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* From Gov. Bruce Rauner’s State of the State Address…
The cost of worker’s comp is the biggest factor driving our job losses. If we simply aligned our workers’ comp costs with those of a state like Massachusetts – which is hardly a bastion of conservatism – we can save state and local taxpayers over $300 million per year, while protecting those who suffer workplace injuries, and grow more careers at higher wages.
* State Sen. Daniel Biss writing in Crain’s…
Rauner loves to talk about the economic success that Texas has experienced, and he has a point. Texas has had robust job growth, and its unemployment rate is only 4.7 percent—while Illinois’ is more than a point higher. These are achievements Texas should be proud of. But it must be noted that Mississippi has a higher unemployment rate than Illinois, and so do several other conservative states. Guess what else. Texas has a poverty rate of more than 16 percent—the fifth-worst in the country. Illinois’ poverty rate is 11.5 percent, putting us roughly in the middle of the pack.
In other words, although Texas’ achievements are real, they come at a huge cost: Lower wages, less regulation and a weaker safety net are causing poverty to rise and the middle class to shrink.
And while the anti-worker policies of the far right might have contributed to Texas’ record of mixed economic success, they obviously haven’t conferred the same benefits on all states where they’ve been tried. Yet they seem to have had the same costs.
On the other hand, the Democratic approach to economic growth mitigates poverty, raises wages and helps grow the middle class. What’s the unemployment rate in deep-blue Massachusetts? It’s 4.7 percent—the same as Texas.
And, by the way, some progressive states, such as Minnesota and Vermont, have unemployment rates that are far lower.
Biss told me a sentence was cut for space…
It isn’t clear exactly what about the Massachusetts system the governor is advocating for, so I can’t immediately comment on the specifics.
* He told me that because I had already done a bit of searching and found this background info on workers’ comp…
In its first 73 years, few dramatic changes were made to the Massachusetts compensation system. Meanwhile, other states implemented speedier procedures and paid more adequate benefits. In the early 1980s injured workers, unions, and health and safety organizations in Massachusetts campaigned for reform.
In 1985 these groups convinced the state legislature to revamp the system: the Massachusetts Division of Industrial Accidents was reorganized, benefits were increased, cost-of-living protection was added, and insurers were made responsible for workers’ legal expenses.
Five years later, however, the Massachusetts economy entered a downturn. Business groups, exaggerating the burden of insurance premiums and threatening to leave the state, demanded rollbacks in worker benefits.
In 1991, in a shameful display of blaming the victim, the legislature:
• Reduced the total-disability benefit rate to 60% of wages
• Shortened the duration of total-disability benefits to three years
• Reduced the partial-disability benefit rate by 10%
• Shortened the duration of partial-disability benefits to five years
• Eliminated payments for the first five days of disability (except for extended injuries)
• Eliminated benefits for scarring other than on the face, neck and hands
• Reduced cost-of-living benefits
• Eliminated certain injuries from coverage
The governor at the time was Republican William Weld. He did, however, have a Democratic legislature to deal with.
* Here’s a column penned by one of the drafters of that workers’ comp reform law…
A gubernatorial candidate travels around Massachusetts and hears complaint after complaint from employers about the spiraling cost of insuring their employees. Annual double-digit rate increases have become the norm. Small businesses are wilting under the weight of these costs. Large businesses are considering relocating to places where insurance costs are lower. Many employees do not have access to quality healthcare. The candidate understands that a crisis exists and makes a priority of controlling, if not reducing, these costs. The candidate becomes governor. Is there any possible way this story ends happily?
Actually, it did, in an almost fairy-tale-like fashion, though not without a lot of angst. The year was 1990, the candidate was Bill Weld, and workers’ compensation insurance rates had gone up a staggering 92 percent over four years. Then, shortly after Weld took office in 1991, things went from bad to horrible. Insurers filed for another rate increase, this time a record 45.6 percent. Faced with this mess, the governor pushed through the Legislature a reform bill that he promised would eliminate the need for any rate increase. Very few people thought he would be able to keep that promise.
Let’s skip to the happy ending. Workers’ compensation rates have plummeted by about 60 percent since passage of the reform, in what many observers have described as the most remarkable turnaround in any insurance market in the country.
So, it did work. Now, all Gov. Rauner has to do is figure out how to be as effective as Bill Weld.
/snark
*** UPDATE *** From Rep. Mark Batinick…
Rich,
I’ve been studying the Mass. model for work comp for a long time. Attached is an LRU report from January of last year I requested. They do several things there well that we don’t. When I look at their model I see a system that focuses on the worker getting paid and healed as fast as possible. Any case open more than 12 weeks after an injury must be reviewed “to ensure that the treatment is necessary, reasonable, effective, and of good quality.” While indemnity costs per worker were near the median, the percentage of claims paid within 21 days of the injury was the highest. The benefit of getting the worker paid and healed quickly is self-evident.
And yes. They do have a causation standard.
