102ND GENERAL ASSEMBLY
State of Illinois
2021 and 2022
HB3896

 

Introduced 2/22/2021, by Rep. Michael Halpin

 

SYNOPSIS AS INTRODUCED:
 
See Index

    Amends the Illinois Insurance Code. In the provision concerning the Illinois Workers' Compensation Commission Operations Fund surcharge, provides that after the effective date of the amendatory Act, the Director of Insurance shall make a loan of $10,000,000 to the Illinois Employers Mutual Insurance Company (the Company) from the Illinois Workers' Compensation Commission Operations Fund for the start-up funding and initial capitalization of the Company. Creates the Illinois Employers Mutual Insurance Company Article in the Code and establishes the Company as a nonprofit, independent public corporation. Provides that the Company (1) shall be operated as a domestic mutual insurance company, subject to all applicable provisions of the Code, (2) shall issue insurance for workers' compensation and occupational disease and shall not provide any other type of insurance, (3) shall not be considered a State agency or instrumentality of the State for any purpose, and (4) shall not receive any State appropriations or funds, except for an initial loan or loans. Sets forth provisions concerning a board of directors, ratemaking, the Illinois Insurance Guaranty Fund, a chief executive officer, liability, a workplace safety plan, investments, dividends, the sale of policies, auditing requirements, and an annual report. Effective immediately.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB3896LRB102 10893 BMS 16223 b

1    AN ACT concerning regulation.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Insurance Code is amended by
5changing Section 416 and by adding Article XLVI as follows:
 
6    (215 ILCS 5/416)
7    Sec. 416. Illinois Workers' Compensation Commission
8Operations Fund Surcharge.
9    (a) As of July 30, 2004 (the effective date of Public Act
1093-840), every company licensed or authorized by the Illinois
11Department of Insurance and insuring employers' liabilities
12arising under the Workers' Compensation Act or the Workers'
13Occupational Diseases Act shall remit to the Director a
14surcharge based upon the annual direct written premium, as
15reported under Section 136 of this Act, of the company in the
16manner provided in this Section. Such proceeds shall be
17deposited into the Illinois Workers' Compensation Commission
18Operations Fund as established in the Workers' Compensation
19Act. If a company survives or was formed by a merger,
20consolidation, reorganization, or reincorporation, the direct
21written premiums of all companies party to the merger,
22consolidation, reorganization, or reincorporation shall, for
23purposes of determining the amount of the fee imposed by this

 

 

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1Section, be regarded as those of the surviving or new company.
2    (b)(1) Except as provided in subsection (b)(2) of this
3Section, beginning on July 30, 2004 (the effective date of
4Public Act 93-840) and on July 1 of each year thereafter, the
5Director shall charge an annual Illinois Workers' Compensation
6Commission Operations Fund Surcharge from every company
7subject to subsection (a) of this Section equal to 1.01% of its
8direct written premium for insuring employers' liabilities
9arising under the Workers' Compensation Act or Workers'
10Occupational Diseases Act as reported in each company's annual
11statement filed for the previous year as required by Section
12136. The Illinois Workers' Compensation Commission Operations
13Fund Surcharge shall be collected by companies subject to
14subsection (a) of this Section as a separately stated
15surcharge on insured employers at the rate of 1.01% of direct
16written premium. The Illinois Workers' Compensation Commission
17Operations Fund Surcharge shall not be collected by companies
18subject to subsection (a) of this Section from any employer
19that self-insures its liabilities arising under the Workers'
20Compensation Act or Workers' Occupational Diseases Act,
21provided that the employer has paid the Illinois Workers'
22Compensation Commission Operations Fund Fee pursuant to
23Section 4d of the Workers' Compensation Act. All sums
24collected by the Department of Insurance under the provisions
25of this Section shall be paid promptly after the receipt of the
26same, accompanied by a detailed statement thereof, into the

 

 

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1Illinois Workers' Compensation Commission Operations Fund in
2the State treasury.
3    (b)(2) The surcharge due pursuant to Public Act 93-840
4shall be collected instead of the surcharge due on July 1, 2004
5under Public Act 93-32. Payment of the surcharge due under
6Public Act 93-840 shall discharge the employer's obligations
7due on July 1, 2004.
8    (c) In addition to the authority specifically granted
9under Article XXV of this Code, the Director shall have such
10authority to adopt rules or establish forms as may be
11reasonably necessary for purposes of enforcing this Section.
12The Director shall also have authority to defer, waive, or
13abate the surcharge or any penalties imposed by this Section
14if in the Director's opinion the company's solvency and
15ability to meet its insured obligations would be immediately
16threatened by payment of the surcharge due.
17    (d) When a company fails to pay the full amount of any
18annual Illinois Workers' Compensation Commission Operations
19Fund Surcharge of $100 or more due under this Section, there
20shall be added to the amount due as a penalty the greater of
21$1,000 or an amount equal to 5% of the deficiency for each
22month or part of a month that the deficiency remains unpaid.
23    (e) The Department of Insurance may enforce the collection
24of any delinquent payment, penalty, or portion thereof by
25legal action or in any other manner by which the collection of
26debts due the State of Illinois may be enforced under the laws

