The following issues are addressed in this edition of our newsletter:
Small Business Chamber Intervenes To Fight Workers’ Comp
Premium Increase: NCCI asks for average 32.9% hike
Workers’ Comp Advisory Committee Yet To Be Formed: Dept. of Insurance delay good news for NCCI
SCE&G Agrees to Natural Gas Settlement: Business & residential customers to save millions
Time Running Out For Job Incentives To Work For Small Businesses Next Year
Small Business Retains Protection From Employment
Small Business Chamber Intervenes To Fight Workers’ Comp Premium Increase
NCCI asks for average 32.9% hike
The SC Small Business Chamber of Commerce has launched an all-out offensive against a 32.9% average Workers’ Comp rate hike in the voluntary market. The Small Business Chamber has petitioned to intervene in the hearing before an administrative law judge on the matter and has issued an 8-page report detailing problems with the recommended increase.
The Small Business Chamber report (www.scsbc.org under “Issues”) challenges the data used by the National Council on Compensation Insurance (NCCI) in developing its recommendations, NCCI’s failure to take Workers’ Comp reforms passed last session into consideration in projecting trends and NCCI’s credibility in arriving at controversial conclusions. The report also makes sound recommendations for controlling the primary driver of Workers’ Comp rates—medical costs.
About 13% of the insurance company data was missing from the information used by NCCI to develop its recommendation. Most of this missing data was from the largest writer of Workers’ Comp insurance in the state—AIG.
In this year’s State budget, important Workers’ Comp reforms pushed by the Small Business Chamber were adopted that will result in faster handling of claims and a reduction in both premium and claimant fraud.
Faster Handling of Claims—The General Assembly approved funds for a new computer system to replace the much slower 1980’s era computer and software being used by the Workers’ Comp Commission. Funds were also approved for new Commission positions that will result in better information flow and management, increased knowledge by employers as to the Workers’ Comp coverage they need and more control over medical costs. The Commission has moved rapidly on completing the RFP needed for the computer system acquisition and expects to have much of the work completed this winter. Recruitment is underway for the new positions and the Commission anticipates that they will be filled this fall.
Reduction in Fraud—The General Assembly, at the request of Senator David Thomas, also approved new funding for the S.C. Attorney General’s Office insurance fraud unit. Four new prosecutors and support staff have been hired and are teamed with two SLED agents. This four hundred percent increase in attorneys for this unit will mean a rapid clearing of the backlog of insurance fraud cases and effective prosecution of new cases brought to it by the Workers’ Comp Commission, the Dept. of Insurance, insurance carriers and the public. The result will be more Workers’ Comp premiums entering the system and fewer claims, both contributing to less “losses” claimed by insurance carriers.
The Small Business Chamber’s report also called NCCI’s data and analysis on the relationship between attorney involvement and costs “amateurish at best and deliberately deceptive at worst.”
The report concluded that while some legislative reforms to the Workers’ Comp system in South Carolina may be advisable, major legislative changes based on NCCI’s filing are not. The State’s Workers’ Comp system continues to be ranked as the 7th lowest Workers’ Compensation cost state in the country.
The report recommends that the problem of escalating medical costs can be readily addressed through the administrative adoption of revised and new fee schedules for the services of medical providers.
Workers’ Comp Advisory Committee Yet To Be Formed
Dept. of Insurance delay good news for NCCI
As part of the State Budget passed in May, a proviso called for the S.C. Department of Insurance to form an eleven-member Workers’ Comp Advisory Board to provide oversight of the assigned risk plan administrator and the workers’ compensation rating organization. Most importantly in light of recent events, the Board is also charged with reviewing the State’s Workers’ Comp rating organization (NCCI) to determine any changes or new directions the state should take. This latter report is due on December 10th of this year.
Ironically, in spite of the controversial Workers’ Comp rate hike filed by NCCI on July 1st, the Workers’ Comp Advisory Board, which could play a pivotal role in determining the State’s continued use of NCCI, has still not been formed. The Dept. of Insurance has instead concentrated on creating the Governor’s Workers’ Compensation Reform Task Force, which had it’s first meeting last week.
“Every day that goes by without the legislatively approved Workers’ Comp Advisory Board functioning is a breath of fresh air to NCCI,” said Frank Knapp, president of the Small Business Chamber, which proposed the Advisory Board. “If the Advisory Board isn’t appointed soon and begin meeting in earnest, it is questionable whether it can meet the December 10th deadline for a report on NCCI.”
