In a recent editorial for Crain’s Chicago Business, Illinois State Representative Jay Hoffman, D-Belleville, lays out a plan to reduce workers’ compensation rates in the state. Rep. Hoffman, who chairs the Illinois House Labor Committee, argues that a Democratic proposal for insurance reform could create a more business-friendly climate in Illinois, with lower workers’ compensation costs, “without having to significantly hurt middle class workers who are injured through no fault of their own.”
Gov. Bruce Rauner has often noted that Illinois has the eighth highest workers’ compensation insurance rates in the country, while neighboring Indiana has the second lowest. Gov. Rauner claims that Illinois’ high rates have cost the state jobs, and has argued that Illinois’ “no-fault” standard of causation has driven up these insurance rates and must be reformed.
Rep. Hoffman argues, however, that Illinois already passed comprehensive workers’ compensation reform in 2011, which included fraud prevention, reduction in carpal tunnel recovery and other injured worker benefits, and medical fee schedule reduction of 30%. As a result, compensable injuries have declined significantly in Illinois, to a rate of 2,883 per 100,000 workers; this number is both below the national average and “significantly lower” than neighboring states such as Michigan, Iowa, Wisconsin, and even Indiana, states Gov. Rauner frequently cites as models.
But, as Rep. Hoffman points out, these significant reductions in workers’ compensation claims and costs have only served to drive down the percentage of insurance premiums used to pay claims (from 75% in 2011 to 61% today) and bolster insurance company profits (from 0.3% to 10.8%) – all without significant savings in workers’ compensation insurance premiums.
To counteract this trend, House Democrats have proposed legislation that would give the Illinois Department of Insurance greater authority over insurance rates. Under this law, the IDOI has prior review of insurance premiums, and can reject those that are excessive before they go into effect. Rep. Hoffman notes that this type of prior approval for insurance rates is already law in 25 other states, including Iowa, Wisconsin, and Indiana.
Rep. Hoffman argues that this legislation would “reduce costs for local businesses, crack down on fraud and abuse, and pass insurance savings along to local employers,” all without taking part in a “race to the bottom” that would “jeopardize the economic security of middle class families.”