By CARL GREEN
Springfield, IL – Illinois Labor and business interests agreed in 2011 on legislation to cut workers’ compensation costs in the state, which ranked second-highest in the nation at the time.
The program has worked, to an extent. Illinois costs have dropped, and the state has dropped to eighth in the ranking.
But there is a problem. The idea was that with costs down, insurance rates would drop, too, and employers would get back millions that they could invest in their Illinois workforces.
That hasn’t happened. Instead, insurance companies have kept rates higher than they need to be, and much of that hard-earned savings has turned into excess corporate profit instead of investment in workers.
“Illinois employers are rightly concerned that they have yet to see significant savings from insurance companies,” state Representative Jay Hoffman said in a recent article. “Real workers’ compensation reform must ensure that cost savings are being passed along to employers in our communities, not padding the profits of massive, out-of-state insurance companies.”
Democrats in the Legislature and Governor Bruce Rauner have very different approaches to the issue. The Democrats are trying to keep the system effective while maintaining protections for workers. Rauner instead wants to protect the insurance companies’ right to excess profits by reducing payouts to workers.
So workers’ compensation is likely to again become a major topic in the new session of the Illinois Legislature, with Democrats promoting a bill to revise the system and Governor Bruce Rauner nursing a long-held desire to diminish it.
In early January, at the end of the previous session, the House passed Hoffman’s bill, although it did not make it through the Senate before adjournment.
The bill would have amended the Illinois Insurance Code by requiring insurance companies to pre-file workers’ comp rates with the Director of Insurance. If the Director would declare the proposed rates “unreasonably high,” he could specify interim rates and place proceeds in an escrow account to be distributed when new rates go into effect.
The bill would also allow a rate reduction if an employer has a bona fide safety and return-to-work program in place. It would bring new penalties for employers that fail to authorize medical treatment for injured workers.
Some employers are self-insured for workers’ compensation, such as Caterpillar. The bill would require them to report their financial losses from injuries on the job.
Also, the bill would authorize a task force to consider creating a non-profit state fund to provide workers’ compensation insurance, potentially reducing costs and allowing employers to reinvest in their Illinois workers.
ON PARTY LINES
The Illinois AFL-CIO was neutral on the bill, but Labor’s supporters in the House voted for it, including all of the southern Illinois and Metro-East area Democrats. It passed 65-45 along party lines.
The bill was opposed by the insurance industry and its lobbyists, who said it would give regulators more control over rates.
The American Insurance Association (AIA) testified that it would “throw out 35 years of successful workers’ compensation insurance regulation and impose government price controls on workers’ compensation insurers.”
In hearings before the House Labor and Commerce Committee, advocates for working families opposed cutting benefits, saying that would become a “race to the bottom” with other states.
Rauner has proposed cutting coverage for injuries suffered over time that aren’t considered “traumatic,” including injuries from repetitive motions commonly occurring on the job. Opponents say that would throw out thousands of legitimate claims that have been covered for many years, leaving the injured workers to suffer.
Noted compensation attorney David Menchetti said that while neighboring Indiana is often cited as an example of lower rates, it’s because employers there control medical choices for workers and pay at “poverty level” to compensate for injuries. Doctors, he said, are not trained to quantify the causes of injuries.
The 2011 reforms cut payments to doctors and hospitals, targeted fraud and reduced some benefits. Since then, injuries subject to compensation have declined and are less frequent than in neighboring states including Indiana, Wisconsin, Iowa and Michigan. Since 2009, claims are down 16 percent and benefits are down 8 percent.
Hoffman (D-Swansea), who is chairman of the House Labor and Commerce Committee, notes that the National Council on Compensation Insurance has now recommended an average insurance rate reduction of 12.9 percent for Illinois employers.
“Members of the House Democratic Caucus stand ready to enact reforms that will effectively target fraud, ensure that businesses are liable only for legitimate claims and guarantee savings are passed on to Illinois employers,” he said in a column published by Crain’s Chicago Business.
“What we will not do is join in a race to the bottom to pay the profits of out-of-state insurance companies, jeopardize the economic security of middle-class families and pretend it’s reform.”