentation that is requested for the purposes of
monitoring, examining, or investigating the regulated entity’s operations and processes. Such
information and documentation, including specific data, shall be made available to the Department
within 14 calendar days of receipt of any request by the Department unless the Department allows
an extension of time.
(2) For examinations or investigations, if the regulated entity maintains hard-copy files, the hardcopy files shall be made available to the Department on or before the date requested by the
Department. If the regulated entity maintains electronic files and an examination or investigation is
conducted at the regulated entity’s offices, a sufficient number of functioning computers shall be
made available to the Department for access to the electronic claims documents and information.
Requests for information may include, but are not limited to:
(a) The date of notification or knowledge of the injury. “Notification” and “knowledge” are defined
in subsections 69L-3.002(23) and 69L-56.002(40), F.A.C.
(b) The date of initial disability, the eighth day of disability and knowledge of the eighth day of
disability,
(c) The date each indemnity payment was mailed to the injured worker, the amount of the payment,
and the period of time that was covered in the payment,
(d) The date that Forms DFS-F5-DWC-9 (Health Insurance Claim Form/CMS-1500), DFS-F5-DWC-10
(Statement of Charges for Drugs and Medical Supplies Form and Instructions), DFS-F5-DWC-11
(American Dental Association Dental Claim Form), and DFS-F5-DWC-90 (Hospital Billing Form (UB04), or their electronic equivalents, as incorporated in paragraphs 69L-7.602(2)(a), (b), (c), and (e),
F.A.C., were received from the health care provider pursuant to paragraph 69L-7.602(1)(m), F.A.C.
(e) The date that Forms DFS-F5-DWC-9 (Health Insurance Claim Form/CMS-1500), DFS-F5-DWC-10
(Statement of Charges for Drugs and Medical Supplies Form and Instructions), DFS-F5-DWC-11
(American Dental Association Dental Claim Form), and DFS-F5-DWC-90 (Hospital Billing Form (UB04)), or their electronic equivalents, were paid, disallowed, or denied,
(f) The date that Forms DFS-F5-DWC-9 (Health Insurance Claim Form/CMS-1500), DFS-F5-DWC-10
(Statement of Charges for Drugs and Medical Supplies Form and Instructions), DFS-F5-DWC-11
(American Dental Association Dental Claim Form), and DFS-F5-DWC-90 (Hospital Billing Form (UB04)), or their electronic equivalents, were mailed or transmitted to the Department,
57
(g) The date that Form DFS-F2-DWC-60 (Important Workers’ Compensation Information for Florida’s
Workers’ brochure) or DFS-F2-DWC-61 (Informacion Importante De Seguro De Indeminzacion Por
Accidentes De Trabajo Para Los Trabajadores De La Florida) was mailed to the injured worker,
(h) The date that Form DFS-F2-DWC-65 (Important Workers’ Compensation Information for Florida’s
Employers), effective 8/2004, or Forms DFS-F2-DWC-66 (Informacion Importante Del Seguro De
Indemnizacion Por Accidentes De Trabajo Para Los Empleadores De La Florida), effective 8/2004, as
incorporated in Rule 69L-3.0036, F.A.C., was mailed to the employer,
(i) The date that the Employee Notification Letter, as incorporated in subsection 69L-26.004(6),
F.A.C., was mailed to the injured worker,
(j) The date that any written request for medical authorization was received and the date that the
medical authorization was granted in response to the written request,
(k) Electronic Data Interchange (EDI) transactions and requirements pursuant to Rule 69L-56.001
through 69L-56.500, F.A.C.,
(l) The date that the 120-day notice required under Section 440.20(4), F.S. was mailed,
(m) All diary notes, claim notes, and correspondence available for review during an examination,
audit or investigation.
Rulemaking Authority 440.13(11), 440.185(10), 440.20(6), 440.525(4), 440.591, 440.593(5) FS. Law Implemented
440.13(11), 440.185, 440.20(6), (8), 440.525, 440.593 FS. History–New 1-12-10.
