Friday, May 26, 2017

Illinois Legislature Okays Non-Profit Workers Comp Insurer

The Illinois legislature has approved a law that creates a not for profit Workers Compensation insurer, to compete with for-profit insurance companies. The bill now goes before Republican Governor Bruce Rauner, and whether or not that governor will sign said bill is something beyond this writer's ability to predict.

If anyone were to ask me (and one of the lobbyists for this bill did, just the other day) I would say it's an idea that could significantly benefit a number of Illinois employers, if done right. Right now, too many employers are in the ultra-expensive Assigned Risk Plan just because they're small, or new, or located away from metropolitan areas. If this not-for-profit insurer were to helps such employers escape the Assigned Risk Plan's excessive rates, it could be a huge help to small business.

But governance will also be key to the potential success of such a venture. Underwriting standards would have to be reasonable, fair, and and yet not give away the store. Audit standards would also have to be similarly fair, to spare employers the terrors of Shock Audits, as I've written about so many times before. Of course, doing a better job with underwriting would go a long way towards reducing Shock Audits, as employers would be advised of the actual cost of coverage at the outset rather than after the policy has expired.

The other potential pitfall of such an entity, if it isn't strangled in the crib by Rauner, would be to make sure it isn't used as some kind of emergency piggy bank by ambitious or unscrupulous politicians. Part of the reason the Illinois Department of Insurance had its budget and staff gutted was that then Governor Blajojevich raided the funds generated by that agency (funds that didn't come from taxpayers but from fees and taxes paid by insurers) to pay for other pet projects.

Letting politicians have access or control to an entity that is banking considerable dollar amounts of reserves for future claims has often been a recipe for disaster. Similarly, some government sponsored Workers Comp funds have sometimes fallen prey to political favoritism and cronyism in underwriting practices. Again, for this proposed entity to really accomplish what sponsors hope it can accomplish, the crooks and cronies will need to be kept at bay. No easy task in a state like Illinois.

But I think it's worth a try. Illinois employers, especially small business employers, desperately need some relief from the excesses of existing insurance companies. Now let's see what Governor Rauner thinks. He may not like this, because it isn't part of the standard GOP playbook of cut benefits for workers and reduce payments to medical providers. But we shall see.

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