Illinois Workers Compensation
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Illinois is the home state of
Advanced Insurance Management LLC, and although we help clients from all over the U.S., we have particular experience and familiarity with Workers' Comp in our home state. With that in mind, we thought we would provide a little information about some of the particulars of Workers Compensation insurance in the Land of Lincoln.
Who has to get Workers Compensation coverage?
In Illinois, virtually any business that has what could be considered an
employee (with over $1,000 in annual payroll) is required
to meet their statutory Workers Compensation obligations by either getting an insurance policy, or by being approved as a self-insurer (only practical for large companies) or by becoming a member of a group self-insurance program. The major exception is
for agricultural enterprises with less than 400 working days of labor during any calendar quarter of the preceding calendar year.
But real-estate brokers, broker-salesmen and commission-only sales people are also not required to be covered.
Sole proprietors and partners are not required to obtain Workers Compensation coverage for
themselves, but they can choose to obtain coverage for themselves.
However, if a sole proprietor or a partnership hires employees, then
they must typically obtain valid Workers Compensation coverage.
And remember that, in Illinois, independent contractors (or
subcontractors) who do not have their own Workers'
Compensation coverage are treated the same as direct
employees. So if your business has workers who are
independent contractors, and they do not have their own Workers
Compensation coverage, they can and will be treated as your
employees if they are injured in the course of their work.
This also means that you can and will be charged premiums
by your Workers Compensation insurer for any uninsured
independent contractors you use. To avoid being charged,
you must have on file certificates of insurance that document
that these independent contractors have their own Workers
Compensation insurance in force.
Executive officers of a corporation can opt out of coverage, if they wish, but this must be done by specific endorsement to the policy.
The Assigned Risk Pool in Illinois
Since the state essentially requires most employers to obtain Workers Compensation insurance (or self-insurance) a program has been established to make sure that any employer that needs coverage can obtain it, even if insurance companies don't want to voluntarily underwrite such insurance. That program is the
Assigned Risk Plan, or Pool, and in Illinois there are some unique features that employers should keep in mind.
First off, rates are significantly higher in the Assigned Risk Plan in Illinois than they are in the voluntary market. The rates themselves are higher, typically
20% or 25% higher than the rates for the same operations in the voluntary market.
On top of that, Assigned Risk policies have no Premium Discount. Depending on the size of the policy, this can add close to another 10% to the cost of the policy.
Furthermore, Assigned Risk policies are not eligible for any Schedule Credits. In the voluntary market, insurance companies have commonly offered discretionary discounts ranging from lows of 15% to highs of 50% (at least they did in the "soft market"--even in the current "hard market", many insurers still offer significant schedule credit.)
Add all these factors together, and the Assigned Risk Plan policy can often be
twice as expensive as the same coverage in the voluntary market. Which means that it is definitely in an employer's interest to get out of the Assigned Risk Plan as quickly as possible.
Sometimes, small employers end up in the Assigned Risk Plan without even realizing it. If there is any doubt about whether or not your company is in the Assigned Risk Plan, check with your agent. And then start working to find a way to get coverage in the voluntary market, if at all possible.
If you can get an insurer to write your Workers Compensation coverage in the voluntary market, you don't have to wait until your Assigned Risk policy expires. There is no penalty to leave the Assigned Risk Plan before the policy expires (unlike the voluntary market, where canceling the policy before expiration can have significant penalties).
How are the premiums calculated?
Workers Compensation premiums are calculated by assigning classifications to the business operations (according to a system devised by the NCCI). Each classification has a particular rate, which is applied to remuneration (the rate is per hundred dollars of remuneration). The policy starts out with estimated remuneration (usually referred to as payroll, but it can be more than that) and then, when the policy ends, actual remuneration is determined, and the policy premium is adjusted by an audit.
Premium is further adjusted, for companies paying $5,000 or more a year in premium, by application of the Experience Modification Factor. This factor, calculated annually by NCCI, is based on prior loss and payroll data of the particular business.
Premium can be further adjusted, in the voluntary market, with Schedule Credits or Debits. Also in the voluntary market, the premium is reduced by applying a Premium Discount factor.
Who regulates Workers Compensation in Illinois?
Claims matters are handled by the Illinois Industrial Commission. This body resolves disputes regarding proper claims settlements, and compensibility of particular claims.
But disputes regarding insurance coverage (other than claims) are handled by the Illinois Department of Insurance.
The National Council on Compensation Insurance, or NCCI, is a private organization but has some quasi-regulatory authority in Illinois, delegated to it by statute. NCCI writes the manuals of rules that determine how premiums are calculated (subject to approval of the Department of Insurance), how particular classifications are assigned to employers, calculating Experience Modification Factors, and administering the Assigned Risk Plan for Illinois. NCCI also is involved in administering the Workers Compensation Appeals Board in Illinois, which rules on disputes involving proper Workers Compensation classifications.
How Are Premium and Classification Disputes Resolved?
Disputes regarding premium computation are handled by the Illinois Department of Insurance, often by means of the Workers' Compensation Appeals Board. This board is administered by NCCI, but the voting members of the board are not NCCI personnel, but rather are: one member from the Department of Insurance; one member from an insurance carrier; and three members from private industry.
This Board meets quarterly, and hears appeals regarding classifications assigned by NCCI, as well as other disputes affecting premiums, such as Experience Modification Factors and premium audits.
The decisions of the board can also be further appealed to a hearing officer with the Illinois Department of Insurance, if needed. It should be noted that only insureds have a right of appeal to the board (or to the hearing officer) which means that insurance carriers must accept decisions of NCCI without having recourse to the appeal mechanism.
If Your Company Has Won an Appeal...
...from the NCCI Appeals board, regarding a change in classification code, or experience modifier, you may want to talk with AIM. Because it may be that we can help you recover refunds from past policies. If you've won a classification change at the Appeals Board, AIM may well be able to negotiate refunds going back a number of years (back to 1984, in some cases). The insurance system often isn't as responsive as it might be when it comes to making good such past overcharges. But AIM specializes in getting back such overcharges for clients. And since we work on a contingent-fee basis, there's no cost to have us check to see if we can produce a refund, as we only earn a fee if we successfully produce a refund.
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Remember, in Illinois it is possible to get refunds of Workers' Compensation insurance premium overcharges going back to the 1984 policies, if such overcharges can be properly documented. So if there has been any change in the classification codes used to develop the premium for your company in any policy since 1984, it may bear looking into. AIM will provide a free consultation to determine if your company may have been overcharged, and advise you if we can help recover those overcharges. |
There's also a rather unique situation in Illinois that the courts have created with a series of decisions that particularly affect contractors in Illinois (but can theoretically affect any employer in Illinois) known generally as Kotecki related exposures.
All of the above relates to Workers' Compensation premium computation and classifications. For information about Workers' Compensation benefits in Illinois, we recommend you go to the Website of the Illinois Industrial Commission.
You can contact AIM Monday - Friday, 9am - 5pm CST at 1-800-288-9256 or email aim@cutcomp.com. |
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