Business Cheers as S.C. Adopts Objective Standards for Workers’ Comp

Gov. Mark Sanford today was joined by business groups from across South Carolina when he signed an executive order mandating that the Workers’ Compensation Commission apply objective standards when making workers’ compensation awards.

The South Carolina Supreme Court has held that the workers’ compensation awards should be made in accordance with objective standards, such as those issued by the American Medical Association, and that their use is mandated by the “due process” clause of the state constitution.

However, according to Sanford, workers’ compensation rulings in the state have varied wildly, averaging 81 percent higher than awards made in other states that follow similar guidelines. He said this has led in part to recent spiraling increases in workers compensation insurance, which he termed “an indirect tax on every South Carolina consumer.”

The new order — Executive Order 2007-16 — is meant to ensure compliance with existing law, and, as a result, help reduce the cost of doing business in South Carolina in order to help grow our economy. It comes after state lawmakers passed other workers compensation reforms earlier this year.

“Even though the bill passed earlier this year represented a big step forward, it fell short on the idea of making clear that workers’ compensation awards should be based upon objective standards, something we’re addressing today with this order,” Sanford said. “We believe this Executive Order will have a material impact in improving our workers’ compensation system, a system that had unfortunately become too subjective, was hurting our small businesses’ ability to compete, and was driving up costs for the average South Carolinian.”

The changes in this year’s reform bill, S.332, were aimed at injecting some “much-needed predictability, consistency, and rationality into the workers’ compensation system in South Carolina,” Sanford said in a statement.

In 2000, South Carolina ranked 49th in the nation in workers’ compensation premium rates and moved up to 42nd in 2002 and moved three more spots in 2004 to 39th. Currently, South Carolina has the 25th highest premium in the nation, having jumping 24 spots in just six years.

Last year, South Carolina’s workers’ compensation premiums grew more than 18 percent and the state ranks second in the nation since 2000 in terms of how quickly rates have increased.

Meanwhile, reform in other states has produced irate reductions for their businesses – California has seen a cumulative rate reduction of 55 percent since July 2003 while Florida’s workers’ compensation filings – which impact the cost of premiums – have seen a 13 percent decrease this year alone, according to the Sanford administration.

The executive order is a victory for the workers and the business community, according to the Property Casualty Insurers Association of America (PCI), which maintains that manipulation of the workers compensation system stifled the business environment by hurting wages and suppressing job growth and economic development.

“PCI commends Gov. Sanford for continuing to take action to curb runaway awards in workers compensation cases which will ultimately benefit not only the business community, but all South Carolina consumers,” said Robert Herlong, vice president and regional manager for PCI.

The National Council on Compensation Insurance (NCCI), which files rates on behalf of insurance carriers, estimates that consumers could see a “significant cost savings when the required use of AMA guidelines is implemented,” according to PCI.

PCI said NCCI found that the AMA guidelines would provide more cost savings than any other proposed initiative and are currently used in 29 other states.

“Using these objective guidelines in order to address excessive and unpredictable awards will help to bring justice and reasonableness back to the workers compensation system,” said Herlong.