In Illinois, virtually any business that uses workers

(full or part time) other than the owners of the company

(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. 

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 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 do in a

 "soft market"--even in a "hard market", many insurers

 still offer significant schedule credit for what they consider a

 desirable account.

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). 

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. 

And always remember, the premium shown when the policy starts is just an estimate.

Final premium will be determined after the policy ends, and sometimes this final premium can be significantly higher than the original estimated premium. 

We regularly get calls from employers who have just received a shockingly-high final premium bill and are at a loss to understand how their Workers Comp policy that originally had a premium of just $2,000.00 has now generated a final premium bill of $25,000--or more.

We can often help employers by finding and

 correcting errors made by the insurance

company in computing that final premium.

Claims matters are handled by the Illinois Workers

 Compensation Commission (formerly the Illinois Industrial

 Commission.) This body resolves disputes regarding proper

claims settlements, and compensability of particular claims.

 

But disputes regarding insurance coverage (other than claims) and

 premium charges 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. 

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. 

...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.

 

Remember, in Illinois it is possible to get refunds of past

 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 past overcharges.

Kotecki Exposures

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.

Also, in 2008, there were statutory changes made (and an Illinois Supreme

 Court decision) regarding when certain workers must be classified as

 employees rather than independent contractors.  The revised statute

added new penalties for employers who improperly classify certain

 workers as independent contractors.  The Illinois Supreme Court decision,

 Roberson v. Industrial Commission, set criteria to differentiate when

 owner/operators in the trucking industry must be considered employees

rather than independent contractors.


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 Workers Compensation Commission.

Advanced Insurance Management has been helping Illinois

 employers reduce their Workers Compensation insurance

 premiums since 1987. 

Although we help employers all across the U.S.A, we

retain particular expertise in regards Illinois rules and

regulations about Workers' Compensation insurance

 premium charges.   

AIM has worked closely with the Illinois

Department of Insurance, we have helped numerous employers

 with appeals to the 

Illinois Workers Compensation Appeal Board,

and have

 often served as experts in litigation cases here involving disputes over Workers Comp insurance premiums, audits,

 and related matters.