Insurance Not to Blame for Workers’ Comp Costs

by Matthew Glans on June 1, 2011

Illinois has the second highest workers’ compensation insurance rates of any state in the United States. Workers’ compensation insurance provides money for medical care and lost wages for employees who are injured as a result of their jobs. In return for guaranteed benefits, the employee agrees not to sue the employer for injuries caused by the employer’s negligence. The size or burden of a workers’ comp system can affect a state’s economy; workers’ compensation costs have proven to be a strong determining factor influencing businesses to expand or relocate in a state.

In a letter originally posted in the Peoria Journal Star, I discussed the multiple problems facing Illinois’ workers’ compensation insurance system and the real causes of these problems. I also analyzed the claims of some critics who blame insurance companies for the woes of the state workers’ comp program and argue that the larger issues are created by systemic fraud and abuse. The letter is reprinted below.

Insurance Not to Blame for Workers’ Comp Costs
By Matthew Glans
Peoria Journal Star
May 29, 2011

Daniel Cusack’s Spotlight letter of May 22 (“Look to insurance industry for workers’ compensation reforms”) attempts to place the blame for soaring workers’ compensation premiums on the insurance companies charging them. This simply isn’t the case in Illinois. While costs are rising, this is due more to the rising costs of health care and systemic fraud and waste in Illinois workers’ comp system.

Many of the problems facing Illinois’ workers’ comp programs emerge because the systems create artificial incentives for employers, employees and others to behave in ways that lead costs to be higher than they otherwise would be. Fraud and misuse are rampant, leading to increased workers’ comp rates, costing employers across the state needless thousands.

Cracking down on fraud is a necessary prerequisite to further reform. Before any additional money is borrowed or spent for workers’ comp programs a serious review needs to be conducted of how the money is now being distributed.

Matthew Glans
Midwest Director, Center on Finance, Insurance, and Real Estate
The Heartland Institute

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