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Legislative Action

Workers' compensation moves back to Mansion


In 1987 representatives of the state's business and labor communities convened at the Executive Mansion to hammer out improvements in Illinois' unemployment insurance and workers' compensation systems. Their work on the unemployment insurance issue came to fruition that November. They reached agreement on revisions designed to keep the system solvent and to preclude the need to borrow from the federal government. The General Assembly passed that agreement into law. No agreement was reached back then on changing the workers' compensation system.

Workers' compensation makes medical payments for and replaces wages lost by workers injured on the job or who become ill because of their jobs. It makes payments for temporary and permanent and for full and partial disabilities. Most Illinois employers are required either to purchase the insurance or to self-insure for the coverage. The Illinois Industrial Commission oversees self-insurance plans and acts to resolve disputes between employers and employees over claims. The current system has been criticized by organized labor as being too slow in compensating workers and by business as being too expensive.

Jeffrey C. Miller, Gov. James R. Thompson's chief of staff, conducted the unsuccessful 1987 negotiations on workers' compensation. "People could not agree on even the most fundamental facts, characteristics or attributes of the Illinois system, and it became increasingly clear that we needed to bring in somebody acceptable to both sides to give us a factual underpinning for future debate," Miller recalls.

For the facts the state turned to John H. Lewis, a Florida lawyer and an expert on workers' compensation. Lewis was paid $150,000 to study the
Workers' compensation system administration funding, selected states
($ in millions)
 Covered work forcebudget
New York6,800,00063.3
No. Carolina2,000,0003.2
Source: "The Illinois Workers'
Compensation System: A Report to the Governor."
Illinois system. His 150-page report was released on March 13.

His report drew rave reviews from both business and labor. Or rather parts of it did, different parts for different interests. Robert G. Gibson, president of the Illinois State Federation of Labor, commended the study and cited findings that the Illinois Industrial Commission is understaffed and underfunded and that workers' compensation costs are below the average of other states in the nation. "I hope that, once and for all, this study's worker compensation cost findings will put a stop to the anti-Illinois rhetoric of some employer associations on the worker compensation cost issue," Gibson said.

But while Gibson found evidence in the report that workers' compensation costs are low, the business community found support for its contention that they are high. Jay Dee Shattuck, chief operating officer of Associated Employers of Illinois, contended, "Mr. Lewis's findings indicate that workers' comp costs for Illinois employers are high when compared to our neighboring states which are our principal competitors for retaining and attracting business."

Despite the conflict Miller thinks the Lewis study will help resolve the impasse, by focusing the debate on whether Illinois' costs should be at the national or the regional average.

The Lewis study criticized the lack of available data for workers' compensation cases in Illinois. Without the data, policy decisions cannot be made. Lewis uses the example of the initial report of injury filed with the Illinois Industrial Commission: "If anyone wishes to learn anything from these reports, such as the kinds of cases involved, who was involved, what types of injuries occurred, whether the reports are filed on time, etc., they need to go to the Commission and receive permission to look through a large number of cardboard boxes because in fact the Commission, due to lack of resources, does nothing with the first report of injury. As a result, it does not have even the most basic information concerning workers' compensation injuries in Illinois."

Lewis also notes that the Industrial Commission only has data on cases that come before it. Those settled between employee and employer or insurance company without appeal to the commission need not be reported. And Lewis says data that is collected is not reliable because of inadequate personnel and a poor computer system. "The system has not had proper maintenance for either software or hardware for a considerable period of time," the report says.

Lewis relies on national data for interstate cost comparisons. Looking at the benefits authorized by workers' compensation statutes, he finds Illinois high. Average potential benefits here are $17,902, seventh highest among the 48 contiguous states and 77 percent above the national average.

But high statutory benefits do not correlate to high employer costs and high employee benefits. Using data from the National Council on Compensation Insurance for 45 states that report to it, Lewis found the cost to employers who purchase insurance that makes cash payments to workers was 84.2 percent of the national average. It was higher, however, than all adjacent states. More markedly, the cost of medical benefits was 61.9 percent of the national average, but it was higher than in Indiana, Iowa and Wisconsin. Adding the cash and medical benefits. Illinois stood at 75.7 percent of U.S. averages, again still higher than all adjacent states but Kentucky.

April 1989 | Illinois Issues | 22

Lewis similarly compares benefits paid to those in other states and breaks them down by industry. The pattern has Illinois at or below national averages but above the averages for surrounding states. The exception is the construction industry, where Illinois' employer costs exceed the national averages by 25 to 30 percent.

