Illinois: Expensive State for Workers' Comp?

Monday, March 5, 2012 | 0

I was reading over the Illinois abstract on workers' comp from the Workers' Compensation Research Institute. Even though there was a supposed reform in Illinois over the last few years, the Workers Comp costs has remained high.  A quote from the press release:

"WCRI found that the 2006 price regulations had a short-term impact on the trend on medical payments per workers’ compensation claim. Medical payments per claim grew 2% from 2005 to 2006, following the direct impact of the new fee schedules. However, medical payments per claim increased an average of 9% per year after 2006. This was similar to the growth prior to the introduction of the 2006 fee schedule, which limited growth rates in the fee schedule rates to changes in the general consumer price index or CPI. The main driver of this post-reform growth was related to hospital inpatient and outpatient payments per claim."

A medical cost growth rate of  9% annually is not staggering when compared to California.  Illinois and California are both post-reform for Workers Comp.  I decided to look further into why there was such a sharp increase in medical benefits.

As I have posted very often, the way that workers' comp tabulations affect the experience modifications is as a very delayed system.  In other words, patience is a virtue as in the case of Illinois. According to the National Council on Compensation Insurance, Illinois' medical severity is actually decreasing since 2008.

The average medical cost for a claim in Illinois was approximately $4,000 more per claim than the countrywide average. This has been reduced to $0 in 2010 when compared to 2008. I am pointing this out as many companies want a risk manager or safety department to show immediate results. It just does not work that way.

The bottom line is the medical rates did grow in Illinois at 9%. They were growing steadily nationwide. The reforms are showing four years later as medical costs are decreasing. This is the same cycle as the experience modification for workers' compensation premiums.

James J. Moore is owner of J&L Risk Management Consultants in Raleigh, N.C. This column was reprinted with his permission from his Cut Comp Costs blog.