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High costs of work comp driving business out of Illinois, experts say

From the Madison Record – For organizations that advocate on behalf of business in Illinois, there’s no question – the high cost of workers’ compensation will continue to have dire consequences for the state and its economy.

Mark Denzler, vice president and chief operations officer of the Illinois Manufacturers’ Association, contends that Illinois’ seventh-place spot in the Oregon Workers’ Compensation Premium Rate Ranking Summary is a detriment to businesses, specifically manufacturers that want to either locate or expand in the state.

Denzler and others at IMA talk to business owners and managers each week who say they consider the high cost of workers’ compensation in Illinois a significant factor.

“There have been a number of notable companies that have left, including Modern Forge, a 100-year-old company in Blue Island that moved across the border into Indiana and cited the fact that workers’ compensation costs cost them about $5-to-$6,000 more per year in Illinois than it did in Indiana,” he said.

Denzler adds that companies close to the Illinois border have an incentive to move once they compare their costs to those in neighboring states. According to the Oregon study, published in 2014, employers in Illinois pay $2.35 per $100 of payroll for workers’ compensation. The national average is $1.85.

“And particularly when you look at manufacturing and construction, which are higher risk jobs, our costs go to $7 or $8 for $100 of payroll,” he said. “It’s a significant cost factor for businesses.”

Other organizations, including the Illinois Trial Lawyers Association, have a different perspective – workers in Illinois are treated fairly and decently, and it should stay that way.

“We don’t believe in a system that makes it cheap to injure workers,” said Christopher T. Hurley, the president of ITLA and founding partner of Hurley McKenna & Mertz, a personal injury firm in Chicago.

Hurley contends that in Illinois, a laborer earning $15 per hour can lose his leg due to the gross negligence of his employer and only recover about $75,000. In his 35 years of representing injured workers, he says, he has seen employers risk the loss of a worker’s limb rather than fix a defective machine.

“There are special interests that would not want to pay anything for that kind of disability injury,” Hurley said. “Those people want to take us back to the 1900s when laborers had no rights and life was cheap.

“Illinois deserves employers that believe in basic safety and care about their workers.”

Business advocates and public policy experts argue that getting Illinois in line with other states would help workers by retaining and attracting employers and increasing middle class jobs.

Michael Lucci, vice president of policy at the Illinois Policy Institute, points out that reforms to the Illinois Workers’ Compensation Act in 2005 included an approximately 7.5 percent increase in indemnity payments provided for certain injuries.

He explains that this is measured by the number of weeks of wages that should be awarded, so, for example, an award for a thumb injury was increased from 70 weeks of wages to 76 weeks of wages.

“Illinois across the board values a number of injuries higher than almost every state in the country —way higher than almost every state in the country,” Lucci said.

According to an April 2016 study by the Workers Compensation Research Institute, indemnity benefits per claim in Illinois were higher than those in most other study states. The average indemnity benefit per claim in Illinois was $21,187. The median state was $18,020.

Lucci adds that the majority of states have tied their medical fee schedules to Medicare, and as a result, the cost for the same surgery can be 200-to-300 percent higher in Illinois than in other states.

“We think there would be value in Illinois looking in that direction,” he said. “We need to put our medical fees in line with other states and put them in line with what they are for non-workers’ compensation procedures.”

Another WCRI study from 2015 shows that workers’ compensation fee schedule rates for professional services in Illinois in 2015 were on average 69 percent above the Medicare rates for the same set of services in the state.

Shuaib Ahmed, founder and managing attorney of ASA Law Group in Oak Brook, Ill., who practices workers’ compensation defense, contends that it’s also not surprising that Illinois has one of the longest average durations of temporary total disability.

WCRI shows that the average duration was 21 weeks in Illinois, which was higher than 14 weeks in the median state.

“I think indemnity is something we have to address in terms of reform,” Ahmed said. “Maybe Illinois needs to revisit the maximum rates or put caps on how long someone can get TTD.”

He maintains that it’s important to make changes that bring Illinois closer to other states in terms of costs and practices, because, otherwise, businesses will have no incentive to stay.

“There is such a disparity between costs affiliated with being in Illinois, versus picking up your stuff and going across the border where your workers’ compensation costs go down,” Ahmed said. “We have to be close to these border states and median states, so we remain competitive and so we can retain businesses here and build our economy.”

Ahmed adds that the business community needs to get more involved in calling for changes in workers’ compensation. He says that when bills are introduced and the public gets the chance to offer input, business owners and managers are not always stepping forward and pushing for legislation.

“What you have are people who are the special interests, lobbyists and people like that, who really don’t have much of an understanding of workers’ compensation,” he said. “They’re not involved in the day-to-day business, and seeing how it’s personally impacting employers.

“It has to start with employers getting involved in the process.”