The following joint letter to the editor by ITLA President John P. Scanlon and Illinois AFL-CIO President Michael T. Carrigan was published in the Daily Herald on Friday, June 1, 2018.
Focus on premiums all that’s needed to fix workers compensation
Guest columnist Steve Schneider of the American Insurance Association recently suggested “three real” steps that Illinois should take on workers’ compensation. It might be simpler than even that. There is only one step that really is needed to reduce workers’ compensation costs for the vast majority of Illinois employers: workers’ compensation insurance premium oversight. It is telling that Schneider’s solutions do not even touch on the need to examine how insurance companies set their premium rates. Instead, his proposals are all directed at the injured, their doctors and the legal system.
Despite documented decreases in the number of claims, decreases in medical costs that in 2013 placed Illinois below the average medical cost in Wisconsin and Indiana, decreases in indemnity benefits as reported by the Illinois Department of Insurance, and decreases in overall loss costs since 2011 of more than 36 percent according to the National Council on Compensation Insurance (NCCI), most Illinois employers seem not to be experiencing reductions in their workers’ compensation insurance premiums, the real cost driver for those employers. The National Academy of Social Insurance reports that between 2011 and 2015, Illinois experienced a 19.3 percent decrease in paid workers’ compensation benefits, the second largest decrease in the country and yet employers seem not to be seeing equivalent reductions in premiums.
Perhaps most significantly, NCCI has recommended a cumulative 40 percent reduction in Illinois workers’ compensation insurance rates since September 2011, the rate reduction in 2018 alone being over 10 percent. It is difficult to understand why a 40 percent reduction in rates, upon which premiums are based, everything else being equal, like payroll and claims experience, has not resulted in anything even close to a 40 percent premium reduction for the average Illinois employer.
Meanwhile, according to the National Association of Insurance Commissioners, workers’ compensation insurance company profits on insurance transactions in Illinois continue to soar since 2011 to over 17 percent in 2015.
When costs, rates and claims go down, Illinois employers are right to wonder why their workers’ compensation premiums have not gone down too. This is where workers’ compensation insurance oversight comes in. The Illinois Department of Insurance is required to publish a workers’ compensation insurance oversight report every year. The last report was published in 2016, almost 2 years ago. Employers should not have to wait 2 years to learn why their premiums are not going down when they should be. Employers should be allowed to petition to the Department to look into unreasonably high workers’ compensation insurance premiums, which was allowed in HB2525, a bill that was vetoed by Governor Rauner.
Illinois leads the nation in the number of insurance companies that write workers’ compensation insurance policies because these profit-driven insurance companies continue to operate without any real oversight. The establishment of a not-for-profit workers’ compensation insurance company that would offer the absolute lowest workers’ compensation premiums possible and pass the savings onto employers would create competition for the private, for-profit workers’ compensation insurance industry and also provide additional oversight. In 2017 lawmakers passed HB2622 which did just this, but again, Governor Rauner vetoed it.
Proposals to slash compensation to legitimately injured workers and decimate the reimbursement to doctors and hospitals that treat them just divert attention away from the real question. Employers in Illinois deserve to know why their workers’ compensation premiums are not lower. Workers’ compensation insurance premium oversight could be the “real step” in providing the answer to that question.
John P. Scanlon
President, Illinois Trial Lawyers Association
Michael T. Carrigan
President, Illinois AFL-CIO