The Illinois House has passed a bill that would set up a public insurer for the residual market, which a national insurance group has already blasted as a bad idea.

Rep. Laura Fine

"Putting the state in the workers' compensation business is the wrong idea at the wrong time," said Steve Schneider, Midwest vice president of the American Insurance Association.

Illinois Republican Gov. Bruce Rauner vetoed a similar bill last year and is expected to do so again if HB 4595 makes it to his desk. The bill, sponsored by state Rep. Laura Fine, D-Glenview, passed the House 62-43 Thursday, but has not seen action in the Senate.

The bill would create a public insurer to address the troubled market of last resort, for employers who can't obtain affordable workers' compensation insurance from commercial carriers. The bill would do this in part by requiring the Department of Insurance to lend $10 million from the Workers' Compensation Commission operations fund to create the Illinois Employers Mutual Insurance Co. 

"While the bill provides that the loan be repaid within five years, there is no guarantee the company will be able to maintain the requisite cash balance to repay," reads the legislature's fiscal analysis of the bill.

The Insurance Association said it has little faith in state government to handle the job.

"Illinois has the most competitive workers' compensation insurance marketplace in the country — 323 insurers currently compete for business across the state," Schneider said. "There is simply no need for the government to enter the market."