It Costs Everyone

Problems with South Carolina’s workers’ compensation system affect consumers’ pocketbooks and employers’ bottom lines


By Representative Bill Sandifer, South Carolina House of Representatives


Reform is a popular word in government these days.  Some reform impacts senior citizens.  Other reform impacts property owners, but issues like workers’ compensation reform affect everyone-our consumers, our workers, our businesses, and ultimately our state’s ability to attract new companies and jobs.

I am concerned that many of our state’s citizens don’t realize workers’ comp problems are much more than a business problem.  In reality, the trickle down effect hurts everyone by causing higher costs for goods and services, lower wages, and fewer jobs. 

For starters, as premiums continue to rise, many business owners are being forced to pass on the costs to consumers through price increases on products and services.  According to the S.C. Policy Council, premiums have increased a whopping 47.5 percent from October 2003 through October 2006. 

Also affected are wage rates in our state.  Many employers simply can’t afford to pay their employees as much when they’re shouldering the high cost of premiums.  Anything that potentially lowers wage rates is in direct opposition to our goal of raising the standard of living and quality of life in South Carolina.

Another reality is that some businesses in South Carolina are being forced to limit growth due to the high cost of worker’s comp insurance premiums, which means that they are not creating as many jobs to benefit our citizens.  Worse yet, some may be forced to shut their doors, leaving their employees jobless.  Yes, we need workers’ compensation to protect workers, but businesses should not fall prey to the system to the point of closing up shop.  In all of these scenarios, the hard working people of South Carolina suffer.

Along with our citizens, companies in our state are being hindered in their ability to do business and aggressively compete by the current workers’ comp system and its ever-growing premiums.  And the likelihood of further rate increases could eventually become crippling-if we don’t take action to completely overhaul the system now.

Make no mistake, only a significant overhaul can stem this negative tide and there’s no time to lose.  We need to pass a worker’s comp bill that stops penalizing South Carolina’s businesses, forcing them to pay premiums they can never recover into a system that’s complex, costly and confusing.

In particular, small business growth will be stymied if we don’t overhaul the workers comp system.  South Carolina is taking measured steps to foster a business climate that’s friendlier to entrepreneurs and small businesses and we’re making great progress.  But our current worker’s comp system stands as an impediment to that goal.  This is most troubling when you realize that small businesses are the backbone of our state and national economy, creating two out of every three new jobs.

As major job creators, small businesses are the pillars of South Carolina’s communities-in our rural areas and our metropolitan ones.  Our state government should demonstrate its commitment to a pro-business climate with workers’ compensation reforms that alleviate the financial burden many entrepreneurs are carrying.  It may surprise you to learn that, after wages, insurance costs are the second-highest expense for small- to mid-sized businesses.  This is unacceptable.  It bears repeating: We must take steps toward change now or we will continue to see double-digit rate insurance rate increases that could smother our small businesses and choke the life out of our economic development strategy.

Reform also demands dissolving the state’s antiquated Second Injury Fund, to which some 98,000 South Carolina businesses contribute while only a relative few benefit.  High-cost assessments discourage insurance companies from writing policies in our state and the ones that do are forced to pass the cost onto the companies they insure through rate increases. There is no end in sight with the system as it is now.

Legislation is currently making its way through the South Carolina General Assembly that’s being championed in the House by my good friend Harry Cato.  This legislation is designed to help business owners, protect the long-term interest of South Carolina workers and consumers, and help keep economic development strong by eliminating the Second Injury Fund, strengthening penalties for fraud, and requiring the South Carolina Department of Insurance to more closely monitor workers’ compensation insurers’ rates, which have gone from the lowest in the nation to ranking in the middle and rising.

Now is the time for us to take action and move this legislation forward.  The cost of inaction is high and can severely hurt our citizens and our businesses.  We must rescue our workers comp system, and at the same time rescue South Carolina’s consumers, workers, and companies.