Workers’ Compensation Rate Hearing Update #4

Workers’ Compensation Rate Hearing Update #4

Hearing On WC Rate Increase–Final Day

Four long days of hearings in an Administrative Law Court ended yesterday bringing to an end to the combative process that will determine how large a workers’ comp rate increase will go into effect this year. The SC Small Business Chamber of Commerce and the S.C. Consumer Advocate put up a strong defense against a proposed 32.9% rate hike supported by the National Council of Compensation Insurance (NCCI) that represents workers’ comp insurance carriers, Governor Mark Sanford’s Department of Insurance (DOI), Companion Property & Casualty and the S.C. Chamber of Commerce.

Judge Marvin F. Kittrell will receive final written arguments from the participants before making a ruling probably within the next two months.

Below are the highlights of Thursday’s testimony:

–Mr. Marty Simons, actuary consultant for the Consumer Advocate, spent much of the day defending his 12.7% rate increase alternative proposal from attacks by DOI, NCCI and Companion Property & Casualty.

–Ms. Linda Haralson, Chief Financial Examiner for DOI, was questioned about the role DOI plays in verifying that carriers properly report their recoveries from the Second Injury Fund (SIF) and subrogation. NCCI had stated in its response to interrogatories that it is the responsibility of the DOI in each state to make these verifications to certify that carriers are not failing to report reimbursements and thus over reporting losses.

Ms. Haralson testified that her department employees examine each of the state’s 6 to 10 domestic workers’ comp insurance carriers once every 5 years. However, she said that these examinations are only for determining carrier solvency. Ms. Haralson said that verifying proper reporting of recoveries from the SIF or subrogation was the responsibility of outside actuary consultants reviewing CPA reports and written answers to questions from carriers. She did not know if all CPA firms look specifically for this recovery information. It was pointed out to Ms. Haralson that there was a line on the carrier annual statements submitted to DOI that asks for SIF and subrogation information.

–Ms. Belinda Ellison, a prominent workers’ comp attorney and officer in numerous legal associations, testified to the history of the state’s workers’ comp system. According to Ms. Ellison the system was well funded in the 1990’s facilitating the smooth and efficient processing of claims. Starting in 2000, budget cuts resulted in staff reductions at the Workers’ Comp Commission. This was accompanied by several vacant Commissioner positions and an aging, almost non-functional computer system. The result was a dramatic increase in the length of time to process cases and receive hearings, factors that most experts equate to higher workers’ comp costs. These negative factors correspond to the years 2002 and 2003 from which the data comes for this rate filing.

Ms. Ellison stated that in 2005, additional funds were given to the Commission for staff and a new computer system. All Commissioner positions are filled. The result has been that cases now are moving more rapidly, hearings are held within three and one half months and orders from Commissioners are being delivered faster—signs of a more efficient system that keeps all costs down.

–Supporting Ms. Ellison’s view of the Commission’s computer system improvements was testimony from Mr. William Johnson of the state’s Chief Information Officer. Mr. Johnson stated that the Workers’ Comp Commission had embarked on a three-year program to phase in the installation of a highly functional computer system. The first year improvements were almost finished.

With this hearing complete, a much shorter hearing to determine the workers’ comp assigned risk multiplier starts this morning. Thousands of small businesses find themselves in the assigned risk workers’ comp pool for no other reason than their size. As a result, they pay much higher rates than in the voluntary market.

The Consumer Advocate and the Small Business Chamber again take up the fight against the DOI and NCCI that are advocating a large increase in the multiplier used to determine the assigned risk rates compared to the voluntary market.

This completes our report on this week’s hearing. Every small business in South Carolina should express their appreciation to the very hard work of two of our state employees—Mr. Elliott Elam, Consumer Advocate, and Ms. Hana Pokorna-Williamson, staff attorney for the Consumer Advocate’s Office—and their consulting actuary, Mr. Martin Simons.

A larger debt of gratitude is due to Mr. Bill Smith and Mr. Kevin Holmes. These two fine attorneys undertook pro-bono the daunting task of months of work preparing and fighting for small business against well-funded big business interests. Without Mr. Smith and Mr. Holmes, the Small Business Chamber could not have so effectively defended the small businesses of this state from the largest workers’ comp loss cost rate increase in the country in the past 10 years.