Workers’ Compensation rate reductions draws praise from all sides

BY BRADY CREMEENS | Special to Watchdog.org

CHICAGO – The consensus is in and there is broad support behind Illinois’ new workers’ compensation reform efforts.

Governor Quinn announced late last week that the National Council on Compensation Insurance has requested a lower workers’ compensation rate in the state. The NCCI recommends a 5.5 percent decrease in the advisory rate beginning in 2015.

The Illinois Department of Insurance estimates the proposed 5.5 percent drop in rates could reduce employer premiums by $143 million in 2015. The DOI also says these savings plus the money saved since Quinn’s 2011 rate rollback will reach nearly $460 million.

“We’ve been getting the job done on workers’ compensation reform and now that reform is generating hundreds of millions of dollars in dividends for Illinois businesses and workers,” Governor Quinn said in a press release. “Illinois is making a comeback and historic reforms like these will keep it going strong, driving our economy forward and creating jobs in every corner of our state.”

This decrease would bring the total drop in compensation insurance premiums rates to more than 18 percent since 2011.

“We’re pleased that the NCCI has proposed a rate reduction in Illinois for the third straight year,” DOI Director Andrew Boron said in a statement. “The lower rate will deliver significant savings for Illinois employers. This rate review process will ensure the state has a responsible advisory rate that supports business growth and protects workers.”

The workers’ compensation advisory rate – the minimum percentage an employer is required by law to pay into the insurance fund – dropped 3.8 percent in 2013 and 4.5 percent in 2014, with this newest drop set to equal 5.5 percent in 2015.

The NCCI advisory rates determine the premium rates employers must pay for workers’ compensation insurance. DOI actuaries must confirm the calculations submitted by NCCI, a process that typically takes about 60 days, according to the governor’s office.

“NCCI’s reduction of its advisory rates for Illinois workers’ compensation provides objective proof that demonstrates that workers compensation costs have been reduced in Illinois,” Illinois Workers’ Compensation Commission Chairman Michael Latz said in a press release. “Actuaries are very careful – and before they recommend that insurance companies reduce their rates – they must first have confirmed data showing reduced costs.”

Illinois has the second highest rate of out-migration in the country and Chief Executive Magazine ranks Illinois as the third worst state in the country for business; numbers Gary Burtless, a senior fellow of economic studies at the Brookings Institute, said could be improved with more competitive tax and regulation policies, including a lower workers’ compensation rate.

“Workers’ comp is important, but we have to realize that these rates do take money out of the pockets of employers,” Burtless said. “That money could be used for business growth and more hiring, but high rates keep that from happening.”

State Rep. Tom Demmer, R – Dixon blames Illinois’ unfriendly business policies for driving companies and people away. The representative favors relaxing the workers compensation requirements the state demands of employers in favor of more pro-growth policies.

Demmer is optimistic that reducing the workers’ compensation rates will help improve the business climate and encourage more businesses to start here and stay here.

“Employers look at these kind of numbers [workers’ compensation rates] to see what the business atmosphere is going to look like,” the representative said. “Lately, Illinois hasn’t had a reassuring outlook.”

A joint statement from the presidents of Illinois AFL-CIO and the Illinois Trial Lawyers Association displayed the both organizations’ tepid support for the move, albeit with some reservations.

“The workers’ compensation reforms enacted by the legislature and signed by Governor Quinn in 2011 have undoubtedly had their intended impact: to reduce workers’ compensation costs for Illinois employers,” AFL-CIO President Michael T. Carrigan and TLA President John D. Cooney said.

But lowered costs aren’t the only concern regarding these rates, the joint statement said, and further reducing the rate could hurt employees more than it helps employers.

“Cries from business interests for more so-called ‘reforms’ will only take away rights from injured workers and increase the insurance industry’s profits,” their statement said. “Any further changes in laws should instead look to promote insurance premium transparency and oversight – not further sacrifices by the injured worker.”

Greg Baise is the president and CEO of the Illinois Manufacturers Association, and said high workers’ compensation rates are one reason Illinois employers are taking their businesses and the jobs they provide to other states.

“Indiana and Michigan have more business-friendly worker’s comp policies and the employment situations there reflect that,” Baise said.

Baise supports reducing the rate employers must pay for this kind of insurance and says it will help with job growth in the state.

“Along with our heavy tax and regulatory codes, high workers’ comp rates is hurting the Illinois economy,” he said.

In the last three years, no state in the U.S. has seen workers’ compensation premium rate decreases at a level matching Illinois’. If the DOI does confirm the advisory numbers, the new rates would begin taking effect January 1, 2015.

Brady Cremeens is a reporter with the Watchdog affiliate, Illinois News Network.