South Carolina Jumps Aboard Workers’ Compensation Alternative Bandwagon

A South Carolina lawmaker has introduced workers’ compensation option legislation that would allow qualified businesses in the state to offer their own injury benefit plan to employees. The state is the second one this year, after Tennessee, to introduce workers’ comp option legislation.

House Bill 4197, known as “The South Carolina Employee Injury Benefit Plan Alternative,” was introduced by Rep. David Hiott (R-Pickens) on May 19. The legislation would allow employers to be exempt from obtaining workers’ compensation insurance coverage and instead obtain certification from the South Carolina Department of Insurance to provide coverage through a qualified employee injury plan.

The Association of Responsible Workers Compensation Alternatives (ARAWC) worked on the bill with Hiott, who is chairman of the South Carolina House Agriculture Committee and a small business owner.

“I firmly believe that markets operate best and participants receive the most benefit possible when competition exists. The South Carolina option will provide businesses an alternative way to provide occupational injury benefits to their employees,” said Hiott.

According to a statement from ARAWC, the South Carolina option will not replace workers’ compensation, but instead act as a “competitive pressure on the system to produce better outcomes for the primary stakeholder in the process – the employee.”

“We worked with the bill sponsors as a technical expert, relying on the legislators to determine the particulars of the option that will work best for South Carolina,” said Brent Buchanan, communications director for ARAWC.

ARAWC, which was formed in 2013 in Dallas, has worked with other states on similar legislation, including Tennessee. The Tennessee Employee Injury Benefit Alternative was introduced in the just-finished legislative session by Tennessee State Sen. Mark Green (R-Clarksville) but lawmakers adjourned before voting on the final bill.

Workers’ compensation alternative options are currently utilized in Oklahoma and Texas, where supporters say they help reduce costs associated with employee injuries and encourage market competition among insurance plans.

South Carolina Version

The legislation introduced in South Carolina would require employers that want to be exempt from offering traditional workers’ compensation coverage to obtain certification from the state insurance department to provide coverage through a qualified employer injury benefit plan.

An employer’s alternative plan must offer comparable medical benefits to South Carolina’s workers’ compensation law and provide for medical, surgical, hospital, dental, and other treatment, surgical supplies, nursing services, rehabilitation services, medicines and prosthetic devices.

In addition to medical benefits, minimum indemnity benefits for total disability, partial disability, permanent impairment, and death are also established by the legislation.

Stipulations for temporary partial disability benefits for employees who are not able to perform their normal job but can perform alternative work are also spelled out in the bill, as are benefits for loss of use or disfigurement, as well as death benefits.

Other provisions of the legislation:

• Allow employer benefit plans to provide for lump-sum payouts to satisfy all benefit obligations and settlement agreements – with the stipulation that payouts must be actuarially equivalent to expected future payments as reasonably determined by the claims administrator.
• Prohibit employers from charging the employee a fee for covering employees under the benefit plan.
• Require the insurance department to maintain a list of all qualified employers and the status of their certifications on the regulator’s website.
• Establish financial responsibility requirements for qualified employer benefit plans and provides that the insurance department may require an employer deposit to secure the payment of benefit plan liabilities.

The act would take effect for injuries that occur on or after Jan. 1, 2017, if passed.

Opponents of Option

Not everyone is on board with option models, with some opponents in Tennessee arguing that not all employers are capable of running an effective plan and expressing concerns with some of the bills fundamentals, such as the amount of the lifetime injured employee medical benefits and the lack of a provision for permanent partial disability benefits.

In Tennessee, Green added amendments to the original bill addressing those issues and said the option would actually provide the same, if not better, benefits.

Green and ARAWC expect the bill will pass next year when the Tennessee legislature resumes.

ARAWC Executive Director Richard Evans said option alternatives have never been about reducing benefits to injured workers but instead about offering a more streamlined process to deliver those benefits, which ARAWC expects will be the case for South Carolina.