Illinois has the most expensive workers’ compensation system in the Midwest, and it’s not just private companies, but also taxpayers who pay for it.
Illinoisans are paying $982 million annually in workers’ compensation costs for state and local governments.
The majority of these costs come from the local level, totaling $727 million; the remainder comes from state-level payouts worth $255 million. Not only is Illinois’ system costly, but it’s also outdated compared with other states. Workers’ compensation was originally designed to remedy high-risk workplaces by providing medical care and income replacement to injured workers. Unlike other states that have implemented reforms such as light-duty work programs, Illinois’ system has not evolved to stay cost effective and is ill-suited for the modern workplace. To make matters worse, these rules are driving employers out of the state, shrinking the pool of jobs available to Illinoisans.
Illinois’ pricey workers’ compensation policies are costing the state blue-collar jobs. Mark Selvaggio, president of Springfield-based Selvaggio Steel, has said he could hire more workers if Illinois’ business climate were different and if Illinois had the same workers’ compensation policies as Indiana. Selvaggio said his small company would save $60,000 a year in workers’ compensation alone if Illinois had Indiana’s workers’ compensation costs.
One of the biggest drivers for Illinois’ local workers’ compensation costs is the sheer number of local government units in Illinois. The Prairie State has nearly 7,000 units of local government, the most of any state in the country and more than Wisconsin and Michigan combined. Having this many units of government drives up payroll, and by extension, workers’ compensation costs. Many of these units of local government are ripe for consolidation. Often, these local government bodies are inefficient and redundant. In Illinois the average unit of local government serves only 1,843 residents, while local government units in Ohio serve an average of more than 3,000 people.
Other factors driving up Illinois’ workers’ compensation bill are Illinois’ workers’ compensation laws, which impose expensive requirements in general and specifically for government workers’ injuries. Court rulings regarding Illinois workers’ compensation issues also make the system expensive: In some cases, judges have extended workers’ compensation to situations not normally covered in other states.
Reforming a broken system
By rolling back costs to the levels in neighboring states, the state government would save $75 million, and local governments would save $190 million, totaling an estimated savings of $265 million annually.
To cut down on these costs Illinois could implement several commonsense reforms that other states have passed. Reforms would include limiting Illinois’ maximum wage-replacement rate to 100 percent of the state’s average weekly wage, and tying the medical fee schedule to Medicare reimbursement rates or private insurance reimbursement rates. State and local governments could also save money by implementing light-duty work programs that would not interfere with an injured worker’s recovery.
Another reform that would cut costs would be limiting physician dispensing to the first few days after an injury. This little-known loophole in Illinois’ workers’ compensation system is being used to exploit vulnerable workers for personal profit, at the expense of workers’ health. Not only would this save money for state and local governments, but it would also help in the fight against the growing opioid addiction epidemic by removing a financial incentive for unscrupulous doctors to overprescribe painkillers.
The need to address the high price of workers’ compensation costs is more urgent than ever. These high costs come at a time when the state can least afford it. Illinois faces nearly $13 billion in backlogged bills, $267 billion in unfunded pension and retiree health care liabilities, and a nearly $8 billion deficit. And information from the Commission on Government Forecasting and Accountability shows Illinois is losing revenue. Overall base revenue for February 2017 is down a whopping $423 million. Now more than ever, the Land of Lincoln needs to implement smart reforms that save taxpayer dollars.