Workers’ comp ‘business boost’ could backfire

Bill Knight column for Mon., Tues., or Wed., May 25, 26 or 27

Illinois’ first-term Republican Gov. Bruce Rauner wants to make the state “more competitive” but neglects the everyday people who actually produce the state’s goods and services. One scheme is to cut workers’ compensation costs by making its victims prove that on-the-job accidents are more than 50 percent responsible for injuries, and cutting fees to doctors, hospitals and pharmacies by 30 percent.

In his February State of the State address, Rauner advocated such ideas as “much-needed reforms that address the shortcomings of the workers’ compensation law that was passed in 2011.”

That law featured a previous 30-percent cut to medical providers in the state's worker’s comp fee schedule, but advocates say such savings weren’t passed along from insurers to employers.

That reform saved $315 million, but business wants more -- $500 million, which former Gov. Pat Quinn had estimated. The independent National Council on Compensation Insurance reported that workers’ comp premiums should have fallen 20 percent, so Illinois AFL-CIO president Michael Carrigan said employers may have a point, but he said it’s not victims’ fault, it’s the insurance industry, which generally sets its own rates and pocketed hundreds of millions in savings instead of passing them along to policyholders.

Meanwhile, House Speaker Mike Madigan (D-Chicago) warned, “Proposals to change the compensation received by men and women injured at their workplaces will have a significant impact on the financial security of middle-class families throughout Illinois. Changes that limit workers’ ability to provide for their families if they are hurt on the job will have an adverse ripple effect throughout our economy.”

So Rauner’s business boost could backfire.

Not the worst in workers’ comp costs, is seventh nationwide for costs per $100 of wages, according to a report from Oregon’s Department of Consumer and Business Services. Illinois’ index rate is better than California, Connecticut, New Jersey, New York, Alaska and Oklahoma, for instance. Further, Illinois’ rate is comparable to 11 other states, including Vermont, Delaware, Louisiana, Montana and Pennsylvania.

At stake is worker’s comp as an “exclusive remedy,” a century-old deal where victims can’t sue for damages except in special cases where product liability can be proved. Administered by each state, the social contract has workers relinquishing the right to sue for negligence and employers agreeing to buy insurance to pay victims’ medical bills and lost wages. That protects companies from large punitive awards from civil suits, but workers surrender their day in court.

One shortcoming is that benefits don’t fully compensate victims. In Illinois, the rates typically are two-thirds of lost wages besides medical expenses, capped at the state’s average weekly wage. Therefore, someone earning yearly pay of $95,000 would be limited to $1,005.80 per week, according to the state Department of Employment Security. That’s $52,301.16, not two-thirds of $95,000 ($62,700).

Also, compensation for the loss of a finger or limb, sight or hearing also are limited, from 22 weeks (a little finger) to 215 weeks (a leg), although the losses are for life. There are no cost-of-living adjustments, either, so victims eventually may have to turn to Medicare, Medicaid and Social Security to get by.

Before workers’ compensation, employers could be sued but had to be proven to be negligent, and companies had three main defenses: blame the victims (“contributory negligence”), the job itself (“assumption of risk”), or other workers (“fellow servant”). Still, there were risks that juries would be sympathetic and that legal costs would be substantial even if companies prevailed at trial.

Today, workers’ comp is another target of some corporations looking to maximize profits by cutting labor costs, from pensions and unions to pay and benefits.

A common corporate criticism of workers’ comp mirrors conservatives’ condemnation of food stamps or other social programs – even voting: fraud. However, research has shown that workers’ comp fraud is less than one-half of 1 percent. Robert Stern of the Washington AFL-CIO said, “In every study that has been done on fraud in workers’ compensation, employer, insurer and provider fraud are found to be a dramatically greater problem than claimant fraud.”

Even the Occupational Safety and Health Administration (OSHA) recently said, “Changes in state-based workers’ compensation insurance programs have made it increasingly difficult for injured workers to receive the full benefits to which they are entitled. Employers now provide only a small percentage (about 20 percent) of the overall financial cost of workplace injuries and illnesses.”

Lastly, Rauner’s demanding workers’ comp cutbacks before he’d compromise on a budget, a minimum-wage increase or tax reform.

“I don't think that our budget process ought to be held hostage given the time that we put in four years ago,” commented State Sen. Kwame Raoul (D-Chicago).

[PICTURED: Illustration from nexislexis.]