Good news for business—well maybe or maybe not

There appears to be some good news for South Carolina businesses with workers’ compensation insurance. On good authority I have been told that the National Council on Compensation Insurance (NCCI is the state’s workers’ comp rating organization) has filed for a 3.7% overall decrease in a key component of rates called the loss cost.

The loss cost is the actual difference between the premiums received and the cost to the insurance companies for claims and directly related expenses. A proposed decrease means that the carriers have collected too much in premiums just for those purposes. (Carriers get compensated for administration, taxes, profit, etc. through another component of premiums called the loss cost multiplier.)

But before business owners get all excited in possibly saving some money on their workers’ comp premiums, their insurance companies aren’t obligated to use the new numbers if approved by the S.C. Department of Insurance. They can just go on using their current rates.

That will change if a House Bill 3111 is passed. The bill, which I testified in support of last week at a House Labor, Commerce and Industry subcommittee, will require insurance carriers to use the latest approved loss costs approved by the state. This much needed legislation is sponsored by Representatives Tom Young and Bill Sandifer (chairman of the LCI Committee).

And there’s another problem. We should have no confidence that the proposed 3.7% decrease is enough. Maybe it should be a 5%, 7% or 10% decrease.

Why should we be suspicious?

NCCI is the same organization that had claimed that the insurance companies absolutely needed increases in loss costs of 32.9% in 2005 and 23.7% in 2007. The S.C. Consumer Advocate and The South Carolina Small Business Chamber of Commerce went to the Administrative Law Court to argue that these increases were not justified by the data. The Judge agreed and reduced the increases to 18.4% and 9.8% respectively.

So why aren’t the Consumer Advocate and SCSBCC reviewing the data supplied by NCCI in their rate filing to see if the business community deserves more of a decrease?

The current state law doesn’t require that NCCI’s filing be shared immediately with the Consumer Advocate and the public. As of late last week we had only heard of the proposed reduction through parties that were shown the reports. Obviously this needs to be changed.

Even more troubling is that the law only gives the Consumer Advocate the ability to ask for a public hearing before an Administrative Law Judge if the filing is for an increase.

Senator Glenn McConnell has filed legislation (S.32) to require a public hearing on any NCCI filing.

Until both H.3111 and S.32 are passed, the business community needs to be very wary of any “good news” from NCCI.

UPDATE:  Shortly after this blog was posted, NCCI provided the Consumer Advocate with a copy of the filing in question.