B. Compliance Economic Review:
COMPLIANCE ECONOMIC REVIEW
Pursuant to section 120.745(5), Florida Statutes
RULES 69L-24.005
FLORIDA ADMINISTRATIVE CODE
INSURERS' STANDARDS AND PRACTICES
MAINTAINING AND PROVIDING RECORDS
DEPARTMENT OF FINANCIAL SERVICES
DIVISION OF WORKERS’ COMPENSATION
April 10, 2012
58
JUSTIFICATION FOR THE RULE
Sections 440.13, 440.185, 440.20, 440.525, 440.591, 440.593, Florida Statutes, create the
structure for the Division to monitor, examine and investigate the performance of regulated
entities, which can only be accomplished through the maintenance and reporting of records as
specified in this rule. The Division cannot accomplish its statutory duties without the regulated
entities maintaining and providing records as required in this rule. Section 440.525(1), Florida
Statutes, provides that the Division may specify by rule the documentation to be maintained for
each file.
STATEMENT OF ESTIMATED REGULATORY COSTS
Direct or indirect economic impact:
b. Adverse impact on economic growth, private sector job creation or employment, or
private sector investment, which is more than $1 million over five years;
c. Adverse impact on business competitiveness, including the ability of persons doing
business in Florida to compete with persons in other states or domestic markets, which
is cumulatively more than $1 million over five years;
d. Likelihood of the regulatory cost, including transactional costs, of more than $1 million
cumulatively over five years.
69L-24.005 – The requirements of this rule overlap with operational costs of the regulated
entities. Claims handling entities maintain their records for purposes of their business
administration and operations. This rule stipulates some of the primary claims handling data
fields that the Division requires to be maintained and provided for purposes of examinations or
investigations performed by the Division. These data fields are components of what an entity
uses to adjust claims. Due to the number of claims handling entities in the State of Florida, it is
very likely that costs in this area exceed $1 million cumulatively over five years given the large
number of companies currently participating. There are approximately 413 self-insurers, 779
insurers, and 98 third-party administrators (TPA’s) currently active in the State of Florida along
with other claims-handling entities.
Types and numbers of individuals or entities likely to be required to comply with these rules:
Currently there are 413 self-insurers, 98 TPA’s, and 779 insurers.
Cost to the Division and other state or local governments to implement and enforce the rule:
The Division examinations average about $5,260 per audit, which includes salaries and travel
expenses. There are no implementation or enforcement costs to other state or local
governments.
59
Effect on state or local revenues: This rule has no effect on state or local revenues.
Transactional costs: Attempts were made to find data in other states for comparison of record
maintenance requirements. The U.S. Chamber of Commerce produces a report that is not
available without cost. Information pertaining to state laws being enacted is available through
the National Council of State Legislatures. However, this data does not provide a side-by-side
comparison of the laws from state to state; rather, it provides summaries for proposed and
enacted laws without describing the effects on each unique workers’ compensation system.
The maintenance costs overlap operational and overhead costs and cannot be extracted for the
sole purpose of maintaining records in accordance with this rule. Claims administration systems
and other software have costs specific to the size, nature, customization and location of each
individual business. The rule provides guidance for entities to use when designing their
business operations and systems, but is not the sole reason for a business to maintain records.
Insurers have to maintain records as part of their operation; therefore, the rule does not cause
additional burden.
The second component of this rule is for claims handling entities to provide records to the
Division for the purpose of examinations and investigations. The majority of these
examinations are conducted on-site, at the location of the claims handling entity, for the
purpose of monitoring claims handling activities and disbursement practices. Records are
maintained in paper files, electronic files, or a combination of the two.
Medical records are reviewed at the Division and indemnity records are reviewed at the
location of the claims handling entity. For those companies that maintain electronic or webbased records, there is no cost to provide these records for an examination. The data is
submitted in an electronic file or access is granted to the Division to view the records. On
average, each auditor reviews 12-14 files per audit. The number of auditors assigned to an
audit varies and is dependent on the insurer’s overall claims volume.
