SIF Injures Cities
Nationally, the upward trend of workers’ comp insurance costs is no secret. Here in S.C., the National Council on Compensation Insurance has requested a 32.7% increase in workers’ comp insurance rates. It’s our hope the request will be denied because the answer to the workers’ comp cost crisis in South Carolina is not rate increases. A large part of a solution to our current crisis can be accomplished by dissolution of the South Carolina Second Injury Fund (SIF).
Set up by the state legislature after World War Two, the SIF provided a “safety net” for employers to hire people with certain preexisting physical conditions, specifically veterans with war-related injuries. The SIF would reimburse the employer for additional treatment costs should the employee have a workers' compensation claim. With the passage of the Americans with Disabilities Act (ADA), the SIF has outlived its purpose and is a financial drain on employers, particularly municipalities. Here’s how:
In order to stay in business, the SIF assesses every workers’ comp insurance company a fee whether or not that insurance company has filed a claim against the SIF. Therefore, well-managed self-insured pools like ours that don't file many claims, are forced to pay the same rate as a company that constantly files claims. Therefore, our fund pays into the SIF much, much more than it ever gets back for claims it files. Our fund subsidizes other insurance companies around the state. What does that mean to our pool? In 2004 our pool paid $1.2 million in SIF assessments. In 2005, our pool paid $4.4 million in SIF assessments. That represents a 259% increase. Why the large increase? Was it because our pool filed more claims? No. The increase reflects the rise in the cost of medical care related to workers' comp claims. That increase has blown a hole in our pool’s FY 05-06 budget and accounts for all of the reasonable 15% premium increase it has passed along to each of its member municipalities. Without the SIF, workers’ comp insurance rates would drop dramatically statewide.
The rate increase the city faces will also punch a hole in its FY 05-06 budget. Unable to anticipate the SIF’s increases from year to year, Woodruff’s insurance budget is a guessing game. Our budget will fall short of covering the increase by more than $6,000. Not a lot of money in the big scheme of things. But that figure represents nearly one mill of city property tax.
The Municipal Association of South Carolina, the parent organization of SCMIT and SCMIRF has lobbied hard for the elimination of the SIF and I support that effort 100%. The SIF is an out-dated system that was long ago supplanted by the federal ADA legislation and other modern-day worker protections. Many states across the country have abolished similar funds and it’s time South Carolina does the same. Workers’ comp costs are a major drag on the economy of South Carolina. All businesses feel the pain of these costs, both private and public, and we pass that pain to our consumers. It’s time to abolish the SIF and implement serious reform to this state’s workers’ comp system.