 

 

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1of this State.
2    (f) Whenever it appears to the satisfaction of the
3Director that a company has paid pursuant to this Act an
4Illinois Workers' Compensation Commission Operations Fund
5Surcharge in an amount in excess of the amount legally
6collectable from the company, the Director shall issue a
7credit memorandum for an amount equal to the amount of such
8overpayment. A credit memorandum may be applied for the 2-year
9period from the date of issuance, against the payment of any
10amount due during that period under the surcharge imposed by
11this Section or, subject to reasonable rule of the Department
12of Insurance including requirement of notification, may be
13assigned to any other company subject to regulation under this
14Act. Any application of credit memoranda after the period
15provided for in this Section is void.
16    (g) Annually, the Governor may direct a transfer of up to
172% of all moneys collected under this Section to the Insurance
18Financial Regulation Fund.
19    (h) The Director shall make a loan to the Illinois
20Employers Mutual Insurance Company of $10,000,000 from the
21Illinois Workers' Compensation Commission Operations Fund for
22the start-up funding and initial capitalization of the
23Illinois Employers Mutual Insurance Company. The Board of
24Directors of the Illinois Employers Mutual Insurance Company
25shall make an application to the Director for the loans,
26stating the amount to be loaned to the Illinois Employers

 

 

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1Mutual Insurance Company. The Illinois Employers Mutual
2Insurance Company shall repay the loans in full within 5 years
3after issuance, plus any interest that would have accrued
4thereon had the loan not occurred.
5(Source: P.A. 95-331, eff. 8-21-07.)
 
6    (215 ILCS 5/Art. XLVI heading new)
7
ARTICLE XLVI.
8
THE ILLINOIS EMPLOYERS MUTUAL INSURANCE COMPANY

 
9    (215 ILCS 5/1700 new)
10    Sec. 1700. Purpose. The purpose of this Article is to
11establish the Illinois Employers Mutual Insurance Company as a
12nonprofit, independent public corporation to insure Illinois
13employers against liability for workers' compensation and
14occupational disease coverage.
 
15    (215 ILCS 5/1705 new)
16    Sec. 1705. Definitions. As used in this Article:
17    "Board" means the board of directors of the Illinois
18Employers Mutual Insurance Company.
19    "Board director" means a member of the board of directors
20of the Company.
21    "Company" means the Illinois Employers Mutual Insurance
22Company created by this Article.
 

 

 

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1    (215 ILCS 5/1710 new)
2    Sec. 1710. Establishment of the Company.
3    (a) There is hereby created the Illinois Employers Mutual
4Insurance Company, which shall be a nonprofit, independent
5public corporation. The Company shall be operated as a
6domestic mutual insurance company, subject to all applicable
7provisions of this Code.
8    (b) The Company shall issue insurance for workers'
9compensation and occupational disease. The Company shall not
10provide any other type of insurance.
11    (c) The Company shall provide workers' compensation
12coverage to employers at the highest level of service and
13savings consistent with reasonable applicable actuarial
14standards and shall maintain the financial integrity of the
15Company. The Company shall foster employer involvement in
16safety initiatives and the creation of workplace safety plans
17set forth in Section 1740 of this Article.
18    (d) The Company shall not be considered a State agency or
19instrumentality of the State for any purpose. Employees of the
20Company are not employees of the State and are not subject to
21the Personnel Code. The Company shall not receive any State
22appropriations or funds, except for an initial loan or loans
23made pursuant to Section 416 of this Code. The State shall not
24borrow or otherwise appropriate funds from the Company. The
25Company or its liabilities shall not be deemed to constitute a
26debt or a liability of the State or a pledge of the full faith

 

 

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1and credit of the State.
 
