While I have been critical of short sighted reform efforts in various states around the nation recently, no state is more fascinating to watch than the State of Illinois when it comes to “fixing” workers’ comp. The passage of two bills, HB 2525 and HB 2622, which are currently awaiting the Governor’s signature, represent interesting potential in the realm of failed workers’ compensation reforms. I am not saying the actions mandated by these bills will be failures in and of themselves; rather that, like recent reform attempts elsewhere, the cure they provide doesn’t necessarily treat the illness with which the state is afflicted.

It is entirely possible the legislature is tying a tourniquet around an arm to stop the bleeding from a severed leg.

HB2525 challenges the state’s current open competitive rating structure by requiring insurers to submit rates to the Illinois Department of Insurance prior to their use. While that, given the state we are discussing, has efficiency written all over it, it is the bill HB2622 that really has my interest. It would establish the Illinois Employers Mutual Insurance Company (IEMIC), “a state-sponsored fund to provide workers’ compensation insurance in Illinois.” This will ostensibly sooth the proponents of this reform, who believe private insurers in the state, despite major competition, are abusing employers with unfair rates and stuffing cash into their mattresses at night.

Personally, I am not an opponent of state funds. In many instances, they are a critical bulwark for a state’s economy, insuring those companies that may have difficulty securing private coverage. The realm of the state fund has been changing dramatically, as several of them have left the confines of their state of birth and compete with the private sector in other jurisdictions. They have become major forces in their own right, and are now part of the private competition ironically deemed a problem in Illinois.

So, the burning question remains, what will the Illinois Employers Mutual Insurance Company look like? Will it be another Montana State Fund or MEMIC? Or will it be more like the Menard Correctional Center, about which I have previously written? We must remember, Illinois is a state with a less than stellar reputation when it comes to both government corruption and efficiency. It is the only state that has an Executive Suite in its state prison, to house a successive line of imprisoned Governors. It is where a significant number of state workers’ compensation arbitrators were out on questionable workers’ compensation claims. And it is a state where projected costs to the taxpayers for workers’ comp claims of public sector employees easily exceeds $1 Billion per year. 

It is possible that the state will follow the example of Maine; establishing an autonomous entity, staffing it with eminently qualified individuals and leaving them the hell alone to do their job. Or, they could establish onerous government oversite tied to an unworkable bureaucratic structure, and then micro-manage it towards a slow and painful death; a death that will never come due to its inclusion in the ranks of state agencies. In Illinois, state agencies never die. They just require greater life support.

When it comes to getting insurance, even from a state fund, no one wants to hear, “I’m with the government, and I am here to help.”

Either way, I find it ironic that the new Illinois Employers Mutual Insurance Company, if it reaches fruition, will be dealing with the same problems that bedevil the state’s workers’ compensation private market. That is because the legislature that gave them life will have failed to address the real cost drivers in Illinois. That state is the most expensive in the Midwest not because of private sector profits squirreled away in mattresses, but because of inefficient claims processes, regulatory burdens and soaring litigation. Those are the issues that should be addressed. Instead, according to proponents, a state-run insurer will somehow solve the state ills.

We don’t yet know how this will turn out. As with all reforms, it takes time to show the cracks of any new foundation. The new state fund of Illinois could be a shining model of efficiency and service; but until the state addresses underlying causes there, they will be dealing with the same issues we are seeing today. 

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