The Dept. of Insurance has recently sent out requests for nominations to the Advisory Board. These nominations are due on August 25th.
SCE&G Agrees to Natural Gas Settlement
Business & residential customers to save millions
SCE&G has agreed to a settlement offer by the Office of Regulatory Staff and all the parties intervening in the case, including Frank Knapp, president of The SC Small Business Chamber of Commerce. The agreement reduces the original request of the company by 20% to $22.9 million.
Most of the reduction is attributable to a reduction in the Return on Equity from SCE&G’s original request of 11.75% to 10.25%. “If the Public Service Commission approves of the settlement, it will be a significant victory for business and residential customers who will save tens of millions of dollars in the coming years,” said Knapp. Mr. Knapp and the Small Business Chamber have been successfully challenging the state’s regulated utilities in rate cases since the year 2000.
Dukes Scott, executive director of the Office of Regulatory Staff, said in a press release announcing the agreement, “I am particularly appreciative of the efforts of Mr. Knapp in assisting in achieving this just and reasonable conclusion which balances the interests of all the parties involved.”
(More good news from SCE&G. The company has dropped its previous requirement that a business had to have an account with SCE&G in order to use the company’s Small Business Resource Center website— www.business.sbrc.sceg.com. The website has over 6000 pages of free information useful to starting and operating a small business including valuable special offers with exclusive discounts. The Resource section of the Small Business Chamber’s website has a link to SCE&G’s Small Business Resource Center.)
Time Running Out For Job Incentives To Work For Small Businesses Next Year
When the Jobs Creation Act of 2005 was passed this year, the Small Business Chamber and others rightfully called it a major success for small businesses primarily because it reduced to 2 the number of new jobs needing to be created by qualified businesses to be eligible for Job Tax Credits. But now that the legislators are back home, the administrative implementation of the Act is not being so small-business friendly.
While the number of new jobs can be as low as 2 to qualify for the economic incentive, businesses must create these jobs at the beginning of their fiscal year to make sure they meet all the criteria. For most small businesses, the fiscal year starts in January.
“If the word doesn’t get out soon about how small businesses can qualify for the Job Tax Credits, we might as well right it off as just another hand out to big business until 2007,” said Frank Knapp, president of The SC Small Business Chamber of Commerce, which lobbied hard for the change in the law. Larger businesses find it easier to learn about changes in the law and how to use the incentives through internal resources or contact from the state’s Department of Commerce.
The Small Business Chamber had wanted to move quickly to spread the word to qualifying small businesses though newsletters, public meetings, the state’s SC Business One Stop website and hopefully communications from the Dept. of Revenue that simplified the explanation. However, the Dept. of Revenue wanted to first issue a Legislative Summary to provide detailed information.
So we waited and now the Legislative Summary is not expected until sometime in September. “We can’t wait any longer,” said Knapp. “If we expect small businesses to take advantage of the Job Tax Credits, they need to start planning in September in order to do it right. We are immediately making plans to spread the word as best we can and refer all questions about details to the Dept. of Revenue. Hopefully they will be prepared to help.”
Small Business Retains Protection From Employment Discrimination Lawsuits
In December of last year, the Small Business Chamber alerted small businesses, the press and the Legislature that a S.C. Supreme Court decision had put small businesses with 14 or fewer employees in jeopardy of employee discrimination lawsuits involving “protected status” (i.e. religion, gender, age, etc.) Federal law on such employment discrimination only applies to businesses with 15 or more employees and state law didn’t address the issue. Racial discrimination is the exception in which the Federal law applies to businesses of all size.
In last year’s ruling (Hessenthaler v. Tri-County Sister Help) the Court created a new cause of action saying that it is against the public policy of the State of South Carolina for an employer to discriminate on the basis of “protected status”. This ruling opened the door to civil actions against businesses of all sizes in the state for employment discrimination.
Just days after the press reported on the issue, the Court agreed to a new hearing on Hessenthaler. With the strong possibility that a new ruling on the case would result in the elimination of the new “cause of action”, the decision was made not to pursue a legislative remedy.
In July, the Court did issue a new ruling in Hessenthaler that did not include the new “cause of action”. By vacating the previous ruling, small businesses will continue to be protected from employment discrimination lawsuits regarding most “protected status”.