The following op-ed by ITLA President John P. Scanlon was published in the Alton Telegraph Wednesday, February 14, 2018. The op-ed was also published in the Moline Dispatch on February 20, 2018 titled “Insurers drive up worker comp costs.”
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 documenting substantial reductions in the cost of Illinois workers’ compensation. And it is clear that the insurance industry is taking advantage of employers in Illinois.
The NASI study examined the trend that followed a 2011 overhaul of workers’ comp in Illinois. At the urging of the state’s leading business organizations, bipartisan majorities of Illinois lawmakers acted at that time in an effort to reduce costs for Illinois employers. The resulting 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.
Total benefits paid to medical providers and compensation paid to 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 this five-year period. Throughout the rest of the country, according to NASI, total benefits paid during that time actually increased by 2 percent.
Medical costs in Illinois declined 23.3 percent, representing the greatest decrease in the U.S., over the five-year time period. Illinois also experienced the third largest decrease in benefits paid, compared to payroll, and the tenth largest reduction in employer costs for workers’ compensation, again relative to payroll, during the same time frame. NASI found that employer costs for workers’ compensation grew at a much lower rate in Illinois as compared to other states – 3.8 percent here versus 21.6 percent nationally.
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.”
But while costs across the board have dropped dramatically, profits in the insurance workers’ compensation market in Illinois have jumped. In 2015, insurance companies had a profit margin of 17.2 percent, generating nearly a half a billion dollars.
Cries from the business and insurance industry for more cuts to the benefits received by injured workers continue unabated. They promote the fiction that the loss of manufacturing jobs and Illinois businesses is due to the cost of workers’ compensation insurance, rather than due to multi-decade trends of automation and overseas outsourcing.
The truth is, Illinois is good for business. It’s 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 especially attractive for workers’ comp insurers. There are 332 insurance companies that write workers’ compensation insurance 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 will shift the costs of care away from insurers and onto the taxpayers while padding the profits of the insurance companies. And with workers sacrificing their rights, employers would be incentivized to forego responsibility for doing everything they can to ensure safe worksites and working conditions. Legislative efforts concerning workers’ compensation should focus not on further eroding protections for 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