NCCI files for 1.9% increase

A Texas-based organization supported by Walmart, Best Buy, Lowe's, and other multistate employers, is exploring pushing for legislation in South Carolina to allow employers to opt out of the workers' compensation system.

The National Council on Compensation Insurance has filed for a 1.9% loss costs increase in South Carolina, effective September 1, 2015.

The requested increase for South Carolina is the highest among 12 southeastern states. NCCI has filed for loss cost decreases everywhere in the region, except for Virginia, where it filed for a 0.9% increase. The group filed for loss costs decreases of 3.4% in North Carolina, a decrease of 3.3% in Georgia, and a decrease of 8.2% in Tennessee.

Loss costs have fluctuated in South Carolina in recent years, decreasing 7.4% in 2014, and preceded by increases of 1.1% in 2013 and 3% in 2012. NCCI reports combined ratios for insurers in South Carolina improved to 100% in 2013, compared to 104% in 2012 and 114% in 2011.

According to separate measures employed by the Oregon department of Consumer and Business Services, South Carolina seems to have stabilized its position against other states in the nation after rapid deterioration between 2002 and 2006. Still, as of January 2014, Louisiana and South Carolina have the highest premium rates in the southeast at $2.23 and $2.00 per $100 of payroll.

Nationwide, the workers' compensation market has been improving steadily. NCCI reports the calendar year combined ratio for private carriers was 98% in 2014, a four-point improvement from 2013 and a 17-point improvement since 2011. "The most recent results show that 2014 was a good year for the industry-and that follows solid results in 2013," reports NCCI President and CEO Steve Klingel.

In other workers' compensation developments, a coalition of large employers headed by Walmart, Lowe's, and Best Buy, among others, is pushing legislation that would allow employers to opt out of the workers' compensation system to create a benefits system more to their liking. The employers are members of the Texas-based Association for Responsible Alternatives to Workers' Compensation (ARAWC), which has said it sees several southeastern states as fertile territory receptive to its opt-out alternative.

To-date, only Texas and Oklahoma allow employers the option of not carrying state-mandated workers' compensation coverage. Opt-out bills were introduced this year in Tennessee and South Carolina, but the proposed legislation did not get very far in Tennessee and was introduced very late in the legislative session in South Carolina. Media reports indicate ARAWC has hired a lobbyist in North Carolina as well, but the group's website only highlights its efforts in Tennessee and South Carolina.

The group says its goal is not to do away with workers' compensation protections but to give employers an alternative to state-mandated coverage, thereby introducing competition which would bring down costs. Indeed, recent opt-out legislation introduced in Tennessee and South Carolina emphasizes that injured workers would receive benefits comparable to what they currently receive under state-mandated coverage.

But as critics have pointed out, such assurances barely cover the tremendous implications of a system expressly set up by employers according to their preferences. Mother Jones, the liberal but well-regarded publication, pointed out that although employers are still required to provide some semblance of workers' compensation, they can write their own rules governing when, for how long, and for which reasons an injured employee can receive medical benefits and wages.




In Texas, for instance, Walmart has written a plan that allows the company to select the arbitration company that hears claims disputes. In Oklahoma, Dillard's requires workers to report injuries before the end of their shift to be eligible for workers' comp.

Similarly, the Center for Justice & Democracy at New York Law School also noted the enormous discretion employers enjoy under opt-out plans: An employer can decide whether a worker qualifies for any benefits.  It can refuse to approve any treatment.  It can completely deny compensation for certain kinds of disability. 

"Depending on the law, an employee may retain the right to sue an employer for negligence.  However, as a condition of employment, the employer can force the employee to sign a contract so all cases are resolved through an employer-designed, secret arbitration system rather than in court," the center notes.

Opt-out legislation introduced in late spring in South Carolina may be instructive. House bills 4171 and 4197 are identical bills introduced by Representatives Bill Sandifer (R-Oconee), David Hiott (R-Pickens), and Craig Gagnon (R-Abbeville). H-4197 is currently in the House Committee on Labor, Commerce and Industry, chaired by Rep. Sandifer.

Brent Buchanan, a spokesperson for ARAWC, told WorkCompCentral the opt-proposal was deliberately introduced late in the session because the group wants to give stakeholders the opportunity to examine and discuss the bill in the legislative off-season before any votes are taken.

"The intention is to get the conversation started and to bring all stakeholders ... to the table throughout the summer and fall break leading into the January 2016 second half of the session," Buchanan said.

While opt-out alternatives may be attractive to employers, the proposal faces resistance in South Carolina. The Property and Casualty Insurance Association of America, Injured Workers' Advocates, and the American Insurance Association are opposed to the bill, according to WorkCompCentral.

H-4197 makes it clear its intention is to set up a separate, independent workers' compensation system that would have little to do with the system in place. A employer who opts out would have considerable discretion in setting up a benefits program, and the bill specifies "except as otherwise expressly provided, an administrative agency of this state may not promulgate rules or procedures related to design, documentation, implementation, administration, or funding of a qualified employer's benefit plan."

Also, "this act must be strictly construed. A conflict between this act and another law must be resolved in favor of the operation of this act." In addition, an employer may choose when to opt-out of the workers' compensation system and when to opt in, and in any event the insurance department "shall provide the employer a reasonable time after the withdrawal or denial to secure workers' compensation insurance coverage."

The bill does not address how employees would be protected if they are injured during the period their employer is without comp coverage or in between the two systems. Indeed, it may well be practically every substantive element of the new system would have to be litigated before it is clear how its provisions and regulations would apply to workplace injuries.

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