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    0 Replies Latest reply on May 14, 2009 11:14 AM by cutcomp

    South Carolina Scandal

    cutcomp Wayfarer
      I thought I would share this with the group, as it has serious implications for employers throughout South Carolina, and even for those in other states. Back in 2006, my company, Advanced Insurance Management LLC, was commissioned to do a study on the impact of the South Carolina Second Injury Fund on Workers Comp costs for employers (with a particular emphasis on smaller employers.) This study (which is still available at found something shocking: most small employers in SC got no benefit in their Workers Comp charges when their insurance company was reimbursed by the Second Injury Fund. Partly, this was because a lot of smaller employers are too small to get an experience modifiction factor, and the mod is the only mechanisms by which these reimbursements can be passed through to an employer's Workers Comp insurance charges.

      But even more shocking, we found that, even when the employer was large enough to have an experience modifier, in over 50% of the cases we examined, the insurance company did not make the necessary corrected reports so that the employer's experience modifier could be corrected.

      This means that over 50% of the employers whose experience modifiers should have been reduced did not have those modifiers reduced. So over half the employers were overcharged on their Workers Comp because the insurance companies didn't send in the appropriate corrected forms to the rating bureau.

      South Carolina enacted new legislation in 2007, in response to our findings, requiring that insurance companies certify in writing that they have filed the corrected reports before the Fund actually releases the money. But we've been doing some follow-up work there, in partnership with the South Carolina Small Business Chamber of Commerce, and have found that the insurance industry appears to have done nothing to fix the problem of those employers who were overcharged due to their negligence.

      So now we're working with individual employers to recover those overcharges, and we''re finding (at least so far) an even higher percentage of employers who were overcharged because of this situation.

      The employer sample in this follow-up work is, at the moment, much smaller than the sample from the original study, so it's possible that this higher percentage will decrease as we work with more employers. But right now, we've found that 80% of the employers we're working with (these are employers for whom the Second Injury Fund paid out reimbursements to their insurance company in the past five years) have been overcharged. So now we're forcing the insurance companies to fix the problems and return the overcharges. (Because in this follow-up work we're hired by the employers on a consulting basis to fix the problems, we have authority to contact the insurers and insist that the problems be fixed. In the original study, we hadn't been hired by the individual employers, so we could observe and report on the problem but not take any action ourselves to correct it.)

      It's clear to us that the insurance industry has a systemic problem in reporting these kinds of reimbursements. And our suspicion is that it hasn't been a problem confined just to South Carolina. A number of other states also maintain Second Injury Funds, and we strongly suspect that the same thing has happened in those other states.

      Those employers who want to learn more about this new follow-up work we're doing can learn more at