2    (215 ILCS 5/1715 new)
3    Sec. 1715. Board of directors.
4    (a) The Company shall be managed by a 7-member board of
5directors. The board of directors shall be appointed by the
6Governor with the advice and consent of the Senate. For the
7initial set of appointments, 2 Board directors shall be
8appointed to a term ending July 1, 2023, 2 Board directors
9shall be appointed to a term ending July 1, 2024, 2 Board
10directors shall be appointed to a term ending July 1, 2025, and
11one Board director shall be appointed to a term ending July 1,
122026. All initial appointments shall be made by the Governor
13within 30 days after the effective date of this amendatory Act
14of the 102nd General Assembly. Thereafter, all appointments or
15reappointments shall be a for a 5-year term ending on July 1 of
16the fifth year. The appointment and reappointment of Board
17directors by the Governor shall be subject to the provisions
18of Article 3A of the Illinois Governmental Ethics Act.
19    (b) A Board director appointed by the Governor must meet
20all of the following qualifications:
21        (1) he or she does not have any interest as a
22    stockholder, employee, attorney, agent, broker, or
23    contractor of an insurance entity that writes workers'
24    compensation insurance or whose affiliates write workers'
25    compensation insurance; however, nothing in this Section

 

 

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1    shall be construed to prohibit an individual who
2    previously had an interest in an insurance entity that
3    writes workers' compensation insurance or whose affiliates
4    write workers' compensation insurance from being appointed
5    to the Board;
6        (2) he or she is not the spouse or an immediate family
7    member living with a person who has an interest as a
8    stockholder, employee, attorney, agent, broker, or
9    contractor of an insurance entity that writes workers'
10    compensation insurance or whose affiliates write workers'
11    compensation insurance; however, nothing in this Section
12    shall be construed to prohibit an individual who
13    previously had an interest in an insurance entity that
14    writes workers' compensation insurance or whose affiliates
15    write workers' compensation insurance from being appointed
16    to the Board;
17        (3) he or she is a resident of the State of Illinois;
18        (4) he or she is of good moral character and has never
19    pleaded guilty to, or been found guilty of, a felony; and
20        (5) he or she is not a registered lobbyist under the
21    Lobbyist Registration Act.
22    (c) The Board directors shall elect a chairman from the
23Board.
24    (d) The Board is vested with the full power, authority,
25and jurisdiction over the Company and may perform any
26necessary or convenient act in the exercise of its power. The

 

 

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1Board shall discharge its duties with the care, skill,
2prudence, and diligence as that of prudent directors acting in
3a similar enterprise and purpose. The powers of the Board
4include, but are not limited to:
5        (1) the ability to enter into contracts;
6        (2) the purchase of reinsurance; and
7        (3) the declaration of dividends.
8    (e) The Board shall develop bylaws which shall be subject
9to the restrictions set forth in this Article. The bylaws
10shall provide for a schedule of at least quarterly meetings
11and set forth rules specifically relating to the conduct of
12meetings and voting procedures.
13    (f) The Board shall reflect the ethnic, cultural, and
14geographical diversity of the State.
 
15    (215 ILCS 5/1720 new)
16    Sec. 1720. Ratemaking. The Board shall have full power and
17authority to establish rates to be charged by the Company for
18insurance, subject to the applicable provisions of this Code.
19The Board shall contract for the services of or hire an
20independent actuary, who is a member in good standing with the
21American Academy of Actuaries, to develop and recommend
22actuarially sound rates. Rates shall be set at amounts
23sufficient, when invested, to carry all claims to maturity,
24meet the reasonable expenses of conducting the business of the
25Company, and maintain a reasonable surplus.
 

 

 

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1    (215 ILCS 5/1725 new)
2    Sec. 1725. Guaranty fund. The Company shall be subject to
3Article XXXIV of this Code and shall pay any assessments
4required for members of the Illinois Insurance Guaranty Fund.
 
5    (215 ILCS 5/1730 new)
6    Sec. 1730. Chief executive officer.
7    (a) The Board shall hire a chief executive officer who
8shall serve at the pleasure of the Board. The chief executive
9officer shall not be a member of the Board and must be
10qualified by education and experience to manage an
11organization with financial and operational obligations to
12policyholders and claimants. The compensation of the chief
13executive officer shall be determined by the Board.
14    (b) The chief executive officer shall be responsible for
15conducting the day-to-day operations of the Company, including
16the hiring of personnel. The chief executive officer shall
17also maintain an Internet website for the Company, which shall
18include information regarding the purchase of policies from
19the Company, as well as any reports required to be published
20under this Article.
21    (c) The chief executive officer shall present a proposed
22operating budget for the Company to the Board for its approval
23on an annual basis. The operating budget shall include a
24description of administrative and personnel costs.
 

 

 

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1    (215 ILCS 5/1735 new)
2    Sec. 1735. Liability. The Board and its employees shall
3not be personally liable for acts performed in good faith,
4without the intent to defraud, and made in an official
5capacity.
 
