Key Trends in Illinois Workers’ Compensation: Rising Indemnity Benefits and the Impact on Experience Mod

A recent study by the Workers Compensation Research Institute (WCRI) reveals key trends in indemnity benefits and medical payments in Illinois for 2022.

The findings highlight changes in workers’ compensation costs and shed light on the factors driving these trends.

• Indemnity Benefits Increase: Indemnity benefits per claim in Illinois rose by 5% in 2022.
• Wage Impact: This increase was driven by a 4% rise in workers’ wages.
• Temporary Disability Duration: The average duration of temporary disability increased by 0.8 weeks.
• Medical Payments Decline: Medical payments have been declining since 2019.
• Overall Cost Stability: Despite fluctuations, overall workers’ compensation costs remained mostly stable.
• New Hires: Workers with less than one year of job tenure were a significant factor in the increased duration of temporary disability.
• High-Cost Ranking: Illinois ranks high among states for total costs per claim due to high indemnity and medical payments.

The WCRI study indicates that while indemnity benefits in Illinois have risen due to higher wages and longer temporary disability durations, decreasing medical payments have helped maintain overall cost stability. The ongoing monitoring by WCRI provides valuable insights into the dynamics of workers’ compensation costs in Illinois.

How does this data point impact an organization’s Workers’ Compensation Experience Mod?

The increase in indemnity payments can significantly impact a company’s Workers Compensation Experience Modification (Experience Mod) in several ways. The Experience Mod is a critical factor in determining a company’s workers’ compensation insurance premiums. Here’s how the rise in indemnity payments negatively affects it, along with the importance of a Return to Work (RTW) program.

Impact of Increased Indemnity Payments on Experience Mod

1. Higher Indemnity Payments:

• Direct Impact on Costs: Indemnity payments, which include wage replacement benefits for injured workers, directly contribute to the total cost of a workers’ compensation claim. An increase in these payments raises the overall cost per claim.
• Experience Mod Calculation: The Experience Mod is calculated based on the actual loss experience of a company compared to the expected losses for similar businesses. Higher indemnity payments mean higher actual losses, which can increase the Experience Mod.

2. Longer Duration of Temporary Disability:

• Extended Claims Duration: As the study indicates, a 0.8-week increase in the average duration of temporary disability prolongs the period during which wage replacement benefits are paid. This extends the claim duration and increases total indemnity costs.
• Frequency and Severity of Claims: The Experience Mod considers both the frequency and severity of claims. Longer disability durations can lead to higher severity ratings, thus negatively impacting the Experience Mod.

Importance of a Return to Work Program

1. Reducing Indemnity Costs:

• Faster Return to Work: An effective RTW program helps injured employees return to work as soon as medically possible, reducing the duration of wage replacement benefits.
• Lowering Claim Costs: By facilitating quicker returns, the overall indemnity costs per claim decrease, helping to manage and lower the Experience Mod.

2. Improving Employee Morale and Productivity:

• Employee Engagement: RTW programs keep employees engaged with the workplace, even if they return in a modified capacity, maintaining their productivity and connection to the company.
• Moral and Mental Health Benefits: Keeping employees active and involved can improve their morale and mental health, aiding in faster recovery.

3. Impact on Experience Mod:

• Positive Influence: By reducing the duration and cost of claims, an RTW program can positively influence the Experience Mod, leading to lower workers’ compensation premiums.
• Preventing Future Claims: Successful RTW programs can also contribute to better overall workplace safety and health culture, potentially preventing future claims and further stabilizing or lowering the Experience Mod.

Final Thoughts

The increase in indemnity payments due to higher wages and longer disability durations can negatively impact a company’s Workers Compensation Experience Mod, leading to higher insurance premiums. Implementing a robust Return to Work program is crucial in mitigating these effects by reducing the duration and cost of claims, improving employee morale, and ultimately helping to manage and potentially lower the Experience Mod.