Workers’ Compensation premiums remain high despite lowered costs

shutterstock_127333064-300x194 Workers' Compensation premiums remain high despite lowered costsIn 2011, Illinois passed reforms to workers’ compensation to bring down the costs and it appears to have worked. Rates are down 24 percent, however this has not translated into measurable savings for workers. Workers gave up valuable rights in the 2011 reform in order to lower costs. In return insurance companies would be more transparent in their price structures and pass the savings along. Instead premiums remain sky-high and insurance companies reap huge profits.

The Reform

Workers gave up several medical benefits in the 2011 reform package. Specifically medical payments were cut 30 percent. This resulted in hospitals taking a harder line against which procedures were covered and whether or not to admit injured workers as patients. This resulted in more claims being denied which increased litigation costs on workers. The result being that the burden of obtaining medical care was shifted from insurance companies onto workers and their families.

By the numbers

According to a study by the Oregon Department of Consumer and Business Services, Illinois experienced a 24 percent drop in workers’ compensation rates between 2012 and 2014. However this drop did not translate into lower premiums, instead insurance companies reaped the benefits which amount to between $625 million and $1 billion.

The Problem

Illinois does not regulate premiums, instead the 300 or so insurance companies set their own rates. In fact, Illinois has more workers’ compensation insurers than any other state – a figure that has not worked to reduce premium rates. A report published by the National Academy of Social Insurance states that workers’ compensation is the second most profitable type of insurance (after auto) in Illinois.

The Results

The result of all of these numbers is that workers are caught in the middle between insurance companies and employers. A nationwide study conducted by the Occupational Safety and Health Administration (OSHA) found that employers only pay 21 percent of workplace injury costs through workers’ compensation. Families bear more than 50 percent of the costs in cut-rate plans and the taxpayers pick up another 16 percent when those families rely on public assistance.

Workers are forced to contend with denied benefits, increased medical claim litigation from hospitals and less coverage all in the name of lowering workers’ compensation costs. All the while insurance companies continue to reap record profits in Illinois. Insurance policies are still not transparent and premiums remain sky high.

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