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Insurance Department director nixes worker’s comp. rate hike
Matter still pending in administrative law court
By Matthew French
Staff Writer
The South Carolina Department of Insurance late last month rejected a proposal that would have led to a dramatic increase in worker’s compensation premiums paid by every employer in the state.
The request by the National Council on Compensation Insurance would represent an increase to nearly 33% from current rates of about 1.8%, something the state’s insurance department called “excessive.”
In its July filing, the Florida-based NCCI, which helps companies set rates, said it needed higher rates to offset rising medical costs and expenses to settle cases. That action prompted an outcry from the state chamber of commerce, the South Carolina Small Business Chamber of Commerce and the chambers of nearly every county in the state.
South Carolina law states that the Department of Insurance is responsible for the regulation of insurance rates and for ensuring that they may not be “excessive, inadequate or unfairly discriminatory.”
State law requires any company employing four or more people to purchase worker’s compensation insurance policies. Premiums are higher for more at-risk jobs, such as construction workers or heavy equipment operators, than they would be for an office job.
“This should explain the statement by (Insurance Department) director (Eleanor) Kitzman that ‘the request would yield rates with an excessive provision for loss and loss adjustment expense and was, therefore, in violation of South Carolina law,’” says Ann Roberson, spokeswoman for the department.
In late August, Kitzman said she decided the rate request was too high to meet the limitations set by state law.
A tangled legal web
When NCCI issued its request for the rate hike, many organizations opposed to the move filed requests for hearings before an administrative law judge to contest the recommendation, says Hana Williamson, a staff attorney for the state consumer affairs department. The Insurance Department saw this as a potential threat to its authority and filed a petition of its own to have a judge rule whether the administrative law courts have jurisdiction over the matter, Williamson says.
An administrative law judge will soon rule whether Kitzman acted within her purview or whether an administrative judge should make the call.
“It was a very interesting move on the part of the Insurance Department and not one that we all understood,” Williamson says. “They are making a very intriguing argument.”
All of the parties that filed the original hearing requests could now withdraw their petitions since the Insurance Department ruled exactly how they would have liked, but NCCI can still file a petition. If that happens, NCCI has a number of legal grounds on which it can contest the ruling, meaning the matter can drag on for some time, Williamson says.
“I don’t see how NCCI doesn’t respond,” says Frank Knapp, president and CEO of the state’s small business chamber of commerce. “They are a membership organization and will have to respond to their members, the insurance companies. How could they propose a 32 percent increase and then not appeal when that increase is rejected?”
Officials at NCCI did not respond to numerous inquiries about their intentions.
Moving forward
Knapp is hopeful that the administrative law judge lets the Insurance Department’s ruling stand.
“We could all find ourselves back in court if he doesn’t let it stand,” Knapp says. “We are ready to fight this and to go to the mat to make sure this rate increase does not take place. It was a shock to everybody because the rate increase proposal was so very large.”
The administrative law court generally moves pretty quickly, so a ruling could be handed down at any time, Williamson says.
When the General Assembly reconvenes in January, the House Labor, Commerce and Industry Committee will likely resume debate and examination of the South Carolina Worker’s Compensation Reform Act of 2005, which is designed to set specific guidelines for the awarding or withholding of worker’s compensation payments.
The Worker’s Compensation Reform Act would remove some of the administrative and appellate duties from the state compensation commission and instead put it in the hands of the administrative law court. It would also reduce or revoke payments owed to people who were injured while intoxicated or negligent.
The law would also stop the practice of paying 100% disability to people who are considered 50% or more disabled.
Matthew French is a staff writer for the Business Journal. E-mail him at mfrench@charlestonbusiness.com.
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