S.C. controversy rages over workers’ comp overhaul

There isn’t any question about overhauling South Carolina’s workers’ compensation system, but there is a lot of disagreement about how to accomplish this feat. Workers’ compensation reform is on the legislature’s spring agenda, but Senator Gerald Malloy (D-Hartsville), was quoted by The Associated Press calling for hearings about if the insurance department is being properly managed and is operating efficiently, which he said should be done before the topic goes to the legislature.

Businesses stung by rate increases are pushing for the overhaul, but opponent say the effort will reduce benefits for injured workers. The disagreements come at a bad time, just as insurers are arguing for rate increases.

The controversy over how the insurance department is being run surfaced after two long-time employees resigned.

AIA comments
AP article, saying it shows once again the extent to which opponents of workers’ compensation reform will go to defeat a measure that is critical to the health of the South Carolina economy.

“The AP reporter unfortunately relied exclusively on the words of a “hired gun” insurance actuary who is attempting to try a pending workers’ compensation rate filing in the press instead of before an administrative law judge, as the state of South Carolina requires,” explained Raymond G. Farmer, AIA assistant vice president. “All with the ultimate goal of discrediting the parties involved in the current effort to pass workers’ compensation reform in the General Assembly.”

“The reporter failed to point out that the actuary making these questionable charges is a long-time industry critic who conveniently finds himself on the same side of the issue as the South Carolina Small Business Chamber of Commerce, a group partially funded by the trial bar–who are also vigorously opposing the workers’ compensation reform legislation,” Farmer said. “The National Council of Compensation Insurers has been a frequent target of Mr. Simons, as have the insurers that rely on NCCI’s data to make important business decisions.

“Just as the sun comes up in the morning, Mr. Simons will find a way to nit-pick industry data to build a case for his side, if not workers’ compensation, then some other insurance issue. The bottom line is that insurers will continue to rely on NCCI data. We also believe that the workers’ compensation debate is an important one to South Carolina’s future and deserves to be reported on fairly and completely.”

Frank Knapp, chief executive of the South Carolina Small Business Chamber of Commerce, has been critical of Kitzman’s work on workers’ comp, saying they cut too much in favor of insurers. “We don’t have anyone who can act as a check to the political pressures to favor the insurance industry,” Knapp said.

Dramatic rate hikes
Last year, the South Carolina Second Injury Fund, which helps employers keep workers with previous injuries on the payroll, said insurers would have pay $253 million in assessments in the wake of a 2003 law change. That’s nearly double the previous year.

In June, the National Council on Compensation Insurance asked the insurance department to raise the primary component in setting workers’ compensation rates by nearly 33 percent.

Kitzman rejected NCCI’s request on Sept. 2, but her decision was filed two days late. The agency “failed to preserve its jurisdiction,” Chief Administrate Law Judge Marvin Kittrell said on Nov. 8. The issue is now in Kittrell’s hands.

The missed deadline didn’t delay how the rate case is being handled, Kitzman said in a written response to questions.

Legislation introduced by Malloy calls for the Senate Banking and Insurance Committee to study how efficiently the agency is operating, protecting the public interest, the interests of consumers and the insurance marketplace.

According to Ann Robertson, an insurance iepartment spokesperson, the special legislation isn’t needed.

The controversy came just as the state’s workers’ compensation costs promise to be larger than the 12.7 percent suggested by Martin Simmons, the Consumer Advocate’s actuarial witness and according to Peter M. Burton, NCCI Holdings Inc. senior division executive, state relations.

“There was no mention of the much larger increases testified to by other parties,” Burton told Insurance Journal. “In particular, the insurance department’s consultant recommended an increase almost twice as large as Simons, and another nationally recognized actuary also testified that he was comfortable with an even larger increase.

Burton said NCCI looks forward to discussing these and other actuarial issues at the upcoming April rate hearing. It believes this is the best forum to fairly and completely evaluate the case.

The Property Casualty Insurers Association of America is working with business groups, Gov. Sanford and lawmakers to secure reform before the crisis in the system worsens.

South Carolina, traditionally a low-cost workers’ compensation state, has seen medical and indemnity costs, attorney involvement, and Second Injury Fund assessments increase. The National Council on Compensation Insurance recommended a 33 percent workers’ compensation advisory loss costs increase. In addition, the state’s Second Injury Fund increased assessments nearly 100 percent, to $253 million.

“We support the legislation introduced by Senators Jim Ritchie and Scott Richardson along with Rep. Harry Cato and all of their co-sponsors and thank them for leading the charge,” Robert Herlong, vice president and regional manager for PCI said. “Dramatic cost increases are hurting the state’s business climate. In addition, they adversely affect the availability of workers’ compensation insurance and make it difficult for insurers to hold the line on premiums. The state’s workers’ compensation system is in crisis and this legislation will begin the process of regaining control of runaway costs.”

Topics Carriers Legislation Workers' Compensation South Carolina