Despite reforms passed by Illinois lawmakers in 2011, the general consensus among employers is that rates are not decreasing, but they continue to rise. David Vaught, director of the state's Department of Commerce and Economic Opportunity is of the idea that it will be up to the insurance companies to pass along any rate reductions that the state has allowed them to implement while underwriting workers comp policies. According to Vaught, the only way that this will happen is through increased competition, as employers shop around for insurance.

If you are a broker in Illinois, this is not exactly good news. In order to reduce workers compensation costs, your clients may opt to go in a different direction with a new broker. You can, however, offer your clients workers comp refunds and get them back money on current and prior policy years, as well as future savings for them to keep. Brokers will earn first-year and renewal commissions and keep their clients for life!

Check’s in the mail on workers’ comp reform

State says still too early to test progress of reforms

Journal Star – June 25, 2012

There’s little evidence yet showing workers’ compensation reforms passed by state lawmakers in 2011 have sharply reduced costs for businesses that say those expenses make it hard to stay in Illinois.

A spokeswoman for the state’s Workers’ Compensation Commission and an official at a leading Illinois business group say the reform efforts must be given time to work. But at least one Peoria-area business has not seen much in the way of an impact so far from the reforms.

Meanwhile, Indiana still cites workers’ comp costs as a part of its recruitment efforts.

“It’s not just the (higher income) taxes” passed by Illinois lawmakers last year, said Indiana Commerce Secretary Dan Hasler. “Look at the differences in workman’s comp that people have to pay in Illinois vs. Indiana.”

Before the reforms went into effect, Illinois ranked third in the nation in workers’ compensation rates, according to a 2010 study by the Oregon Department of Business and Consumer Services. Bordering Indiana ranked 50th, Iowa ranked 36th, Missouri ranked 33rd, Michigan ranked 23rd, Wisconsin ranked 19th, and Kentucky ranked 15th out of 50 states and the District of Columbia.

When the reforms passed last year, policymakers predicted they would save Illinois businesses $500 million to $700 million a year. But the state is unable to put a dollar figure on what the savings has been so far.

The legislation made several major changes that are already in effect:

►It called for the hiring of new arbitrators who are licensed attorneys to decide workers’ comp cases. Those have been appointed by Gov. Pat Quinn and confirmed by the Senate.

►New staff have been hired at the commission to focus on efficiency, preventing fraud and internal audits.

►Medical fee schedules have been slashed by 30 percent, and wage differential awards have been capped. Under current law, if an employee’s earnings are reduced because of an injury, they’re entitled to receive two-thirds of the difference between their new wages and old ones. The new law ends that provision five years after the employee receives the award or at age 67, whichever comes last.

Two other changes — establishing a preferred-provider organization program for workers’ comp claims and upgrading computer systems at state agencies to make fraud detection easier — are in progress.

A year ago, policymakers predicted that cutting the medical fee schedule would result in most of the savings for employers. But now, the Quinn administration said the PPOs will do the most to cut costs for employers.

“Establishing the preferred-provider networks will also result in much of the estimated savings for businesses. As employers sign up, we will be able to better pinpoint these savings in the coming months,” said Anjali Julka, a spokeswoman for the state’s Workers’ Compensation Commission.

Some cost reductions

Mark Denzler, chief operating officer of the Illinois Manufacturers’ Association, said some employers are seeing reduced costs.

 “I think we’ve been fairly pleased with the results so far,” he said. “The NCCI (National Council on Compensation Insurance), which is a rating agency, recommended initially an average decrease of rates of 8.8 percent. There’s obviously some time to get some of the things implemented, like the PPO network. Some of those things are taking a little while longer to get implemented, but we’re starting to see some reductions in medical costs.”

Progress in some areas has been faster than others, Denzler said. The new arbitrators are working well, but the beefed-up fraud provisions still are in the nascent stages.

“You’re starting to see cases that are significantly less or, in some cases, rejected by arbitrators and commissioners. I think it was one of the quieter provisions not a lot of people focused on,” Denzler said.

“But I think the renewed professionalism, the new ethical standards, the continuing education requirements for arbitrators and commissioners is making a big difference.

“And also getting the attorney general and getting the fraud unit up and going, which was actually passed several years previously and funding wasn’t made available to it … we think that needs to be … enforced a little bit.”

Skepticism remains

Some businesses throughout downstate Illinois remain skeptical, however.

Marc Collins, associate risk manager for Core Construction Group in Morton, said his company has yet to see any decline in coverage rates.

“We’ve been told … that workers’ comp rates are going to go up,” he said, thanks to a hardening of the overall insurance market.

However, he did acknowledge some improvements in the arbitration system since reforms went into effect.

“I feel like we’ve got a better shot now, definitely,” Collins said.

But the system, in his eyes, still needs significant improvements.

“On a few things we’ve had to go in front of the arbitrator for in the last year, I still think that maybe there is a slight bias toward the employee,” he said.

Some of those experiences are echoed by Doug Knight, owner of Springfield’s Knight’s Action Park. He said his premiums have not gone down.

“Really, it was a token deal. I thought it really wasn’t reform,” Knight said. “Was it really a work-related incident or was it some health condition they held prior to coming on the job?

“Without significant reform, we’re not going to see rate reductions. It’s just not going to happen because the insurance companies still have to cover the loss whether it happened here or prior to here.”

Knight wants a provision in the law making employees prove that their injury was caused and occurred in the workplace, a legal concept called causation.

Bringing rates down

David Vaught, director of the state’s Department of Commerce and Economic Opportunity, said insurance carriers have been slow to pass down savings from the reforms to businesses, and other savings have not yet been realized.

“We’re hearing about it. They look at rates. They compare rates to other states. We’re generally higher,” Vaught said. “We’re concerned that it may take a little time for those reforms to work into the rates that companies get from their carriers.”

As businesses shop around for insurance, competition should bring rates down, Vaught said.

“In some cases, that is maybe as important and more important to them than tax rates because those can be significant costs for certain kinds of businesses,” Vaught said. “We’re not a state that sets insurance rates. It’s up to private sector to make own adjustment on their own schedule. There’s a tendency sometimes that these things stay up there a bit until the competition brings them down.”

But Vaught acknowledged that employers want relief now.

“It’s hard to be patient. You get a bill this month, you’ve got to pay it. I think we’re on the right track. There had not been workman’s comp reform in Illinois in 30 years,” Vaught said.

Mark Selvaggio, president of Selvaggio Steel in Springfield, said his rates have not been significantly affected either. For the system to improve, the state needs to do more to fight fraud.

“How many people have been incarcerated for fraud before or after these reforms were put in place? I think you’ll find that it is nobody. Fraud is rampant, and nobody cares,” Selvaggio said.

The total workers' compensation premiums written for Illinois employers:

2011: $2.42 billion

2010: $2.25 billion

2009: $2.35 billion

Source: Workers'  Compensation Commission