VETOES PROPOSAL FOR STATE-OWNED WORKERS’ COMPENSATION INSURANCE PROVIDER
Illinois Policy Institute/
House Bill 2622 would create a state-run
workers’ compensation insurance company, while failing to address the
real problems with Illinois’ workers’ compensation system – the most
expensive in the region.
On Aug. 18, Gov. Bruce Rauner vetoed
a bill that would’ve created a state-run workers’ compensation company.
Proponents of the bill claimed the new state-run insurance provider would
mitigate Illinois’ highest-in-the-region workers’ compensation costs.
But Rauner stated that the proposal “does nothing to address the actual cost
drivers and broken aspects of our workers’ compensation system,” according to
the Chicago Tribune.
House Bill 2622 would mandate the creation of the Illinois Employers Mutual
Insurance Company, or IEMIC. The state-based provider would be a nonprofit
started with a $10 million loan from the Illinois Workers’ Compensation
Commission Operations Fund.
If passed, the measure would have the governor select the board of the IEMIC
with Senate approval. At that point, the government-appointed board would hire a
CEO to run the company.
Supporters of HB 2622 claim the creation of IEMIC would bring more competition
to the workers’ compensation insurance market, forcing private sector insurers
to drop rates. However, Illinois’ market is already competitive, and this is
unlikely to remedy the state’s high workers’ compensation costs.
Illinois has more than 330 companies writing workers’ compensation insurance,
more than any other state, according to a 2016 report by the Illinois Department
of Insurance, or DOI. There’s also evidence from DOI that Illinois workers’
compensation insurers have slimmer profit margins than in other states. From
2010-2014, Illinois workers’ compensation insurance companies had average annual
profit rates of 2.7 percent, far lower than the national average of 7.1 percent.
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While increased competition is good for the market,
the establishment of the state-run IEMIC would not bring down
insurance costs because it does not tackle the massive cost drivers
of Illinois’ workers’ compensation.
Currently, Illinois employers in certain industries can save 5
percent of their payroll costs by moving to Wisconsin, and 10
percent of payroll costs by moving to Indiana. For blue-collar work,
this makes Illinois uncompetitive and costly. Companies such as
Hoist Liftruck have left Illinois for this very reason.
If lawmakers truly want to lower the cost of workers’ compensation,
they should embrace commonsense reforms that have brought down
workers’ compensation costs in other states. Tying medical fee
schedules to Medicare or private insurance reimbursement rates,
reforming overly generous maximum and minimum wage replacement
rates, getting rid of financial incentives for doctors to
overprescribe certain medication such as painkillers, and
instituting light-duty work programs could all help cut high
workers’ compensation costs in the Land of Lincoln. This would make
Illinois more competitive for attracting blue-collar jobs.
Lawmakers should consider these policy ideas if they are serious
about reducing workers’ compensation costs, and pass on the IEMIC.
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