Letter to Senator Glenn McConnell and Speaker Bobby Harrell:

January 7, 2006

The Honorable Glenn F. McConnell
President Pro Tempore
South Carolina Senate
101 Gressette Building
P.O. Box 142
Columbia, SC 29202

The Honorable Robert W. Harrell, Jr.
Speaker, South Carolina House of Representatives
508 Blatt Building
Columbia, SC 29211

Re: Workers’ Compensation Advisory Board

Dear President Pro-Tempore McConnell and Mr. Speaker:

I am writing to you to express concerns about a December 9, 2005, report provided to you by the Workers’ Compensation Advisory Board authored by Ms. Eleanor Kitzman, Director of the S.C. Department of Insurance (DOI). Ms. Kitzman, who has been with DOI only since February 2005, also chaired the Advisory Board.

The Advisory Board was created by a budget Proviso in the last legislative session for the purpose of reviewing the performance of the workers’ compensation rating organization and assigned risk plan administrator as well as to make recommendations for change if necessary. The National Council of Compensation Insurers (NCCI) serves both functions for South Carolina.

The SC Small Business Chamber of Commerce proposed the Advisory Board after a workers’ compensation task force, sponsored by the Small Business Chamber in 2004, made the recommendation. Our task force, consisting of diverse organizations, cited concerns of NCCI’s performance in terms of responsiveness, accuracy and attitude.

Our concern about the Advisory Board’s December 9th report is that the management of the Advisory Board was so rushed, defective and prejudiced that any final recommendations must be questioned.

1. The Proviso (both written and legislatively promoted by DOI staff) creating the Advisory Board was passed in May with the specific provision that a report was due on December 10, 2005. However, in spite of the complexity and importance of the task, DOI did not appoint the members of the Board until early September. The Advisory Board finally had its first meeting on September 26, 2005, three months after DOI knew that the Advisory Board needed to be appointed and only 2 ½ months before the report was due.
2. Because of this shortened time frame, the Advisory Board only had time to meet 6 times for approximately 2 hours each meeting. That is only 12 hours to learn the intricacies of the workers’ compensation rating system for the voluntary market and administration of the assigned risk market. No subcommittees were formed to explore in detail the complicated issues in the time available.
3. Much of the precious time available for Advisory Board members was largely squandered due to both the Advisory Board’s Chair’s lack of leadership to effectively follow the Proviso’s mandate and misguided leadership to protect NCCI. For example, one of the six meetings was earmarked for presentations from NCCI. While appropriate for the purpose of the Advisory Board, there was almost no time for questions and answers from members. Essentially NCCI delivered the message they wish heard without ample time for questions from board members.
4. Instead of a well-organized plan to efficiently perform all the specific tasks called for in the proviso in the short time available, a semi-laissez faire management approach was utilized with no plan provided. The chair set the tone for the Advisory Board at the first meeting by asking the members why the Advisory Board even existed and then clearly stating that the Advisory Board had no jurisdiction to perform some of the tasks laid out in the Proviso.
5. The Chair was more determined when it came to the protection of NCCI:
a. Allowed (appropriately) NCCI a full meeting to review how it carries out its duties but, as mentioned above, left virtually no time for questioning at this meeting.
b. Refused to allow a key DOI employee, who had almost all the institutional knowledge of past NCCI performance, to appear before the Advisory Board even though a Board member made such a request. This employee had expressed concerns about NCCI both in writing and orally in the past. Not only was this employee not allowed to appear before the Advisory Board to provide valuable information, he was subsequently terminated by DOI during this period allegedly for “not being a team player.”
c. Did not offer the services of other DOI employee(s) to work with the Advisory Board to understand the myriad of documents presented to them.
d. “Sanitized” DOI documents critical of NCCI past performance prior to being given to NCCI for response and then distributed to the members. No analysis of the NCCI response by knowledgeable DOI employees was provided.
e. Argued forcefully that the Advisory Board had no specific performance standards on which to evaluate NCCI and thus NCCI performance could not be fairly evaluated by the Advisory Board. No contractual documentation between DOI and NCCI was provided to the Advisory Board for review. The Chair then failed to include in the final report a recommendation to establish performance standards.
f. Prohibited active participation by other knowledgeable parties attending the meetings through an oral directive at the beginning of the first meeting that audience participation was not allowed. (Some, mostly unsolicited, audience comments were made.) Other than NCCI, input from no other South Carolina organization was solicited or encouraged.
g. Refused to review or discuss NCCI’s July filing for a 32.9% increase in average workers’ compensation rate that has a wealth of information concerning NCCI’s performance in data collection, data accuracy and rate filings as required in the Proviso. Ironically, DOI itself rejected NCCI’s filing before the Advisory Board had its first meeting. Obviously, as to the very important function of rate filing DOI determined that NCCI’s performance had not been adequate. Yet, the reason for this inadequacy was never presented or acknowledged to the Advisory Board.
h. Joined industry representatives on the Advisory Board (including one who serves on the board of NCCI) in arguing against looking at states without NCCI as their workers’ compensation rating organization and assigned risk plan administrator. The Chair and industry members were determined not to seek input from these other states since, they claimed, NCCI’s performance had been deemed adequate by the Advisory Board. Only due to the strong determination of one Advisory Board member to have alternatives to NCCI looked at did the Chair finally concede to have one alternative mechanism reviewed by the Advisory Board. A telephone presentation by a North Carolina official was made at the final meeting of the Advisory Board, leaving the Advisory Board no time to process the information provided to them or to seek additional input from other states.

The Small Business Chamber has not taken a position on the continued use of NCCI’s services but does believe that the December 9th report from the Advisory Board fails to provide the State with the comprehensive and impartial review envisioned in the Proviso. As the primary business organization responsible for the creation and adoption of the Proviso, it is clear to us that this effort was “hijacked” in order to protect NCCI’s relationship with the South Carolina workers’ compensation system.

It is very clear that the current administration of DOI is too closely aligned with the insurance industry to the detriment of the small business community. The performance of DOI in this matter should lay to rest any lingering support for transferring workers’ compensation responsibilities from the S.C. Workers’ Compensation Commission to DOI.

The issue of NCCI’s performance as the state’s workers’ compensation rating organization and assigned risk plan administrator is far from resolved. Unless a settlement on NCCI’s July rate filing is reached, hearings before an Administrative Law Judge will revive concerns about the performance of NCCI and future review will be required.

The Advisory Board recommended that it should continue is some fashion to perform future reviews of the state’s workers’ compensation rating organization and assigned risk plan administrator. However, unless the Advisory Board’s composition and leadership is appropriately changed, it is hard to see a meaningful future role for the Board.

The revival of the Workers Compensation Advisory Committee, appointed by the Governor, has been suggested also as a vehicle to address the review of these matters. If this approach is accepted, the composition of the Committee must be of top concern if a fair and comprehensive review is to be accomplished.

I would be happy to further discuss these matters with you.


Frank Knapp, Jr.

Cc The Honorable Mark Sanford, The Honorable David Thomas, The Honorable Harry Cato, Workers Compensation Advisory Board 


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