NCCI Glitch Triggers Push For Investigation: Politics

By Mike Whiteley, WorkCompCentral

Published July 12, 2006

South Carolina state Sen. Gerald Malloy compares the state’s proposed 32.9% hike in workers’ compensation rates and news that a computer glitch by the National Council on Compensation Insurance may have clouded past rates to a baby dinosaur growing up in the back yard.

Now, says the Hartsville attorney and Democrat, it’s about to trample the house.

“These issues are not baby dinosaurs anymore. Now we’re seeing that they’re getting full grown,” said Malloy.

Malloy said Tuesday he will renew efforts next January to pass a resolution ordering an oversight investigation of the South Carolina Insurance Department by the Senate Banking and Insurance Committee.

Malloy’s SR 1113 sailed out of committee in February but died on the Senate calendar without reaching the floor. Under an unusual provision of the Senate rules, a bill can be kept off the floor with the objection of one senator. To be resurrected, it must be placed on the special order calendar. Banking and Insurance Committee Chairman David Thomas, R-Greenville, said that requires a two-thirds vote of the Senate.

With NCCI’s recommendation for a 32.9% rate hike pending before the state’s chief administrative law judge, Malloy and 18 other members of the Senate filed the resolution early in the 2006 session.

The resolution called for the Banking and Insurance Committee to “conduct oversight hearings with respect to the operations and management of the South Carolina Department of Insurance and report to the Senate findings and any recommendations resulting from these oversight hearings.”

Critics of the regulatory agency and NCCI say the department, run by a director appointed the governor, is controlled by the insurance industry. Director Eleanor Kitzman has defended the department, which is backing the NCCI rate hike. The state’s consumer advocate, meanwhile, is calling for increases averaging 12.7% in workers’ compensation rates.

Malloy said the state constitution empowers the Senate to investigate state agencies. But the initiative died with the objection of Sen. Scott Richardson, a Republican insurance and real estate consultant from Hilton Head Island. Richardson could not be reached for comment.

While the rate hike alone has triggered a bitter feud among state officials and the South Carolina Small Business Chamber of Commerce, it wasn’t until after lawmakers went home in June that news broke of an NCCI computer glitch that over-estimated loss costs for some job codes in all 36 states for which it calculates rates.

Kitzman said NCCI has assured her those problems, which date back to 2003, were repaired before NCCI ran the analysis on which the rate hike is based.

The Small Business Chamber and the consumer advocate have asked for the department to reveal how much it knows about the glitch. Based on that, the groups may ask that hearings into the rate hike be reopened.

Malloy said he’s already drafted a new resolution to be pre-filed in December.

“We had a lot of other things that were dominant during the session — for example property tax,” Malloy said. “I thought at the time, with everything going on in the department, it was time to delve into it. I want to bring some folks in and talk to them, especially now that we know the NCCI data is flawed.”

Thomas said the panel is ready and willing to conduct the hearings into the rate hike, the NCCI glitch and the forced Nov. 8, 2005, exit of the agency’s former chief casualty actuary, Dean Kruger.

While Kitzman and Kruger have declined comment, Thomas confirmed Tuesday that Kruger was fired at a time when NCCI was supplying data key to the rate hike.

Thomas also said NCCI and the state never explained why rates for the private sector soared far above the 4% increase reported by the State Accident Fund.

“You would be hard-pressed to explain that,” Thomas said. “There is a sense that something is amiss to a horrific degree.”

–By Michael Whiteley, Southeast Bureau Chief

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