Our South Carolina Project

Our new South Carolina recovery project is going great guns. This is a followup to a study we performed a couple of years ago, where we found that significant percentages of employers in South Carolina had not received the experience modifier adjustments they were due over Second Injury Fund reimbursements their Workers Comp insurers had received. We're finding significant recoveries for South Carolina employers so far, and this project is just in it's early stages.

Interested South Carolina employers can learn more about this project at www.cutcomp.biz, by the way, or by calling 800-288-9256 and choosing extension 6.

You can also read the original report we published here.

The New Book

The new updated book is done, at last. It took longer than I thought it would, but Workers Compensation Insurance: A Field Guide for Employers & Others is now complete. It's a revised and updated version of my earlier book, Ultimate Guide to Workers Compensation, which went out of print earlier this year. The publisher of Ultimate Guide wasn't interested in publlishing an updated edition, so we took it on ourserlves (along with Amazon's BookSurge publishing arm.)

The actual book version will be available shortly from Amazon, but the new book is available now as a CD-ROM or pdf via email at www.cutcomp.com/ultimate/htm.

I saw reports that folks were offering their used copies of Ultimate Guide online for over $100! Sorry to deflate that market, but the new updated publication is available for a lot less than that now. So if you liked Ultimate Guide, or the even earlier (1995) book CompControl, I think you'll love Field Guide.

The new book updates a lot of the information from Ultimate Guide, and adds some expanded new material as well. So if you need a book that can help you learn to control your Workers Compensation premiums, the Field Guide is for you.

California Comp Increases Proposed

WCIRB, the California rating bureau for Workers Compensation insurance, has called for a nearly 25% increase in California Workers Compensation rates. This would be a nasty coup-de-grace for California employers, who are already stressed to the breaking point by the current economic crisis (which has hit the Golden State particularly hard.) The crisis in California Workers Compensation costs had abated a bit in recent years, after some much-publicized changes in their benefits rules, but things appear to be changing again for the worse.

California can be a tough state to do business in even in good times, but the past year or so has been anything but good times for a lot of employers there. And the state's Workers Compensation system has never been particularly employer-friendly--the State Compensation Insurance Fund, or SCIF (the state fund that competes with private insurers) can be a difficult and demanding agency to deal with, and SCIF writes about half the Workers Compensation coverage in the state. Combine that with high rates and rules that make it more difficult for employers to recover overcharges, and you have a recipe for encouraging employers to set up shop somewhere else if possible.

And now, if WCIRB has its way, the Golden State may be about to become even more tarnished as a place to do business.

South Carolina Has a Very Bad Idea

Legislators in South Carolina have come up with a truly bad idea. They are proposing to reduce the Workers Compensation benefits for illegal aliens. While the bill would still have the WC system pay for medical costs for injured illegals, it would deny them disability payments.

"I think the attempt is to punish a company that hires illegal aliens," said Senator Brad Hutto. But it wouldn't punish them, it would reward them.

By making serious claims less expensive if they happen to illegal immigrants, the bill would reward such employers by reducing future experience modification factors (and thus reducing future Workers Compensation insurance premiums.) It would penalize those employers who don't hire illegals because their Workers Comp insurance would not be so reduced, all other things being equal.

Perhaps even worse, it would reduce the financial incentive for employers who maintain safe workplaces. If the financial impact of workplace injuries is lower if you hire illegals, it reduces the incentive to avoid such injuries. That eventually leads to more dangerous work environments at employers who hire illegals--more dangerous for the illegals, and for those who work alongside them.

All in all, a very bad idea.

AIG Nationalized--End of an Era?

Everybody who can read or turn on a radio probably already knows that AIG--American International Group--has just been rescued by the Federal Reserve for $85 billion. The U.S. government has taken a 79.9% ownership stake in the world's largest insurer, to prevent a truly catastrophic meltdown in the world financial markets. So AIG has been nationalized--by a Republican administration that once wanted to privatize Social Security and have us all invest in the stock market.

I suspect it will only be a matter of time before federal regulation of large national insurance companies if finally enacted. And the collapse of AIG certainly makes the case that more strenuous oversight of such companies is absolutely needed.

