In the early 1990s, when most states were sweating out urgent reforms in their workers compensation systems, South Carolina basked in the warm southern sun. They were ranked #2 for low costs at that time and their good fortune continued up to the year 2000. Now the state is struggling with increasing costs. Rates went up by 17.3% in 2003 and again by 11.4% in 2004. Even with these raises, the recommended rate increase for 2006 is a whopping 33%.
When costs go up, the reactions are predictable. The business community argues that any increase in the rates will drive business out of the state. So they recommend cutting benefits for injured workers. The insurance carriers say that they are losing money. Without a rate increase, they will leave the state. So they say, you have to raise the rates. And the lawyers, while never threatening to leave the state, argue that the insurers are just cooking the books. Current benefits can be preserved with no rate increases, regardless of what anyone else says.
Reforms: Who Pays?
A draft report for workers comp reform in South Carolina was recently presented to Governor Sanford. The report contains an interesting and by no means unique assortment of recommendations, including some significant reductions in benefits. These include:
Criminal penalties for premium fraud, including fines and jail terms.
Elimination of the Second Injury Fund.
Limits to how much employers must pay for prior injuries (but in the absence of a second injury fund, who would pay?)
Requiring treatment within an employer-chosen medical panel (but what, if any, are the standards for treatment?)
Raising the bar for stress-related claims by requiring that more than half of the stress in the claimant's life be work related (this would be in keeping with the standards in many other states)
Perhaps most significant for injured workers, the report recommends the denial of claims for repetitive trauma unless the injury can be tied to a specific event on a specific day. They are trying to eliminate injuries tied to "normal activities of day to day living" - although they cast a very wide net that would include, for example, legitimate rotator cuff injuries to carpenters and dry wall workers, carpal tunnel for office and factory workers, and loss of hearing for workers in heavy industry. Should this recommendation become law, South Carolina workers would have to learn how to tie any repetitive motion problems to a specific incident.
We think it's important for every state to revisit the comp statute periodically. When costs go up, as is happening in South Carolina, it's important not to shift into panic mode. Any reforms -- specifically, any proposed cost-savings -- should involve a shared burden. It's too easy to ask injured workers to bear the full brunt of reform. While it might be tempting to redefine repetitive motion injuries so that many are not compensable, it isn't fair. In the search for equilibrium, state legislatures need to align the incentives. We think it's possible to increase indemnity and related benefits and still lower costs. To do so, you have to make sure that the system focuses relentlessly in one direction: a rapid return to productive employment for every injured worker. The key player in this is the employer. They must know how to respond to injured employees, how to secure first rate medical services, and how to speed recovery through the appropriate use of temporary modified duty. It isn't rocket science, but the vast majority of employers just don't get it. If South Carolina builds some employer education into the reforms, they'd be on track to fix the problem in a lasting way. We wish them the best of luck.
A Little Procrastination?
This is my favorite time of year, when I can look at the pile of unfinished work on my desk and tell myself, it can wait until next year. So as we enjoy this brief seasonal respite, the Insider wishes all of our readers a happy, productive and safe New Year.