Both medical and indemnity records require preparation time by staff at the claims handling
entity. Information provided to the Division by an insurer after a recent audit indicates
approximately 14 hours of record preparation. The staff of the insurer is also required to be
available during the on-site audit to respond to clarification sheets and questions from the
Division. The insurer spent a total of 59 hours, spread among various staff to assist the Division
in completing its statutory audit responsibilities.
On-site examinations require access to records in the form which the claims handling entity
operates. Paper files are provided for review and access to electronic system data is made
available at a computer station for each Division staff member. Providing computers and
access to the electronic system was approximately $1,200 for the most recent examination of
60
an insurer. If paper files are kept on-site, copies are not required as the audit occurs at the site
of the claims-handling entity.
The frequency of examination for an insurer averages between one and five years depending
on the results of previous examinations and the relationship of insurers and the groups in which
they belong. The Division acknowledges insurers that belong to the same group and attempts
to structure the schedule of examinations to distribute the on-site audits across insurance
groups.
The Division conducts examinations and investigations pursuant to Section 440.525, Florida
Statutes, and this rule indirectly provides the means by which the examinations and
investigations occur and specifies the documentation that must be maintained for each claim
file.
Impact on small businesses: This rule impacts all businesses in the same manner and has no
particular impact unique to small businesses.
Impact on small counties and small cities:
All small cities and small counties are required to provide workers’ compensation. To the
extent that these entities are purchasing coverage in the private market, no adverse impact
would be expected. Small cities and small counties that choose to self-insure and use thirdparty administrators to service their claims would not be expected to have any adverse
impact as they are sharing their costs with other market participants. The Division expects
that the only impact on small counties and small cities would be if any are self-servicing
their claims. However, the Division is unaware of any small counties or small cities that are
doing so.
Additional information:
The Division is responsible for ensuring the self-executing nature of the Florida Workers’
Compensation system to ensure quick and efficient delivery of benefits to injured workers.
The statutes and rules provide the structure for the system by which claims handling
entities adjust claims. The Division is charged with examining and investigating these
entities as needed in order to ensure that the system continues to be self-executing. The
records maintained and provided for examinations and investigations ensure that the
Division can accurately monitor the claims handling and disbursement practices of all claims
handling entities. Monitoring promotes adherence to the statutes and rules which
facilitates the self-execution of the workers’ compensation system.
61
METHODOLOGY
The insurer cost of an on-site examination was provided by an insurer based on a recent audit.
The costs related to time and resources were furnished for the portion of the rule relating to
providing records. Based on the insurer’s estimate, the examination involved 31 employees, 59
hours and cost $1,200. The Division averages 60 audits per year, which results in a total annual
industry average of 3540 work hours and $72,000. Across five years, the cost for the portion of
the rule pertaining to providing records aggregates to 17,700 hours of staff time and $360,000.
The Division cost per staff member averages $1,315 per week, which includes salary and the
cost of travel. The Division averages four people per examination and 60 audits per year
totaling $315,600.
Costs for maintenance of records cannot be ascertained due to the diverse models of business
operations. These costs are assumed to be included as operational or administrative costs to
the regulated entity and are not readily available from the industry. Costs for these expenses
can also be absorbed through corporate entities rather than individual insurers.
C. Lower Regulatory Cost Alternatives Received: None
D. Reasons to Reject Lower Regulatory Cost Alternatives: N/A
E. Reason to Retain the Rule without Amendment: Section 440.525(1), F.S., states
that DFS may specify by rule the documentation that is required to ensure
compliance with statutory requirements such as those found in ss. 440.13,
440.185, 440.20, 440.525, and 440.593, F.S., to monitor, examine and investigate
the performance of regulated entities in the Workers Compensation program.
This rule has been developed to provide such documentation and no
amendment is necessary.
62