Workers’ comp rates debated

By Peter Hull, The Post and Courier

Published June 8, 2006

With a proposed increase in workers’ compensation rates in the hands of a state judge, a state small business advocate says thousands of employers may have paid too much for workers’ compensation premiums for at least five years.

A study conducted for the South Carolina Small Business Chamber of Commerce shows that more than half of small businesses that qualify for reduced premiums from the Second Injury Fund, a program intended to help workers with previous on-the-job injuries return to work, have not received the discount.

The chamber has asked the state attorney general’s office to investigate its findings.

Employers whose premiums rise after a claim should receive a discount if the claim is accepted by the injury fund. But the Columbia-based chamber says an ‘experience modification factor,’ a discount given to employers who give jobs to people with previous workers’ compensation claims, was not passed on to 51 percent of the companies that should have received it.

The study examined more than 51,000 workers’ comp claims filed in the state between 1998 and 2003. It was conducted for the chamber by Riverside, Ill.-based Advanced Insurance Management, an independent insurance auditor and consultant.

Frank Knapp, president of the Small Business Chamber, said the study does not show whether the problem results from insurance carriers not filing the required reports or an industry-backed rate-setting organization failing to make compensation insurance,’ Knapp said.

A spokesman for the National Council on Compensation Insurance, the Florida-based group that recommends workers’ comp premium rates in many states, said the report is nothing more than a smoke screen.

NCCI’s Peter Burton, a senior division executive for state relations based in Wayne, Pa., said that if the report is so important, it should have been presented during a week of hearings in April into NCCI’s recommendation that workers’ comp rates in South Carolina should jump by 32.9 percent.

‘This is but another attempt by the Small Business Chamber to fog the issue and draw attention away from a needed and justified significant-loss cost increase in South Carolina,’ he said.

Knapp said he has discussed the report with Attorney General Henry McMaster and his staff attorneys and asked for an investigation.

‘We have received the information from Mr. Knapp’s organization and we’re looking into the matter,’ said McMaster spokesman Trey Walker.

Last July, NCCI said a 32.9 percent increase in premiums was needed in South Carolina because of a shortfall in the amount insurers received in premiums versus the amount they paid out in claims.

The group’s figures are a benchmark that insurers use to set rates, subject to regulatory approval.

Workers’ compensation covers medical costs and some wages for workers injured on the job. All businesses in the state with four employees or more must carry the insurance.

At the April hearings, NCCI, the state Department of Insurance and other interest groups, including the small business chamber, argued before an administrative law judge for and against an increase. The judge could rule by early next morning on whether rates should increase and by how much.

During this year’s state legislative session that ends June 1, lawmakers in the House voted 92-16 in favor of a bill aimed at stabilizing the state’s workers’ comp system and promoting competition in the insurance company.

A provision of the bill phased out the Second Injury Fund, which some lawmakers see as one of the main causes of high premiums. Although the bill made it through the House, it was not taken up by the Senate and must be reintroduced next year.

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