Pursuant to section 120.745(5), Florida Statutes
INSURERS' STANDARDS AND PRACTICES
MAINTAINING AND PROVIDING RECORDS
DEPARTMENT OF FINANCIAL SERVICES
DIVISION OF WORKERS’ COMPENSATION
April 10, 2012

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.

1.
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.
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.
2.
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.
3.
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.
4.
Effect on state or local revenues: This rule has no effect on state or local revenues.
5.
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 web-based 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 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.
6.
Impact on small businesses: This rule impacts all businesses in the same manner and has no particular impact unique to small businesses.
7.
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.
8.
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.
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.