The truth behind workers’ compensation in Illinois
By DAVID JEROME
Recently, the Illinois Policy Institute released a report titled, Workers compensation estimated to cost Illinois taxpayers nearly $1 billion per year (Illinois Business Journal, May 2017). This report is clearly propaganda created by a GOP-led organization that has been utilized by Gov. Rauner to further his pro-business agenda at the cost of the injured worker.
The report complains about the monetary payments required for the state and local municipalities to cover its employees with workers’ compensation insurance. However, the report fails to note that the workers’ compensation scheme was originally created at the request of employers to create civil immunity and remove the option of injured workers’ being able to sue their employer in civil court. This in turn has significantly reduced the employers’ liability and created cost certainty as injured workers’ benefits are limited to medical treatment, paid pursuant to a medical fee schedules, and a scheduled table of loss that dramatically reduces the recovery. Non-economic issues such as pain-and-suffering and loss of consortium are specifically excluded by employees who are injured at work.
Further, the report also fails to acknowledge that the state and local municipalities are serving in the role of an employer and therefore are responsible for providing the same workers’ compensation insurance required by law as that of private employers. As such, the state and local municipalities are subject to and must avail themselves to the same laws required by private employers. It should be noted that state and local municipalities have the option of subcontracting many of the projects which in turn would transfer the cost of such insurance to the employer. However, it is improper to argue that simply because the employer is a state or local municipality that they should somehow be exempt from insuring the costs associated with the injuries stemming from work accidents caused by their employment.
The report also misquotes portions of the current Workers’ Compensation Act and shows little understanding of the current form of the act as well as the amendments that were completed in 2010. As it relates to medical bills, bills are paid through a medical fee schedule that places strict limits on the amounts that can be charged for service. In 2010, the amounts that could be charged for service were dramatically reduced. In 2016, the Department of Insurance Oversight Report showed that medical payments decreased 6.7 percent between 2012 ($643 million) to 2016 ($600 million). In October 2015, Crain’s Chicago Business reported that medical payments had fallen nearly 15 percent and that the average medical payment per claim in Illinois had fallen below that of Indiana (23 percent lower), Wisconsin (18 percent lower) and Iowa (9 percent lower).
Further, in response to these allegations of runaway costs, the report recommends alterations to the current Workers’ Compensation Act to try to reduce compensable cases as well as to reduce the amounts paid in indemnity. The report’s stated purpose is to make Illinois more business–friendly when compared to our surrounding states. This argument sounds identical to that which is currently being made by Gov. Rauner in his mandates that he is requiring before considering negotiating a budget. However, this argument falls hollow as it fails to take into account the significant reductions already caused by the changes that occurred with the amendments in 2010.
According to NCCI, the official ratings organization, workers’ compensation loss cost decreased by over 26 percent following the Illinois amendments in 2010. Similarly, according to an Oregon study, the Illinois Worker’s Compensation index rate decreased by over 26 percent since 2010. The reductions were not simply for medical costs but also indemnity decreased anywhere from 11 percent to 32 percent since 2010. These reductions in indemnity were measured and identified in a 2016 oversight report from the Illinois Department of Insurance. If one were to simply isolate the final settlement dollars (indemnity), the decrease has been even greater, at 32.2 percent decrease.
As a result of all of these reductions from the amendments made in 2010, the National Academy of Social Insurance ranked the state of Illinois as being 21st in the nation for workers’ compensation premiums. It should be noted that being placed in the middle of the states is exactly where a state should be. If premiums are too low, it means that an inordinate number of cases are being denied or benefits being inappropriately paid. In such scenarios, alternate state medical insurance (Medicare or Public Aid) would have to pick up the medical costs associated with these injuries. Alternatively, if premiums are too high, it discourages business to come to the state. Being ranked in the middle places the state of Illinois in a competitive position to draw new businesses while not increasing taxpayers’ responsibility for funding alternate medical insurance for injuries that should be covered under the Workers’ Compensation Act.
It should be noted that the author makes several factually incorrect statements regarding the benefits paid to injured workers. The author incorrectly believes that when an injured worker is taken off of work, he/she receives 100 percent of their wages tax-free. This is factually incorrect as the Workers’ Compensation Act limits lost time benefits to two-thirds of the injured worker’s pre-accident wages. Further, the author seeks to tie medical bills into the rates paid by the group carrier. In many instances the medical fee schedule is actually below that of many group carriers. Additionally, the act can limit the allowable amounts under the fee schedule to those charged by the employer’s group carrier. As result, many of the author’s requested changes are already present in the act.
In conclusion, the report appears to be propaganda as it clearly misuses information to draw the conclusion that further modifications are required under the Workers’ Compensation Act. However, the report fails to consider the significant reductions in the amounts of medical bills and indemnity payments made since the 2010 amendments. As has been noted by several evaluating agencies, the state of Illinois ranks 21st in the nation and places it in a desirable place relative to its premiums.
David Jerome is a partner with the law firm of Brown & Brown. He has represented employer/insurers as well as injured workers’ during his 22 years of practice that has been limited exclusively to workers’ compensation matters.