South Carolina Approves Rate Changes to State Workers’ Comp Plan

South Carolina Insurance Director Raymond Farmer approved an overall revision of +1.9 percent to the state’s voluntary workers’ compensation policy loss costs and a decrease of .3 percent in the assigned risk rate level results for the state’s workers’ comp assigned risk plan. Changes to both markets are effective as of Sept. 1, 2015.

The changes to the assigned risk plan came as a result of a “Corrective Action” order issued by Farmer after a letter was sent to the South Carolina Department of Insurance (SCDOI) by the state’s residual plan administrator, the National Council on Compensation Insurance (NCCI).

NCCI advised SCDOI on March 24 that excessive losses were indicated for the assigned risk plan and were “jeopardizing the ability of the plan to operate as a self-funded mechanism.”

NCCI is required to monitor rate adequacy and plan results and is required to notify the director of SCDOI in the event excessive losses are indicated so as “to enable the director to take corrective action,” under South Carolina law.

Following a review by SCDOI’s internal property and casualty actuary and other supporting data from NCCI, revised rates and rating values for South Carolina’s assigned risk market were submitted to the state’s consumer advocate without objection.

The class level changes by industry group, according to the Corrective Action order, include:

• Manufacturing – .6 percent increase on average (maximum decrease 31 percent, maximum increase 39 percent)
• Contracting – 1.2 percent decrease on average (maximum decrease of 33 percent, maximum increase of 37 percent)
• Office & Clerical – 4 percent decrease on average (maximum decrease of 37 percent, maximum increase of 33 percent)
• Goods & Services – 2.4 percent increase on average (maximum decrease of 34 percent, maximum increase of 36 percent)
• Miscellaneous – .8 percent decrease (maximum decrease of 32 percent, maximum increase of 38 percent).

“This order implements corrective action so that assigned risk rates can be self-sustaining, and so that the assigned risk plan can continue to be a market of last resort for employers who are unable to secure workers’ compensation insurance in the voluntary market,” Farmer’s order stated.

The order said that based on the most recently available distribution of payroll by class code in the assigned risk market, the proposed change in the assigned risk cost multiplier (2.112), and the voluntary market loss cost level changes effective Sept. 1, the proposed changes are estimated to be an overall decrease of .3 percent in the assigned risk rate level results.

Farmer wrote in the Corrective Action order that when losses in a particular class (or classes) are excessive, there is a need to correct the class relativities to reflect higher expected losses.

“The fact that the resulting overall impact is a decrease does not invalidate the NCCI’s assertion that assigned risk losses are excessive, requiring corrective action to revise the assigned risk rate level,” Farmer stated in the order.

A spokesperson from SCDOI said the Corrective Action order to the state’s work comp plan has no effect on the voluntary workers’ comp market, which will also see changes to loss costs (not rates) starting Sept. 1, according to a public notice filed in June.

The change to the voluntary market is necessary, however, because of a 2005 Corrective Action order by SCDOI that implemented the process for synchronizing rates and rule changes in the voluntary and assigned risk workers’ compensation markets.

As a result, the changes to the voluntary market include:

• Manufacturing – 3.9 percent average increase (maximum decrease of 21 percent, maximum increase of 29 percent)
• Contracting – 2 percent average increase (maximum decrease of 23 percent, maximum increase of 27 percent)
• Office & Clerical – 1.9 percent average decrease (maximum decrease of 24 percent, maximum increase of 23 percent)
• Goods & Services – 1.3 percent average increase (maximum decrease of 24 percent, maximum increase of 26 percent)
• Miscellaneous – 2.6 percent average increase (maximum decrease of 22 percent, maximum increase 28 percent).