Turning to the Illinois Industrial Commission, the agency that runs the workers' compensation system, Lewis terms it an "industrial injury court" because, except for overseeing the 500 employers who self-insure workers' compensation, the commission's sole function is to resolve disputes. In other states the commission's sister agencies enforce coverage, provide safety information, do medical cost-containment, identify candidates for vocational rehabilitation, collect data and assist parties in filing claims. Because the commission has a relatively limited role in Illinois, Lewis says, it operates with a small budget. Two years ago Gov. Thompson proposed to boost the Industrial Commission's annual budget from $5 million to $7.5 million, to help it catch up on some of its backlog. Giving it the kinds of new responsibilities that Lewis proposes would take even more money.

Lewis also looks at delivery of benefits, comparing practices in Illinois to an ideal under which benefits are paid routinely from the beginning until the resolution of the claim. In one-third of a sample of cases that arose in a two-week period more than 14 days elapsed between injury and first payment. "The data raise the real possibility that many injured workers do not receive their first temporary total disability payment until well after their last paycheck," the study notes.

The study also illustrates that attorney involvement is more prevalent in Illinois cases than in other states. Lewis says this is to be expected since an unrepresented claimant would be greatly handicapped, given the complexity of the laws. He extrapolates that legal and court fees may account for 14 percent of the benefits paid by the workers' compensation system in a year.

Lewis also criticizes the speed at which cases are handled. Initial attempts to resolve disputes by the 21 arbitrators who work for the commission proceed reasonably quickly, the Lewis report concludes. The delay comes when the arbitrators' rulings are appealed to the commission, an occurrence in 70 percent of cases. The reviews by the commission take another two years.

Lewis found that Illinois has more persons on permanent partial disability (the loss of an arm, a leg, an eye) than the national average, but their benefits are below those same averages.

Other options raised (Lewis carefully avoided recommendations) in the report include:

  • Revision of a current rule that says that no more than two years may have elapsed since last exposure and onset of the disability. "The last exposure rule is patently inadequate for workers who develop diseases that involve long latent periods," Lewis says.
  • Consideration of some mediation process in cases where petitioners do not see the need for litigation.
  • Getting the state into the workers' compensation business either in place of or as a supplement to private insurance carriers.

Employers' costs of workers' compensation insurance

 Costs per $100 of payroll State's costs as a percentage of U.S. average Rank
Illinois$ 1.89189.4 %24
Indiana.61128.9 %47
Iowa1.31762.2 %37
Kentucky2.530119.6 %10
Missouri1.28960.9 %38
Wisconsin1.51871.7 %33
Contiguous state average1.35363.9 %
California3.415161.4 %4
Florida2.567121.3 %15
Massachusetts1.85187.5 %25
New Jersey1.50871.3 %34
New York1.64777.8 %31
No. Carolina.92543.7 %46
Pennsylvania2.451115.8 %12
National average2.116100.0 %
Source: "The Illinois Workers' Compensation System: A Report to the Governor."

Released at the same time as the Lewis report were the recommendations of the Governor's Workers' Compensation CEO Advisory Committee. The five businessmen noted that the state's workers' compensation costs were high compared to the neighboring states with whom Illinois competes for jobs. The CEO's recommendations included establishment of a viable data collection system, reduced litigation, clearer guidelines for arbitrators and commissioners, adequate funding for the commission and consideration of an early mediation process.

There has been no dearth of studies of the workers' compensation system lately. The Coalition for Consumer Rights, whose members include the trial lawyers, in December released conclusions similar to those of Lewis. They found Illinois' workers' compensation costs to be average and the Industrial Commission greatly underfunded. Their study also recommended extending coverage to all farmworkers and extending from two to 25 years the period during which a claim could be brought for occupational disease caused by exposure.

A few days after the report from the Coalition for Consumer Rights, the Illinois State Chamber of Commerce released its own study. It, too, found the Industrial Commission underfunded. The chamber also wanted better training for arbitrators and clearer authority for the commission.

Expect more reports. Any talk of limiting litigation or putting Illinois in the insurance business will bring other parties into play. Changes on that scale would affect lawyers and insurance companies, who have considerable legislative clout.

But the main parties remain labor and business. They agree on some aspects of reconfiguring the system but disagree on others. For example, both would better fund the Industrial Commission. Business would use general funds, labor an assessment on insurance premiums. Despite differences, Jeff Miller sees prospects for success. "I think there's a recognition on both sides that the system is badly in need of change." To pass changes will require agreement on a single bill. To reach compromise will take plenty of sessions at the Mansion. □

April 1989 | Illinois Issues | 23

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