The era of state regulation of insurance in the U.S. may be about to finally end. We'll have to be careful not to throw the baby out with the bathwater, as many states have enacted truly important protections for insurance consumers. But state insurance regulators have seen their staffs, budgets, and authority eroded in recent decades, as many state governments bought into the idea that insurance should be more deregulated to encourage "innovation" and "efficiency".

Now we all get to pay for all the "innovation" and "efficiency" that was going on at AIG.

I just hope that as the Feds take over ownership of Mr. Greenberg's former imperial duchy, they check out all the dirty little secrets that were rumored to be hidden in the closet of Mr. Greenberg's office. The NCCI (National Council on Compensation Insurance) apparently figured out some of those secrets, as they filed a billion dollar lawsuit against AIG in the past year, claiming that AIG systematically dodged their fair share of taxes and assessments meant to maintain the Workers Comp Assigned Risk system. I suspect that was only the tip of the iceberg over at AIG.

Since the various states have not been able to do the job of regulating these mutating financial behemoths, and since these once arrogant empires are now begging for corporate welfare to save them, methinks it may be time to actually start exercising some real oversight over their activities. It's the Golden Rule, after all. He who has the Gold makes the Rules.

California Bracing for Comp Cost Jump

California is a tough state to do business in. Just ask anyone trying to run a small or medium sized business in the Golden State, and you'll hear plenty of reasons. Workers Comp costs are likely to be near the top of their lists, and now there's new reason for California employers to groan: a proposed 16% rate increase for next year.

California employers suffered through horrendous rate increases after the WC rules were changed back in 1995 to deregulate rates. Then, more recently, there were some significant rate reductions after benefits rules were changed. But California is still an expensive state for Workers' Comp, and the 16% rate increase being proposed by the WCIRB (California's version of the NCCI) will really ratchet up the pain levels for employers who are already trying to survive the current economic headwinds.

To make matters even worse, California has the worst rules and regulations concerning Workers' Comp overcharges and refunds--it is significantly more difficult to get refunds of premium overcharges under California rules, and those rules do not allow employers to recover overcharges for as many past years as other states allow.

All in all, Workers Comp remains a compelling reason for California employers to consider moving to Arizona. And it's about to get worse.

Has Workers Comp Been Rigged For Decades?

A lot of employers, in their more cynical moments, have probably felt that Workers' Comp insurance is definitely rigged against them. Now, according to the largest insurance company in the world, those suspicions may have been confirmed.

AIG is in the middle of a federal lawsuit brought by the NCCI, the National Council on Compensation Insurance. AIG is a member of NCCI, but NCCI has filed suit for a billion dollars, claiming that under-reporting of Workers Comp premiums by AIG has harmed the other NCCI member insurance companies.

AIG has already settled charges brought by a number of states over this issue--settled them by paying several hundred million dollars, without admitting wrongdoing. But NCCI says the harm done to other insurers is more than that--a cool billion dollars more.

By under-reporting Workers Comp premiums, NCCI says AIG dodged out on their fair share of assessments and taxes that help fund various assigned risk programs. And so the other insurance companies would have had to pick up the slack.

But now in federal court here in Chicago, AIG has defended itself by claiming that all the other major insurance companies have done the same, since the 1980's. AIG says that Liberty Mutual, Travelers, Hartford, CIGNA, Aetna, ACE, Sentry, and others all under-reported Workers Comp premiums for decades.

The thing is, if this is true, it would have done more than just dodge assigned risk assessments. It would have seriously distorted the data that NCCI (and other rating organizations) have used to calculate the manual rates charged on every Workers Compensation insurance policy for the past twenty years or so. Every employer who bought Workers' Comp insurance (save those in monopoly state funds) would have been overcharged, because the manual rates would have been higher than they should have been. After all, if insurers are reporting all their claims, but not reporting all the premiums they're getting in, the fundamental data used to figure out those manual rates would be skewed in favor of higher rates.

I've made my living for the past 25 years catching insurance companies overcharging employers--and then getting that money back--but even I am shocked at this latest development. I've always chalked up the errors I found to innocent mistakes made in a complex system. But what AIG is alleging would be a systemic overcharge on every Workers Compensation insurance policy that's been going on since the 1980's. The mind boggles.

Now, it must be kept in mind that this is just an allegation, made by an insurance company that already has major blots on its own ethical record. Only time (and the federal court) will tell how much substance these charges really have. But if even a portion of what AIG is saying turns out to be true, somebody's gonna have a lot of explaining to do.