Battling over workers’ comp

 The state workers’ compensation system is being eyed for changes as part of a possible resolution to Illinois’ budget crisis, setting up a battle between employers, injured workers and the doctors who treat them.

A recent report says the cost of workers’ compensation for employers decreased because of changes made in 2011, but business groups say they need further changes that irk both medical providers and attorneys representing injured workers. Republicans in the Illinois Statehouse are pushing for changes to workers’ compensation, one of few issues on which Democrats appear willing to compromise as a path to a budget deal. Gov. Bruce Rauner included workers’ compensation reform as part of the Turnaround Agenda he insists on having before he will agree to a budget deal.

Workers’ compensation is a state-regulated system in which employers pay insurance premiums to cover treatment for workers injured on the job. Each state’s system is different in terms of payouts for injuries and requirements for proving injuries are work-related.

In 2011, citing costs higher than most other states, Illinois lawmakers made several changes to the system, including reduced reimbursement rates for medical providers by 30 percent and implementing “utilization review” to allow insurance companies to control costs.

The Workers Compensation Research Institute, a nonprofit research organization based in Massachusetts, studied the effects of the 2011 changes in Illinois and released a report in April which found that the average total cost per claim has decreased 8 percent since 2011. The largest factor in that decrease was reducing the amount medical providers are paid for treating injured workers, the report notes, adding that medical payments per claim have dropped nearly 17 percent since 2011.

Mark Denzler, vice president of the Illinois Manufacturers’ Association, says Illinois still ranks seventh in the nation for employer costs within workers’ compensation. He says that’s an improvement from being third nationwide before the 2011 changes, but not nearly enough to make up for changes in 2005 that increased certain benefits. Before the 2005 changes, Denzler says, Illinois ranked 23rd.

Denzler points to an annual study published by the Oregon Department of Consumer and Business services, which compares states on the basis of what an employer pays into workers’ compensation for every $100 of payroll. The national average, according to the study, is $1.85 paid for every $100, but Illinois employers pay $2.35 on average. He notes that in manufacturing and other dangerous industries, the cost can be as high as $8.

Perry Browder, president of the Illinois Trial Lawyers Association, says wages are a major factor in what employers pay because wages largely determine workers’ compensation benefits. Illinois workers enjoy comparatively higher wages than workers in many other states, Browder says, so it’s natural that benefits – and thus workers’ compensation costs – would be higher here.

Browder says the real problem is that insurers writing workers’ compensation policies aren’t passing savings they reaped from the 2011 changes along to employers. An ITLA memo from January says insurers have reported a 19 percent decrease in benefit payments since 2011, and Illinois had the largest decrease in premiums of any state during that time. Browder wants lawmakers to examine profits among the roughly 300 workers’ compensation insurance companies operating in Illinois before any changes are made which might negatively affect workers.

Denzler says it’s an “absolute ridiculous argument” to blame insurers. He says the 2011 changes applied to both companies buying workers’ compensation insurance on the open market and companies which are self-insured, but even self-insured companies aren’t seeing significant savings. He adds that it’s a “long leap” to allege 300 insurers are colluding to keep savings from employers.

Although no specific legislation on workers’ compensation has been released by lawmakers attempting to hammer out a budget deal, there are a handful of issues being considered.

Workers already must show that an injury arose from their job, but Denzler says the degree to which the job contributed to the injury isn’t considered. To address that, Gov. Bruce Rauner has called for a “causation standard” so that an employer isn’t liable unless more than 50 percent of a worker’s condition is attributable to their employment. Attorneys for injured workers say that could make it difficult for workers to prove their case and be compensated.

Rauner has also called for implementation of the American Medical Association’s guidelines for partial permanent disability, which describe a range of impairment for various injuries, such as a torn rotator cuff. Business groups say that would reduce subjectivity by doctors, but trial lawyers say the guidelines are too strict because they don’t account for whether an injury actually affects job performance.

While lawmakers in 2011 reduced by 30 percent what medical providers can be paid for treating injured employees under the workers’ compensation system, some medical services in Illinois remain more costly than in other states – in some cases nearly four times what Medicare pays for comparable services. Business groups are pushing for further reductions in what’s known as the “medical fee schedule” to limit medical costs to employers. That’s likely to prompt resistance from doctors, which fought the 30 percent reduction in 2011.

Jay Shattuck, executive director of the Employment Law Council for the Illinois Chamber of Commerce, says reaching a compromise on workers’ compensation is critical to fixing the budget crisis. That’s because any budget deal will likely involve a tax increase, and employers want to know their increased taxes will be offset by savings on workers’ compensation.

Shattuck says businesses have an interest in protecting worker benefits because injured workers can’t do their jobs.

“Employers are not interested in taking away benefits from legitimately injured workers,” he said. “We just want to make sure employers are treated fairly.”

Browder says workers’ compensation shouldn’t be tied to the budget process in the first place.

“There certainly aren’t any savings in workers’ compensation that are going to balance the budget,” he said.

Contact Patrick Yeagle a [email protected].