Workers’ compensation is a system of benefits that is mandated by the state of Illinois for all injured workers employed in the state, other than Federal and interstate commerce railroad workers. In 2011, state legislators instituted an overhaul of the Illinois workers’ compensation system at the behest of businesses and insurance companies demanding a more “business-friendly” environment. The legislative reform of workers’ compensation benefits was designed to cut costs for insurers and employers with the understanding that insurance companies would pass along the savings to employers in premium rate reductions. According to a recent study, the insurance companies haven’t kept up their part of the bargain. Though workers’ compensation benefits in Illinois have plummeted, insurance companies serving the state enjoy record profits while offering no significant reduction in premiums.
Significant Decline in Illinois Workers’ Compensation Benefits
The National Academy of Social Insurance (NASI) looked at workers’ compensation trends for all 50 states from 2011, the year of Illinois’ legislative overhaul, through 2015. The results in Illinois were striking. During this period, total benefits paid to medical providers and total workers’ compensation benefits to injured workers dropped 19.3 percent. This decline represents the second-largest drop in overall costs in the country. As a baseline of comparison, NASI found that these costs actually increased by 2 percent nationwide from 2011 to 2015.
When medical costs are isolated, the reduction in payments is even more pronounced. During the period examined by the NASI study, medical costs associated with workers’ compensation fell 23.3 percent, which represents the steepest reduction in the United States. Illinois also had the eighth largest decrease in cash benefits paid to injured workers during this period.
Additionally, Illinois experienced the third largest reduction in the country for benefits paid compared to employer payroll. To highlight the progress made in workers’ compensation cost reductions in the state, consider the following data from the NASI study: “In 2011, workers’ compensation benefits paid per $100 covered wages were 10 percent higher in Illinois than in the rest of the US; in 2015 they were 13 percent lower. Costs to employers (per $100 covered wages) were 8 percent higher in Illinois in 2011; in 2015 they were 5 percent lower.”
Clearly, Illinois has done its part to reduce the costs associated with workers’ compensation benefits. But what about the insurance premium costs to employers? There, a different story emerges.
Insurance Companies Experience Record Profits
Illinois has the most workers’ compensation insurance companies in the United States. There are 332 carriers writing policies for Illinois employers – and these companies profited handsomely from the state’s self-imposed workers’ compensation diet. In the five years captured by the NASI study, the premiums collected from employers and kept by insurance companies – that is, not paid out in claims for injured workers – have more than doubled.
In 2011, Illinois workers’ compensation insurers collected $2.4 billion in premiums from the state’s employers, 75% of which – or $1.8 billion – was utilized to pay workers’ compensation benefits. By 2015, the annual intake of workers’ compensation premiums had increased to $2.83 billion, but the amount paid out in benefits had decreased to $1.5 billion, roughly 53% of the premiums collected. In fact, from 2011 through 2016, workers’ compensation insurance companies in Illinois have kept over $6 billion in premiums.
This increase in premium retention has proven very profitable to insurers in Illinois. In 2015 alone, the state’s workers’ compensation carriers reaped nearly $487 million in self-recorded profits.
Admittedly, the reduction in workers’ compensation benefits paid out may have helped curb premium increases in Illinois. According to the NASI study, employers’ workers’ compensation costs in Illinois grew at a much lower rate from 2011 through 2015 – 3.8 percent in the state versus 21.6 percent nationally. Nevertheless, workers and employers in Illinois seemed to have made big sacrifices without the state’s workers’ compensation insurers offering similar rewards. Why is that? The answer may simply be that if insurance companies don’t have to reduce their premiums, they won’t.
Insurers Not Required to Pass On Savings
Unlike many other states, Illinois does not require insurance companies to adopt lower rates based on market need. Therefore, while workers’ compensation insurance providers have seen significant savings thanks to changes in Illinois law, they have not been legally compelled to pass those savings onto businesses in terms of reduced premiums, so they have not done so.
Lawmakers in Illinois have proposed rectifying this state of affairs. In June 2017, Democratic State Rep. Jay Hoffman and State Sen. Kwame Raoul initiated a measure that would require state Insurance Department-approved rates based on market need. Another measure, sponsored by State Sen. Daniel Biss and State Rep. Laura Fine, would create a non-profit insurance company, with government oversight, that would compete for policies in an effort to drive down rates. Both bills passed the House and the Senate and were sent to Gov. Rauner’s office.
Republicans Propose Stricter Workers’ Compensation Rules
Republican legislators and the Illinois Manufacturers’ Association opposed both measures. In fact, despite the savings already gained because of the 2011 legislation, state Republicans continue to push even stricter rules to limit workers’ compensation benefits.
Republican lawmakers have advocated for workers’ compensation arbitration that solely considers American Medical Association (AMA) guidelines for “impairment.” Under the current system, arbitrators may also consider a worker’s occupation, future earning capacity, and age, among other factors.
Democratic Senate Pres. John Cullerton, however, has argued that using only AMA guidelines would be inadequate. For example, by employing that criterion, both a concert pianist and a bus driver would be entitled to the same award for the loss of a finger, even though it would impact their livelihoods to different degrees.
Chicago Workers’ Compensation Attorneys
Because of the ongoing controversies surrounding workers’ compensation benefits, many injured workers find that they may benefit from the guidance of an experienced and knowledgeable attorney, like the Chicago workers’ compensation attorneys at GWC Injury Lawyers.
If you have been injured in the workplace, please contact GWC today to schedule a free consultation with one of our workers’ compensation attorneys. Call our office at (312) 464-1234 or click here to chat with one of our representatives.