By Michael Whiteley, WorkCompCentral
Published May 13, 2010
The South Carolina Small Business Chamber of Commerce and a Chicago insurance consultant that teamed up to review carrier reimbursements from the state Second Injury Fund last year have asked lawmakers to intercede in a fight over potential repayments to employers.
Chamber President Frank Knapp and Brad Zaba, the South Carolina business development manager for Advanced Insurance Management (AIM), said they have asked Senate President Pro Tem Glenn McConnell to pass legislation eliminating state regulatory limits on when employers’ experience modifiers can be changed based on reimbursements from the Second Injury Fund.
McConnell could not be reached for comment Wednesday, but Knapp acknowledged there was little hope of legislative intervention with about two weeks left in the 2010 session of the state Legislature.
Discussion of how carriers handle reimbursements from the Second Injury Fund was a significant part of talks over a set of major workers’ compensation reforms passed in 2007.
But, to date, lawmakers have declined to intervene in the debate between the two groups and the state’s rating organization, the National Council on Compensation Insurance, over past reimbursements.
Among other changes, lawmakers voted in 2007 to ban claims involving new injuries to fund after July 1, 2008. The Second Injury Fund won’t accept any new claims for reimbursement after Dec. 31, 2011.
Prior to the reforms, the Small Business Chamber commissioned AIM to study the handling of reimbursements from the SIF. The group reported back that carriers failed to report the reimbursements to NCCI in about half the cases it studied in 2006.
Because carriers failed to report the payments, NCCI didn’t adjust the employer’s experience modifiers to reflect the lower payouts by insurers.
In March 2009, the Small Business Chamber teamed with AIM to review insurers’ records to identify employers that were due lower experience modifiers and potential refunds.
Contracts with employers called for AIM to be paid a contingency for refunds it collected. Knapp said his group would collect a “small percentage” of the profits. But he declined to say how much.
Amy Quinn, NCCI’s state relations executive, said the debate revolves around slow turnaround times at the SIF and the state time limits on changes to experience modifiers.
The state regulations prevent NCCI from adjusting experience modifiers more than three times in five years and prohibit any adjustments extending beyond the five-year period.
At issue are claims dating back to 2001, 2002 and 2003, Quinn said.
Knapp and Zaba appealed the issue of time limits in the adjustment of experience modifiers to a dispute resolution board that is administered by NCCI, but appointed by the South Carolina Department of Insurance. AIM contended that it has proof that employers deserved modifiers dating back eight and nine years. The appeal was rejected.
Quinn said the Department of Insurance declined to intervene. NCCI and AIM also are at odds over how many employers may be due refunds.
Zaba said AIM has found “several hundred employers” due adjustments, but declined to say how many because of “proprietary reasons.” Under agreements with its clients, AIM gets to keep half of what it recovers.
Quinn challenged the estimate and said AIM never had sufficient access to private insurer data to make that determination.
“I would be really surprised,” Quinn said of Aim’s estimates. “The question is do they want these completely open-ended? We went to the Insurance Department, and they didn’t want this extended beyond the five years.”
Zaba said Georgia has no limit on modifications. But Quinn said the time limits are typical of most states.
Zaba said the employers are due refunds despite the regulatory limits.
“We think the majority of them overpaid their premiums. To make matters worse, when we do catch the misdeeds by the carriers and try to get our money back, they can hide behind a completely arbitrary statute of limitations.
“The winners would be the carriers and the losers would be the small guy – the policyholder- the businesses of South Carolina,” Zaba said.
Mike Harris, deputy director of the Second Injury Fund, said his agency attempted to investigate the allegations following the legislative debate. But he said the fund was told data from the carriers was proprietary.
Harris said the SIF fund has often not reimbursed carriers until four years after a worker’s injury.
Martin Simons, a South Carolina actuary who testified as a key witness in court battles over NCCI’s rate filings, said he also warned lawmakers that employees may not have gotten the experience modifiers to which they were entitled.
“It takes so long that the time has passed,” Simons said. “The insurance company gets the benefit, but the employer doesn’t unless they ask for it.”