Gov. Bruce Rauner recently offered a broad outline of proposed changes to the state’s workers’ compensation system. Members of the House Democratic Caucus, meantime, have been working to advance specific reforms that will lower workers’ compensation costs for Illinois employers. The difference in the approach is that House Democrats think we can help improve the business climate and bring down costs without having to significantly hurt middle class workers who are injured through no fault of their own.
Finding an effective solution to the challenges Rauner outlines requires a review of what has already been done, where these reforms have succeeded and what we can do further to help employers.
In 2011, Illinois enacted a comprehensive workers’ compensation reform package, providing for fraud prevention, reduction in carpal tunnel recovery, reduction in other injured worker benefits and a 30 percent reduction in the medical fee schedule—which sets the amount doctors, medical providers and hospitals can charge for treatment of injured workers.
While the full effect of these reforms is still being realized, this much is clear:
Compensable injuries have declined and occur at a lower frequency in Illinois than in our neighboring states, according to the Illinois Workers’ Compensation Commission. Compensable injuries take place at a rate of 2,883 per 100,000 workers in Illinois; this is not only below the national average of 3,279 per 100,000 workers, but significantly lower than Indiana, Wisconsin, Iowa and Michigan. Annual claims filed in Illinois have been reduced by 16 percent, and total workers’ compensation benefits paid per claim have decreased by 8 percent since 2009.
Since the 2011 changes, the National Council on Compensation Insurance, the organization that recommends rates on behalf of insurers, has recommended that rates be reduced by 30 percent.
WHO’S REALLY BENEFITING
But while the 2011 reforms are helping reduce claims and costs, they do not contain a mechanism requiring workers’ compensation insurance companies to pass these savings along to employers in the form of lower insurance rates. As a result, insurance company profits from workers’ compensation insurance have increased to 10.8 percent from 0.3 percent in 2011. This occurred while the percentage of premiums used to pay claims decreased to 61 percent from 75 percent.
Illinois employers are rightly concerned that they have yet to see significant savings from insurance companies. Real workers’ compensation reform must ensure that cost savings are being passed along to employers in our communities, not padding the profits of massive, out-of-state insurance companies. This is why House Democrats have fought for legislation that would continue to reduce costs for local businesses, crack down on fraud and abuse and pass insurance savings along to local employers.
This legislation would give the Illinois Department of Insurance authority to review insurance rates before they become effective and reject those it finds excessive. This form of prior rate approval is already in place in 25 other states, including Indiana, Iowa and Wisconsin—states frequently held up as models by Rauner.
Members of the House Democratic Caucus stand ready to enact reforms that will effectively target fraud, ensure that businesses are liable only for legitimate claims and guarantee savings are passed on to Illinois employers. What we will not do is join in a race to the bottom to pad the profits of out-of-state insurance companies, jeopardize the economic security of middle class families and pretend it’s reform.
We urge the governor to match his rhetoric with action and stand with us to pass real reforms that put the needs of Illinois employers ahead of insurance company profits.
Jay Hoffman is a Democratic state representative from Belleville and chairman of the Illinois House Labor Committee