State of Illinois
2017 and 2018


Introduced , by Rep. Laura Fine


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 one or more loans to the Illinois Employers Mutual Insurance Company (the Company) in an amount not to exceed an aggregate amount of $10,000,000 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.

LRB100 11185 SMS 21486 b






HB2622LRB100 11185 SMS 21486 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 surcharge
15on insured employers at the rate of 1.01% of direct written
16premium. 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 collected
24by the Department of Insurance under the provisions of this
25Section shall be paid promptly after the receipt of the same,
26accompanied by a detailed statement thereof, into the Illinois



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1Workers' Compensation Commission Operations Fund in the State
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 under
9Article 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 if
14in the Director's opinion the company's solvency and ability to
15meet its insured obligations would be immediately threatened by
16payment 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 legal
25action or in any other manner by which the collection of debts
26due the State of Illinois may be enforced under the laws of



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1this State.
2    (f) Whenever it appears to the satisfaction of the Director
3that a company has paid pursuant to this Act an Illinois
4Workers' Compensation Commission Operations Fund Surcharge in
5an amount in excess of the amount legally collectable from the
6company, the Director shall issue a credit memorandum for an
7amount equal to the amount of such overpayment. A credit
8memorandum may be applied for the 2-year period from the date
9of issuance, against the payment of any amount due during that
10period under the surcharge imposed by this Section or, subject
11to reasonable rule of the Department of Insurance including
12requirement of notification, may be assigned to any other
13company subject to regulation under this Act. Any application
14of credit memoranda after the period provided for in this
15Section 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) After the effective date of this amendatory Act of the
20100th General Assembly, the Director shall make one or more
21loans to the Illinois Employers Mutual Insurance Company in an
22amount not to exceed an aggregate amount of $10,000,000 from
23the Illinois Workers' Compensation Commission Operations Fund
24for the start-up funding and initial capitalization of the
25Illinois Employers Mutual Insurance Company. The Board of
26Directors of the Illinois Employers Mutual Insurance Company



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1shall make an application to the Director for the loans,
2stating the amount to be loaned to the Illinois Employers
3Mutual Insurance Company. The Illinois Employers Mutual
4Insurance Company shall repay the loans in full within 5 years
5after issuance, plus any interest that would have accrued
6thereon had the loan not occurred.
7(Source: P.A. 95-331, eff. 8-21-07.)
8    (215 ILCS 5/Art. XLVI heading new)

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



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



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1Company or its liabilities shall not be deemed to constitute a
2debt or a liability of the State or a pledge of the full faith
3and credit of the State.
4    (215 ILCS 5/1715 new)
5    Sec. 1715. Board of directors.
6    (a) The Company shall be managed by a 7-member board of
7directors. The board of directors shall be appointed by the
8Governor with the advice and consent of the Senate. For the
9initial set of appointments, 2 Board directors shall be
10appointed to a term ending July 1, 2018, 2 Board directors
11shall be appointed to a term ending July 1, 2019, 2 Board
12directors shall be appointed to a term ending July 1, 2020, and
13one Board director shall be appointed to a term ending July 1,
142021. All initial appointments shall be made by the Governor
15within 30 days after the effective date of this amendatory Act
16of the 100th General Assembly. Thereafter, all appointments or
17reappointments shall be a for a 5-year term ending on July 1 of
18the fifth year. The appointment and reappointment of Board
19directors by the Governor shall be subject to the provisions of
20Article 3A of the Illinois Governmental Ethics Act.
21    (b) A Board director appointed by the Governor must meet
22all of the following qualifications:
23        (1) he or she does not have any interest as a
24    stockholder, employee, attorney, agent, broker, or
25    contractor of an insurance entity that writes workers'



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1    compensation insurance or whose affiliates write workers'
2    compensation insurance;
3        (2) he or she is not the spouse or an immediate family
4    member living with a person who has an interest as a
5    stockholder, employee, attorney, agent, broker, or
6    contractor of an insurance entity that writes workers'
7    compensation insurance or whose affiliates write workers'
8    compensation insurance;
9        (3) he or she is a resident of the State of Illinois;
10        (4) he or she is of good moral character and has never
11    pleaded guilty to, or been found guilty of, a felony; and
12        (5) he or she is not a registered lobbyist under the
13    Lobbyist Registration Act.
14    (c) The Board directors shall elect a chairman from the
16    (d) The Board is vested with the full power, authority, and
17jurisdiction over the Company and may perform any necessary or
18convenient act in the exercise of its power. The Board shall
19discharge its duties with the care, skill, prudence, and
20diligence as that of prudent directors acting in a similar
21enterprise and purpose. The powers of the Board include, but
22are not limited to:
23        (1) the ability to enter into contracts;
24        (2) the purchase of reinsurance; and
25        (3) the declaration of dividends.
26    (e) The Board shall develop bylaws which shall be subject



