In the early part of the last century, the only legal remedy for a worker injured or killed on the job was to bring a lawsuit against his or her employer to recover medical bills and lost pay. It was a lengthy and expensive process for both those who were hurt and businesses.
Looking for a solution, employers and workers came to a “grand bargain” under which employers agreed to compensate injured workers for medical expenses and lost wages. Workers, for their part, forfeited the right to take employers to court over job-related injuries.
Each state thereby enacted its own workers’ compensation system aimed at protecting both injured workers and employers.
These days, however, states are abandoning that mutual agreement. In re-engineering workers’ comp laws to lower costs for employers, they’re sacrificing protections for injured workers.
In Illinois, a 2011 overhaul came at the urging of business and insurance companies. Lawmakers rewrote the statute to cut costs for insurers and employers while injured workers gave up longstanding rights based on the understanding that the insurance industry would pass along savings to employers through premium rate reductions. But while costs dropped dramatically for insurers, the insurers did not pass those savings along. They instead pocketed enormous profits.
The National Academy of Social Insurance, a non-profit, non-partisan organization made up of the nation’s leading experts on social insurance, recently examined the trend in Illinois following the 2011 workers’ comp rewrite. Clearly, the report shows, workers’ comp costs here have declined substantially.
Total benefits paid to medical providers and compensation paid to injured workers dropped 19.3 percent between 2011 and 2015. This was the second largest drop of overall costs in the country during that time. Throughout the rest of the U.S., NASI reported, such costs actually increased by 2 percent.
Medical costs here fell 23.3 percent, representing the steepest reduction in the U.S., during the five-year period. Illinois also experienced the third largest decrease in benefits paid, compared to payroll, and the tenth largest reduction in employer costs during the same time frame.
Though employers here have yet to realize the full benefit of the 2011 overhaul, because insurance companies are banking the savings as profit, NASI found that employer workers’ comp costs grew at a much lower rate in Illinois as compared to other states – 3.8 percent here versus 21.6 percent elsewhere.
A co-author of the NASI report said of the experience here: “In 2011, workers’ compensation benefits paid per $100 covered wages were 10 percent higher in Illinois than in the rest of the U.S.; in 2015 they were 13 percent lower. Costs to employers (per $100 covered wages) were 8 percent higher in Illinois in 2011; in 2015 they were 5 percent lower.”
Meanwhile, the profits of workers’ comp insurers in Illinois have grown significantly. In 2015, they had a profit margin of 17.2 percent, generating nearly a half a billion dollars.
Cries from the business and insurance industry for deeper cuts to the benefits received by injured employees, punctuated with false claims that businesses avoid Illinois because of our workers’ compensation costs, are nothing more than a ploy to pressure lawmakers into stripping what remains of workers’ rights.
The truth is, Illinois is good for business. It’s home to 36 Fortune 500 companies – only three other states have more. And according to the U.S. Department of Commerce, we are ranked fifth in the country for gross domestic product.
Illinois is especially attractive for insurers. There are 332 insurance companies writing workers’ comp policies here – more than in any other state. They come here precisely because there is little oversight and the laws favor their interests over those of seriously injured workers and their employers.
The 2011 workers’ comp rewrite is producing the intended result of cutting costs. If there is another revision, it must focus on insurance companies and the unjust premiums they charge business owners.
Deeper benefit cuts for injured workers, diminished medical reimbursement and denied claims only will boost insurance industry profits while shifting the cost of caring for injured workers onto the backs of taxpayers through Medicaid and other publicly funded programs.
That is a proposition that neither the worker nor the Illinois taxpayer can afford.
John P. Scanlon is president of the Illinois Trial Lawyers Association.
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