Today, as most business owners have come to recognize, South Carolina’s Workers’ Compensation System is broken. Ironically, the solution to fixing much of the problem rests in the hands of business owners. Reform is a much-debated and needed solution, but reform alone will not have the results the businesses expect. If South Carolina businesses decide that they will change the way they view Workers’ Compensation issues, the outcome could have a positive effect on the state’s economic climate.

The Workers’ Compensation system started to show serious wear and tear in July 2005 when the National Council on Compensation Insurance proposed a 32.9 percent average rate increase for employers in South Carolina. It cited high medical claims costs, slow settlement of cases, a large number of medical and personal injury lawsuits, and the Second Injury Fund assessments as reasons for the dramatic rate increase.

It was the third year in a row the NCCI called for double-digit increases in South Carolina, while states such as Florida, Virginia and California continued enjoying rates that were going down. To make matters worse, the Second Injury Fund assessments over an eight-year period had risen from $57.8 million to $253 million in 2005. The result: A lot of insurance companies were losing money and pulling out of South Carolina.

A state judge tried to make the problem go away by dropping the rate increase to 18.4 percent, effective Dec. 1, 2006. For many employers this was only a band-aid relief, resulting in a lot of activity in the press and calls for reform.

Now, we are right back where we started. The results of claim cost and expenses vs. the premium paid by employers have caused the National Council on Compensation Insurance to recommend another increase of 23.6 percent So, what can be done to fix the problem? True, the call for reform may eventually help in rectifying the inequities in the Workers’ Compensation system, but so much more can be done to help alleviate the problem.

In South Carolina, the first step seems obvious: The state should abolish the antiquated Second Injury Fund, which will go a long way in keeping insurance companies from pulling out of the state. But more steps can be taken to reduce the impact of the NCCI-mandated increase.

More importantly employers have to fixate less on rate increases and more on what they can do to bring their own costs down. When the employers of California recognized that they were paying the costs of Workers’ Compensation with money they were “borrowing” from insurance companies, the change process was under way.

In an issue of Charleston Regional Business Journal (Feb. 6, 2006), it was stated: “According to NCCI, there are a lot of significant cost drivers in South Carolina. The first, and most pressing, are medical costs that continue to spiral upwards.” Recent studies have shown that while the total number of workplace injuries has trended downward for a decade, the direct total cost of workplace injuries has increased – dramatically. Fewer employees are getting hurt, but the medical expenses associated with those who are injured are rising.

The solution to the medical cost problem, ironically, is not to twist the arms of the medical providers to get lower prices. The primary responsibility for cost control rests with employers.

Here are several steps employers can take to reduce medical costs:

1. Establish a relationship with a clinic that practices occupational medicine. As part of this relationship, acquaint the clinic staff with job descriptions of your employees, along with the physical requirements for the jobs. This will help the clinic staff prescribe a recovery regimen that fits the injured worker.

2. Develop a protocol of the steps that should occur when someone is injured on the job. Do not assume that a worker knows what to do when injured.

3. Train supervisors how to work with injured workers and the importance of staying in close touch throughout the recovery process.

4. Develop and implement a Recovery-at-Work program. By having a clinic relationship, the medical professionals are prepared to prescribe the type of job a person can perform at each stage of the recovery process.

However, companies should support making available modified tasks.

Feeling valued by getting back to work is good therapy and aids recovery.

By taking these steps, employers can take control of their Workers’ Compensation expenses. Unfortunately, their insurance agents are unable to give them the support they need because they lack the knowledge and experience in dealing with the unique complexities of Workers’ Compensation insurance. All too often, they leave it up to the insurance company to provide the critical account monitoring that’s absolutely necessary. That simply doesn’t occur.

It’s the responsibility of the insurance agent or broker to take the lead in educating employers in understanding Workers’ Compensation.

Employers have a right to expect their agents to work closely with them in establishing a continuing process for controlling and reducing Workers’ Comp costs.

So far, we haven’t mentioned what some employers call the “dreaded” Experience Modification Factor. This is the well-known figure that measures a company against its industry peers in terms of loss data. In South Carolina many employers have seen their Experience Mods going up, along with escalating premiums.

Rising Mods indicates that a company’s Workers’ Compensation account is not being monitored and managed properly. They signal the fact that companies do not have the right processes in place to control costs. At the same time, they also indicate that insurance agents are not doing their job for their clients.

If businesses take the right steps, they will control their Workers’ Comp costs over the long term. When this happens, South Carolina businesses will be one step closer to fixing what’s broke.

Jon Beckham, CWCA, is president of SIA-Reliance Insurance Agency Inc. of Rock Hill. He is a Certified WorkComp Adviser and the agency is one of only 20 agencies in the nation to be granted Level 5 status by the Institute of WorkComp Professionals of Asheville, N.C., indicating that it demonstrates exceptional competence in reducing Workers’ Compensation costs for employers. Beckham can be contacted at 800-333-8771 or j.beckham@siareliance.com.

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