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1to the restrictions set forth in this Article. The bylaws shall
2provide for a schedule of at least quarterly meetings and set
3forth rules specifically relating to the conduct of meetings
4and voting procedures.
5    (215 ILCS 5/1720 new)
6    Sec. 1720. Ratemaking. The Board shall have full power and
7authority to establish rates to be charged by the Company for
8insurance, subject to the applicable provisions of this Code.
9The Board shall contract for the services of or hire an
10independent actuary, who is a member in good standing with the
11American Academy of Actuaries, to develop and recommend
12actuarially sound rates. Rates shall be set at amounts
13sufficient, when invested, to carry all claims to maturity,
14meet the reasonable expenses of conducting the business of the
15Company, and maintain a reasonable surplus.
16    (215 ILCS 5/1725 new)
17    Sec. 1725. Guaranty fund. The Company shall be subject to
18Article XXXIV of this Code and shall pay any assessments
19required for members of the Illinois Insurance Guaranty Fund.
20    (215 ILCS 5/1730 new)
21    Sec. 1730. Chief executive officer.
22    (a) The Board shall hire a chief executive officer who
23shall serve at the pleasure of the Board. The chief executive



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1officer shall not be a member of the Board and must be
2qualified by education and experience to manage an organization
3with financial and operational obligations to policyholders
4and claimants. The compensation of the chief executive officer
5shall be determined by the Board.
6    (b) The chief executive officer shall be responsible for
7conducting the day-to-day operations of the Company, including
8the hiring of personnel. The chief executive officer shall also
9maintain an Internet website for the Company, which shall
10include information regarding the purchase of policies from the
11Company, as well as any reports required to be published under
12this Article.
13    (c) The chief executive officer shall present a proposed
14operating budget for the Company to the Board for its approval
15on an annual basis. The operating budget shall include a
16description of administrative and personnel costs.
17    (215 ILCS 5/1735 new)
18    Sec. 1735. Liability. The Board and its employees shall
19not be personally liable for acts performed in good faith,
20without the intent to defraud, and made in an official
22    (215 ILCS 5/1740 new)
23    Sec. 1740. Workplace safety plan.
24    (a) The chief executive officer shall formulate,



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1implement, and monitor a workplace safety plan for all
2policyholders. This plan shall include written guidance to
3reduce workplace accidents, prevent injuries, and promote safe
4working conditions. Each plan shall have clearly stated safety
5objectives for the policyholder.
6    (b) Employees of the Company shall have access to the
7premises of any policyholder for the purpose of examining the
8safety conditions of the workplace. The Company may terminate a
9policy if there is a refusal by the policyholder to permit
10on-site examinations by the Company or if the policyholder
11disregards or fails to comply with the safety objectives set
12forth by the Company in the workplace safety plan.
13    (215 ILCS 5/1745 new)
14    Sec. 1745. Investments.
15    (a) The Company shall formulate and adopt an investment
16policy that safeguards the value of all assets and maximizes
17investment potential. All investments by the Company shall be
18subject to the applicable restrictions for domestic mutual
19insurers set forth in this Code.
20    (b) The Company may retain an independent investment
21counsel who shall be subject to standards applicable to
22fiduciaries responsible for safeguarding the assets of a
24    (215 ILCS 5/1750 new)



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1    Sec. 1750. Dividends.
2    (a) The Company may declare a dividend in accordance with
3the requirements set forth in this Code.
4    (b) Dividends may be distributed in the form of premium
5discounts, dividends, or a combination of dividends and
7    (c) In addition to any requirements for dividends set forth
8in this Code, dividends may only be distributed if:
9        (1) the initial funding of the Company has been repaid
10    in full;
11        (2) an independent actuarial report of the prior year's
12    operations has been completed and reviewed by the Board;
13        (3) the Company has met all expenses for administration
14    and claims for the prior year; and
15        (4) adequate reserves exist to pay all claims.
16    (215 ILCS 5/1755 new)
17    Sec. 1755. Sale of policies. The Company shall administer
18the sale of policies for workers' compensation and occupational
19disease coverage. The Company shall utilize the Internet and
20other technologies to the greatest extent possible in order to
21facilitate the purchase of a policy for employers in this
22State. Policies of the Company shall not be sold by any
23insurance agent or broker licensed to sell workers'
24compensation insurance in this State.



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1    (215 ILCS 5/1760 new)
2    Sec. 1760. Auditing requirements.
3    (a) The Company shall be subject to all examinations and
4audits required under this Code.
5    (b) The Board shall retain a competent and independent firm
6of certified public accountants to perform an annual audit of
7the performance and management of the Company and an audit of
8the accounts, funds, and securities of the Company. The costs
9of these audits shall be paid for by the Company. The audits
10shall be published on the Company's Internet website.
11    (215 ILCS 5/1765 new)
12    Sec. 1765. Annual report.
13    (a) On August 1, 2017, the Board shall prepare and submit a
14report to the Governor, the President of the Senate, the
15Minority Leader of the Senate, the Speaker of the House, and
16the Minority Leader of the House. This report shall describe
17the progress of the Company to date in establishing its
18operations as a domestic mutual insurance company in this State
19providing workers' compensation and occupational disease
20coverage. This report shall include the information required in
21subsection (b) of this Section, if available.
22    (b) Beginning July 1, 2018 and continuing every July 1
23thereafter, the Board shall prepare and submit a report to the
24Governor, the President of the Senate, the Minority Leader of
25the Senate, the Speaker of the House, and the Minority Leader



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1of the House. This report shall contain, at a minimum, the
2following information:
3        (1) a summary of the most recent audits performed
4    pursuant to Section 1760 of this Code;
5        (2) statistical and actuarial data related to the
6    determination of premium rate levels; and
7        (3) the incidence of work-related injuries and costs
8    related to those injuries.
9    (c) The reports required under this Section shall be
10submitted electronically and posted on the Internet website of
11the Company.
12    Section 99. Effective date. This Act takes effect upon
13becoming law.



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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