6    (215 ILCS 5/1740 new)
7    Sec. 1740. Workplace safety plan.
8    (a) The chief executive officer shall formulate,
9implement, and monitor a workplace safety plan for all
10policyholders. This plan shall include written guidance to
11reduce workplace accidents, prevent injuries, and promote safe
12working conditions. Each plan shall have clearly stated safety
13objectives for the policyholder.
14    (b) Employees of the Company shall have access to the
15premises of any policyholder for the purpose of examining the
16safety conditions of the workplace. The Company may terminate
17a policy if there is a refusal by the policyholder to permit
18on-site examinations by the Company or if the policyholder
19disregards or fails to comply with the safety objectives set
20forth by the Company in the workplace safety plan.
 
21    (215 ILCS 5/1745 new)
22    Sec. 1745. Investments.
23    (a) The Company shall formulate and adopt an investment

 

 

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1policy that safeguards the value of all assets and maximizes
2investment potential. All investments by the Company shall be
3subject to the applicable restrictions for domestic mutual
4insurers set forth in this Code.
5    (b) The Company may retain an independent investment
6counsel who shall be subject to standards applicable to
7fiduciaries responsible for safeguarding the assets of a
8corporation.
 
9    (215 ILCS 5/1750 new)
10    Sec. 1750. Dividends.
11    (a) The Company may declare a dividend in accordance with
12the requirements set forth in this Code.
13    (b) Dividends may be distributed in the form of premium
14discounts, dividends, or a combination of dividends and
15discounts.
16    (c) In addition to any requirements for dividends set
17forth in this Code, dividends may only be distributed if:
18        (1) the initial funding of the Company has been repaid
19    in full;
20        (2) an independent actuarial report of the prior
21    year's operations has been completed and reviewed by the
22    Board;
23        (3) the Company has met all expenses for
24    administration and claims for the prior year; and
25        (4) adequate reserves exist to pay all claims.
 

 

 

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1    (215 ILCS 5/1755 new)
2    Sec. 1755. Sale of policies. The Company shall administer
3the sale of policies for workers' compensation and
4occupational disease coverage. The Company shall utilize the
5Internet and other technologies to the greatest extent
6possible in order to facilitate the purchase of a policy for
7employers in this State.
 
8    (215 ILCS 5/1760 new)
9    Sec. 1760. Auditing requirements.
10    (a) The Company shall be subject to all examinations and
11audits required under this Code.
12    (b) The Board shall retain a competent and independent
13firm of certified public accountants to perform an annual
14audit of the performance and management of the Company and an
15audit of the accounts, funds, and securities of the Company.
16The costs of these audits shall be paid for by the Company. The
17audits shall be published on the Company's Internet website.
 
18    (215 ILCS 5/1765 new)
19    Sec. 1765. Annual report.
20    (a) On July 1, 2022, the Board shall prepare and submit a
21report to the Governor, the President of the Senate, the
22Minority Leader of the Senate, the Speaker of the House, and
23the Minority Leader of the House. This report shall describe

 

 

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1the progress of the Company to date in establishing its
2operations as a domestic mutual insurance company in this
3State providing workers' compensation and occupational disease
4coverage. This report shall include the information required
5in subsection (b) of this Section, if available.
6    (b) Beginning July 1, 2023 and continuing every July 1
7thereafter, the Board shall prepare and submit a report to the
8Governor, the President of the Senate, the Minority Leader of
9the Senate, the Speaker of the House, and the Minority Leader
10of the House. This report shall contain, at a minimum, the
11following information:
12        (1) a summary of the most recent audits performed
13    pursuant to Section 1760 of this Code;
14        (2) statistical and actuarial data related to the
15    determination of premium rate levels; and
16        (3) the incidence of work-related injuries and costs
17    related to those injuries.
18    (c) The reports required under this Section shall be
19submitted electronically and posted on the Internet website of
20the Company.
 
21    Section 99. Effective date. This Act takes effect upon
22becoming law.

 

 

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1 INDEX
2 Statutes amended in order of appearance
3    215 ILCS 5/416
4    215 ILCS 5/Art. XLVI
5    heading new
6    215 ILCS 5/1700 new
7    215 ILCS 5/1705 new
8    215 ILCS 5/1710 new
9    215 ILCS 5/1715 new
10    215 ILCS 5/1720 new
11    215 ILCS 5/1725 new
12    215 ILCS 5/1730 new
13    215 ILCS 5/1735 new
14    215 ILCS 5/1740 new
15    215 ILCS 5/1745 new
16    215 ILCS 5/1750 new
17    215 ILCS 5/1755 new
18    215 ILCS 5/1760 new
19    215 ILCS 5/1765 new