South Carolina Jumps Aboard Workers’ Comp Alternative Bandwagon

By | June 10, 2015

A South Carolina lawmaker has introduced workers’ compensation option legislation that would allow qualified businesses in the state to offer their own injury benefit plan to employees. The state is the second one this year, after Tennessee, to introduce workers’ comp alternative legislation.

House Bill 4197, also known as “The South Carolina Employee Injury Benefit Plan Alternative” was introduced by Rep. David Hiott (R-Pickens) on May 19. The legislation would authorize employers to be exempt from obtaining workers’ compensation insurance coverage and instead obtain certification from the South Carolina Department of Insurance to provide coverage through a qualified employer injury plan.

The Association of Responsible Workers Compensation Alternatives (ARAWC) worked on the development of the bill with Hiott, who is chairman of the South Carolina House Agriculture Committee and a small business owner. His co-sponsors on the legislation were Reps. Bill Sandifer, chairman of the House Labor, Commerce and Industry Committee, and Craig Gagnon, also a small businessman.

“I firmly believe that markets operate best and participants receive the most benefit possible when competition exists. The South Carolina Option will provide businesses an alternative way to provide occupational injury benefits to their employees,” said Hiott. “The Option will also require high benefit levels, which is a win for hardworking South Carolina workers.”

According to a statement from ARAWC, the South Carolina Option will not replace workers’ compensation, but instead act as a “competitive pressure on the system to produce better outcomes for the primary stakeholder in the process — the employee.”

“We worked with the bill sponsors as a technical expert, relying on the legislators to determine the particulars of the Option that will work best for South Carolina,” said Brent Buchanan, communications director for ARAWC.

ARAWC, which was formed in 2013 in Dallas, has worked with other states on similar legislation, including Tennessee. The Tennessee Employee Injury Benefit Alternative was introduced in the just-finished legislative session by Tennessee State Sen. Mark Green (R-Clarksville) but didn’t get voted on in its revised form before lawmakers adjourned.

Workers’ compensation alternative options are currently utilized in Oklahoma and Texas as a means of reducing costs associated with employee injuries and encouraging market competition.

The option legislation introduced in South Carolina would require employers that want to be exempt from offering traditional workers’ compensation coverage to obtain certification from the South Carolina Department of Insurance to provide coverage through a qualified employer injury benefit plan.

An employer’s alternative plan must offer comparable medical benefits to South Carolina’s Workers Compensation Law and provide for medical, surgical, hospital, dental, and other treatment, surgical supplies, nursing services, rehabilitation services, medicines and prosthetic devices.

In addition to medical benefits, minimum indemnity benefits for total disability, partial disability, permanent impairment, and death are also established by the legislation. The total disability benefits offered must be of at least 75 percent of the employee’s average weekly wage up to 110 percent of the state’s average weekly wage for the preceding fiscal year and not less than $75 per week.

Stipulations for temporary partial disability benefits for employees who are not able to perform their normal job but can perform alternative work are also spelled out in the bill, as are benefits for loss, loss of use or disfigurement, as well as death benefits.

Other details of the legislation include:

  • Allowing employer benefit plans to provide for lump-sum payouts to satisfy all benefit obligations and settlement agreements — with the stipulation that payouts must be actuarially equivalent to expected future payments as reasonably determined by the claims administrator.
  • Prohibits employers from charging the employee a fee for covering employees under the benefit plan.
  • Requires the Director of Insurance to maintain a list of all qualified employers and the status of their certifications on the Department’s website.
  • Establishes financial responsibility requirements for qualified employer benefit plans and provides that the Department may require a deposit by employers to secure the payment of benefit plan liabilities.

The Act would take effect for injuries that occur on or after Jan. 1, 2017, if passed.

Not everyone is on board with option models. Opponents of the Tennessee plan voiced concerns that not all employers would be capable of running an effective plan. There were also concerns with some of the bills fundamentals, such as the amount of the lifetime injured employee medical benefits and the lack of a provision for permanent partial disability benefits.

Green added amendments to the original bill addressing those issues and said the option would actually provide the same if not better benefits to employees.

Green and ARAWC expect the bill will pass next year when the Tennessee legislature resumes.

ARAWC Executive Director Richard Evans said option alternatives have never been about reducing benefits to injured workers but instead about offering a more streamlined process to deliver those benefits, which ARAWC expects will be the case for South Carolina.

“It is reasonable for South Carolina to mandate Option benefits comparable to those required under workers’ comp, combined with the same liability protections employers receive under workers’ comp. We expect the South Carolina Option to provide improved outcomes for injured workers while generating substantial savings for employers inside and outside the workers’ comp system,” he said.

About Amy O'Connor

O'Connor is the Southeast editor for Insurance Journal and associate editor of MyNewMarkets.com. More from Amy O'Connor

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