By Peter Hull, The Post and Courier
June 26, 2006
Two of the parties that oppose a proposed workers’ compensation insurance rate increase have asked a state court judge to make available information that could show how many of the state’s employers overpaid on their workers’ comp premiums and by how much.
The move comes after it emerged earlier this week that employers in South Carolina were overcharged for several years because calculations used to set premium rates were in error.
Furthermore, the South Carolina Department of Insurance did not disclose the information to groups that opposed the increase, despite later acknowledging that department officials knew the
National Council on Compensation Insurance, the company that recommends workers’ comp premiums in 36 states including South Carolina, had based the rate recommendations on faulty data. Rates in all 36 states were affected.
In a letter filed Friday with Judge Marvin Kittrell, the administrative law judge who in April oversaw a week of hearings on NCCI’s most recent rate increase proposal, the state Department of Consumer Affairs and the South Carolina Small Business Chamber of Commerce have asked the court to order the insurance department and NCCI to provide the information for review.
The parties then will decide whether to file a motion to reopen the proceedings on the most recent rate recommendation, the letter states.
Kittrell is expected to rule by next month on whether rates should increase and by how much.
“We want them to produce the information of the data problems experienced in other states, because we want to know how it affects South Carolina,” said Frank Knapp, president of the Small Business Chamber. “Let’s look at the data.”
Peter Burton, a Wayne, Pa.-based senior division executive for state relations for Florida-based NCCI, said Friday that NCCI has been truthful and honest throughout this process. “We think this motion is without foundation,” he said.
Insurance department spokeswoman Ann Roberson said that because this is a pending legal matter, the department is unable to comment.
On Tuesday, insurance department officials said they became aware of the data problems last June after the New Hampshire Department of Insurance said it had ordered NCCI to refund overcharges to employers in that state.
At least two other states, Vermont and Missouri, have issued similar statements. In each case, employers’ payroll information used to calculate workers’ comp rates was understated by NCCI. The higher the payroll, the lower workers’ comp rates should be.
A few weeks later, in early July 2005, NCCI recommended that workers’ comp rates in South Carolina should increase by an average 32.9 percent. The insurance industry-backed group said the increase was needed because of a shortfall in the amount insurers received in premiums versus the amount they paid out in claims.
Later that month, and at least a month after the problems in New Hampshire were made public, attorneys at the consumer advocate’s office, preparing for hearings on the NCCI rate recommendation, asked the insurance department if there were any concerns with the reliability of NCCI’s data.
The consumer advocate says the insurance department did not disclose information about NCCI’s miscalculations, even though officials knew at least a month earlier that problems existed.
In April, NCCI, the Department of Insurance and other interest groups argued for and against an increase during a week of hearings before an administrative law judge. The data issue was not raised during the hearings, and the insurance department did not consider the matter relevant, the department’s Roberson said this week.
Following an internal investigation, insurance department officials decided to correct the problems on a “going-forward basis,” Roberson said. In other words, adjustments will be made to future premium rates to compensate for prior overpayments.
Data accuracy problems in South Carolina were not as acute as in other states, officials said. Furthermore, the discrepancies did not influence NCCI’s proposed rate increase.
However, the consumer advocate’s office asserted late last summer that the question of NCCI’s data accuracy was the major issue in this proceeding, said staff attorney Hana Williamson.
“The four days of hearings before the administrative law judge concentrated primarily on the issue of accuracy,” Williamson said. “There was no evidence introduced that NCCI’s own data was compromised for approximately three years.”
Reach Peter Hull at 937-5594 or phull@postandcourier.com.