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Hidden surprise: A potential new state agency

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One of the surprises buried in the 10,000 or so bills floating around Springfield is a proposal to create Illinois' very own government insurance company to sell workers compensation insurance.

Last year, workers comp reform was one of the big issues in the General Assembly, and a reform package eventually was signed by Gov. Pat Quinn. New cases have only begun working their way through the system, so it's too soon to tot up actual savings from the reform legislation.

Gov. Pat Quinn (Seth Perlman~AP)

But here's an indication: The National Council on Compensation Insurance has analyzed the law and concluded employer premiums for workers comp insurance should go down 8.8 percent. That makes the law sound like a big success.

And here's the catch. Private insurance companies don't have to adopt the NCCI's recommended rate. They could reduce their premiums by less than that or even raise them. (About 200 of the largest employers in the state -- think Ford, United and Caterpillar -- are self-insured, but everyone else depends on private insurers.)

The self-insured companies are rumored to be saving money, but some other companies complain premiums aren't coming down sufficiently, leading some legislators to say workers comp reform didn't go far enough.

The apparent lesson? If you do workers comp reform but don't do insurance rate regulation reform, you can't force insurance companies to pass on their savings to the employers.

That's the reason for Senate Bill 3825, which -- by creating a "Workers' Compensation Insurance State Fund" -- would put the state in direct competition with the private companies. If the private companies don't cut their costs, they could lose business to the state. The bill stresses this would cost taxpayers nothing.

Does the state really want to set up its own company? The guess here is that they'd rather the private companies cut rates on their own, now that they see a potential source of competition. That way, the General Assembly can deal with the many other problems on its plate.

"I think they are sick and tired of workers comp down there," one insider said.

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1 Comment

The market system works when it's truly competitive. The trouble is that so many companies strive for monopolies, or near monopolies. That's why governments have to step in and referee the game. And when private enterprise can't fill a social need, government needs to take over.

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This page contains a single entry by Thomas Frisbie published on March 7, 2012 12:06 PM.

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