|Posted on Monday, April 07, 2008|
We Mean Business. Illinois Business.
Illinois employers footing higher workers' comp insurance premiums
Costs of workers' comp insurance premiums, when compared to neighboring states, make Illinois an expensive place in which to own and operate a business.
According to the FY 2006 annual report from the Illinois Workers' Compensation Commission - the state agency governing workers' compensation - Illinois employers pay one of the highest workers' comp insurance premium rates in the Midwest. Nationally, Illinois ranks 20th highest in terms of how much employers are paying per $100 of payroll in workers' comp-related insurance claims.
Illinois' average premium rate is $2.69, which is higher than Missouri's ($2.50), Wisconsin's ($2.18), Indiana's ($1.24), Iowa's ($1.75), Michigan's ($2.05) and equal to Minnesota's. Nationwide, Alaska and California have the highest insurance premiums at $5 and $4.13 respectively. Indiana's is second-lowest, with North Dakota the cheapest at $1.10.
Jay Shattuck, executive director of the Illinois Chamber of Commerce's Employment Law Council, says workers' compensation insurance premium rates rank as one of the hottest issues with Illinois employers.
Shattuck says the comprehensive set of workers' comp reforms passed by the Illinois General Assembly in 2005 have not yet produced the savings they promised.
"Illinois remains very uncompetitive," Shattuck said. "It's even more recognizable when you compare us to Indiana, Missouri and Iowa. What many, many of the employers that we've heard from see so much in the way of abuse. Illinois' system is loaded up against the employer."
Comparative workers' compensation costs assuredly played a factor in Honda Motor Co.'s decision in late June of 2006 to build its $400 million plant southeast of Indianapolis - and not in Illinois, which was one of the states vying for it, Shattuck said.
Another example where Illinois' high cost of workers' comp insurance costs makes site selection a hard sell, Shattuck said, is in the decisions of native Illinois corporations such as Peoria-based Caterpillar Inc. Caterpillar has opted to make major plant expansions over the past several years in South Carolina, Alabama, Mississippi and other states, but not in its home state.
"When we answer to outside site locators, the toughest subject is on our workers' compensation costs," he said. "This Illinois Workers' Compensation Commission study that ranks Illinois 26th highest is actually flattering study. There are other studies of workers' compensation costs that don't paint Illinois in quite as favorable of a light."
Dennis Ruth, chairman of the Illinois Workers' Compensation Commission, asserts that it's not a fair comparison to hold Illinois' $2.69 per $100 of payroll insurance premium cost against Indiana's $1.24 premium.
"Indiana really doesn't have a humane work law," said Ruth. "They don't treat their workers fairly. They have low minimum and maximum rates of compensation and they're very restrictive. Most people wouldn't think they're fair. We're (Illinois) not going to compare fairly to Indiana. Nobody likes to bear these costs, but when you look at these numbers, we're not out of control. Illinois tends to be right in the middle of the pack," he added.
The IWCC's FY2006 study ranked Illinois 17th highest of all 50 U.S. states in workers' compensation indemnity costs per claim (costs for injuries suffered). The study also ranked Illinois 9th highest in the nation in wages; 21st highest in workers' comp medical costs per claim; 21st highest in the growth rate of workers' comp payments; 26th highest nationally in the workers' comp benefit cost rate, which are benefits paid per payroll; and Illinois ranked only 37th highest in workers' comp injury rate.
What the legislative reforms of 2005 have allowed the IWCC to make progress on, according to Ruth, is beefed up enforcement in the field relative to investigating workers' compensation fraud.
"One of the significant things we did in 2005 was to create an anti-fraud division and fully fund an investigative unit at the Department of Insurance," Ruth said. "And within the past six months, we've received our first guilty plea."
Prior to 2005, according to Ruth, there was no state law on the books specifically for workers' compensation fraud. "Frequently the fraud cases our investigators see pertain to individuals faking how seriously they are actually injured," Ruth said. "For example, someone may legitimately be injured and entitled to benefits but is trying to settle for more than he is entitled to. Our investigators are cracking down on settlements that maybe should be $50,000 rather than $200,000, for example," he added.
Thanks to more workers in the field since the 2005 reforms were set in motion, the backlog of workers' comp cases in the system has decreased. Ruth said there are currently some 97,000 cases pending statewide compared to approximately 116,000 that were pending five years ago.
Tying Illinois workers' comp medical reimbursement rates to the Consumer Price Index is a recent move the IWCC has made to try to hold these costs steady, Ruth said. "As of Jan. 1, 2008, reimbursement rates increased by 1.97 percent," he said. "Historically, we've seen increases of 9, 10 and 11 percent. We're really starting to see the effects of tying medical reimbursement rates to the CPI paying off."