Court victory for small businesses

The wheels of justice turn slowly but they do turn.

On Wednesday a ruling by the South Carolina Court of Appeals found in favor of the state’s Consumer Advocate in an extremely important issue affecting workers’ compensation insurance premiums.  Our own Department of Insurance was fighting to keep the Consumer Advocate, the S.C. Small Business Chamber and other parties from having the ability to challenge data used by the National Council on Compensation Insurance (NCCI) to justify its proposals that result in premium increases or decreases.

Here is the background (don't let your eyes glaze over).

Currently the law prescribes that proposed average increases in workers’ compensation insurance loss costs rates must be approved by an Administrative Law Judge in a public hearing if requested by the S.C. Consumer Advocate.  The “loss cost” is a vital part of how insurance companies determine future rates for businesses.  This open process is an opportunity for the Consumer Advocate and business community to challenge in court any proposed rate increase that will effectively raise premiums.  However, if the workers’ compensation insurance industry proposes an average decrease in overall loss costs, no matter how slight, the state’s Consumer Advocate and businesses community cannot challenge the proposal before a Judge even if a much more significant decrease is warranted.  That was how the Department of Insurance interpreted the current law—so much for transparency.

In 2009 NCCI proposed a 0.3 percent overall decrease in loss costs.  Even though many of us felt that the data might justify an even greater decrease, there was no ability to review the data and possibly show that a bigger decrease was justified.  The Small Business Chamber, which has intervened numerous times to fight rate increases, and the Consumer Advocate were blocked out of the process.

That’s why Senate Bill 31 was introduced last year--to allow the Consumer advocate to review all NCCI data and request a public hearing before a Judge for any proposed change (increase or decrease) to workers’ compensation insurance loss costs.

But the Consumer Advocate didn’t wait for legislation to help small businesses.  Elliott Elam challenged the Department of Insurance and NCCI in court arguing that while NCCI did propose a 0.3 percent average decrease in loss costs, there were businesses categories that were recommended for an increase.  This, he argued, meant that he should be able to review all the data and interested parties be allowed to challenge the NCCI filing in Court even if the overall average loss costs is a decrease in rates.

Yesterday the Court of Appeals agreed with the Consumer Advocate—a victory for small business.  (See the WorkCompCentral story below.)

So now the question is whether S.31 is needed.  The jury is out on that and will probably depend on whether our Department of Insurance wants to keep protecting the insurance industry’s ability to hide data from the consumer by appealing this Court ruling.  Stay tuned.

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WorkCompCentral
February 23, 2012

Court Upholds Consumer Advocate's Right to Review Rate Filings

The South Carolina Consumer Advocate has a right to inspect loss-cost data from the National Council on Compensation Insurance, even if NCCI is calling for an overall average decrease in rates, the South Carolina Court of Appeals ruled on Wednesday.

The court reversed a decision by the Administrative Law Court that prevented the advocate, who operates under the Department of Consumer Affairs, from reviewing NCCI rate filings when they call for an overall decrease.

The court pointed out that loss costs are just one element of the total rate that is approved by the Department of Insurance. Even when the average rate decreases, loss-cost changes filed by NCCI can result in increases for individual classification codes.

"In this case, the NCCI's filing contains increases in many classifications," the appellate court said in its opinion. "Had the Legislature intended to make publication a requirement only for overall increases, it could have amended Section 38-73-910 to specify it is only concerned with 'overall' increases as it did in other paragraphs of Section 38-73-910."

NCCI has submitted loss-cost filings that call for overall rate decreases in each of the past three years, so Consumer Advocate Elliot F. Elam Jr. has not been able to review the data to form an opinion as to whether the decreases were adequate given insurers' loss experience. For 2010, however, NCCI has called for an average increase of 7.3% to take effect July 1. The Insurance Department has not yet approved the filing.