The following op-ed by ITLA President John P. Scanlon was published in the Rockford Register Star on Saturday, February 10, 2018.
In 2011, at the urging of the state’s leading business organizations, bipartisan majorities of Illinois lawmakers approved changes to Illinois workers’ compensation laws in an effort to reduce costs for Illinois employers. The legislation forced workers to forfeit longstanding rights in exchange for insurance companies being transparent with pricing and passing savings along to employers in the form of rate reductions. Unfortunately, the insurance companies are not holding up their end of the bargain.
The National Academy of Social Insurance (NASI), a non-profit, non-partisan organization made up of the nation’s leading experts on social insurance, recently released a report examining the trend in Illinois following the enactment of a 2011 workers’ compensation overhaul. What’s clear is that Illinois has experienced substantial cost reductions in several areas.
Total benefits paid to medical providers and money paid to compensate injured workers fell 19.3 percent between 2011 and 2015, NASI found. This is the second largest drop of overall costs in the country during that five-year period. Throughout the rest of the country, during the same time, the costs actually increased by 2 percent.
Medical costs in Illinois declined 23.3 percent, representing the greatest decrease in the U.S. during the five-year period. Illinois also experienced the third largest decrease in benefits paid, compared to payroll.
Though employers here have yet to realize the full benefit of the 2011 overhaul, because insurance companies are banking the savings as profit for themselves, NASI reported that Illinois saw the tenth largest reduction in employer costs, relative to payroll, for workers’ compensation during the five-year period. Employer costs here grew at just 3.8 percent while elsewhere across the country they grew by 21.6 percent.
A co-author of the NASI report said of the experience in this state: “In 2011, workers’ compensation benefits paid per $100 covered wages were 10 percent higher in Illinois than in the rest of the U.S.; 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.”
While costs across the board have dropped dramatically, profits in the workers’ comp insurance market in Illinois have significantly increased during this time. In 2015, insurance companies had a profit margin of 17.2 percent, generating nearly a half a billion dollars.
Insurance companies are taking advantage of both workers and employers. Notwithstanding the substantial fall in costs, there still are cries from the business and insurance industry demanding deeper cuts to the benefits injured workers receive. False claims that businesses don’t come to Illinois solely because of our workers’ compensation costs are nothing more than a ploy to get lawmakers on board for taking away even more rights and protections that help lower and middle-income Illinoisans.
The truth is, Illinois is good for business. It is home to 36 of the nation’s largest companies on the Fortune 500 list. Only three other states have more Fortune 500 companies. According to the U.S. Department of Commerce, Illinois is ranked fifth in the country for gross domestic product.
Illinois is an especially attractive place for workers’ compensation insurers. There are 332 insurance companies writing workers’ comp policies in our state, which is more than in any other state. Illinois is desirable for these companies because there is little oversight and favorable laws that put their interests ahead of seriously injured workers and their employers.
Reducing benefits to injured workers only shifts the cost of care away from insurers and onto the taxpayers while further padding the profits of insurance companies. It also would disincentivize employers from spending the money needed to ensure safe worksites and working conditions. Legislative efforts concerning workers’ compensation should focus not on further eroding the rights of the injured, but on improving workplace safety and providing meaningful oversight of workers’ compensation insurers.
John P. Scanlon is president of the Illinois Trial Lawyers Association