The Massachusetts information starts on page 4 of the attached report. But in the interest of transparency, I attached the entire document.
posted by Rich Miller
Wednesday, Feb 3, 16 @ 11:53 am
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A leading workers comp defense guy recently posted this on his website;
“We are certain IL Work Comp coverage, TTD and PPD awards will be lower under our new, professional and proficient Arbitrators and Commissioners so Governor Rauner’s WC reform concepts aren’t worth fighting over in the larger context of our state’s many crises;
When the Oregon WC Premium Ratings come out later this year, we fully expect to see additional improvement in IL WC premium costs relative to our sister states”
Comment by The anti-trib Wednesday, Feb 3, 16 @ 12:04 pm
Bill Weld is a great guy.
Comment by Tone Wednesday, Feb 3, 16 @ 12:04 pm
In the last Oregon ranking Mass. was 48th. Hardly middle of the pack.
Comment by The anti-trib Wednesday, Feb 3, 16 @ 12:10 pm
Re: Texas, any legitimate comparison of their economy vis-a-vis ours must take into account their vast reserves of oil.
Comment by chi Wednesday, Feb 3, 16 @ 12:11 pm
Most buisness wage cuts just push money up to the top, they do not cause a failing business to stay flush w/ cash.
on a side note. corporations are hording over a trillion in cash. In other words it is not trickling down, and is not helping the economy. It turns out when toy allow companies to pay low wages and benefits they just horde the mone saved. it seems we need a better sustem as the one we have is collapsing under a growing poverty rate at tje base and huge cash reserves in the ha da of fewer and fewer.
cutting taxes, reducing wages is just making a latger group impoverished and a small grp even richer.
Decreased spending an taxes by the state results mostly in lost economic spending and horded cash. we had the greatest economic prosperity as a nation during the clinton years when we had higher taxes on the wealthy. perhaps we should consider the model that worked….
Comment by Ghost Wednesday, Feb 3, 16 @ 12:15 pm
According to Rauner’s own commission and report with his name on it, work comp costs went down. How does that equal job losses? From FY14
http://www.iwcc.il.gov/annualreportFY14.pdf
Comment by 360 Degree TurnAround Wednesday, Feb 3, 16 @ 12:16 pm
>So, it did work. Now, all Gov. Rauner has to do is figure out how to be as effective as Bill Weld.
Sorry, I left off the snark in the quote. Work Comp reform would be great for the state. What form that takes would make for great debate. Is there any doubt that, if he was able, Rauner could have delivered some reforms already and gotten a budget done for this fiscal year? There’s disappointment to be had from a business perspective as well as a human services one.
Comment by Earnest Wednesday, Feb 3, 16 @ 12:18 pm
Why isn’t Illinois using a Minnesota model?
Comment by Oh Brother Wednesday, Feb 3, 16 @ 12:19 pm
It’s worth checking out ProPublica’s interactive on worker’s comp; they actually break down what a body part is worth, in those terms, by state. Illinois is near the top on every one, Massachusetts is at the bottom, and the gap is pretty dramatic. Whether or not that’s good or bad, whether the gap is too dramatic, and so forth, is (currently) above my pay grade.
Comment by whetstone Wednesday, Feb 3, 16 @ 12:20 pm
Work Comp costs have gone down…but not insurance rates…therefore new legislation focused on insurers, who are right behind the Wall Street hustlers in the race to #1 Scum of the Earth.
Most believe ‘nsurers bundle coverages so they give the CEO free life, car, long care coverage and keep the comp rates high. Then the SuperStars can bang the workers one more time.
Comment by Annonin' Wednesday, Feb 3, 16 @ 12:24 pm
It took a few months, but I finally got a job offer that I will accept. Thank you Rauner for driving me away from a good job in a city I liked living in (Springfield). The new job is in Minneapolis and it starts on the 22nd. I enjoyed working here for 11 years, but have no ties to the area as I grew up in South Dakota. Thankfully I never got married and can simply bail on this awful situation. I feel bad for the people who have no option but to stay as things will only get worse with this horrible Governor. Best of luck to AFSCME in their fight against Rauner.
Comment by Former State Worker Wednesday, Feb 3, 16 @ 12:29 pm
I echo Earnest above. Although I certainly did not vote for him, I was encouraged that maybe Gov Rauner could actually get some things done around here. Then he took the oath of office.
Comment by paddyrollingstone Wednesday, Feb 3, 16 @ 12:30 pm
Great research Rich. Thank you. very interesting.
Comment by Honeybear Wednesday, Feb 3, 16 @ 12:35 pm
Did Governor Weld have a Turn Around Agenda??? Did Weld know how to count the number of Democrats in each chamber?? Just asking..
Comment by Not Rich Wednesday, Feb 3, 16 @ 12:36 pm
The Texas comparison can be manipulated almost any way one wants–they have oil, they also have a ginormous problem with poor, undocumented aliens. Texas is really not usefully comparable to Illinois.
It would be best if Rauner and everyone else on both sides just drop comparing us to Texas. There are plenty of other States where the situation is more useful.
Comment by Harry Wednesday, Feb 3, 16 @ 12:41 pm
Would the governor like Massachusetts tax code, too?
5.2 % on income and…drumroll please, 12 % on capital gains!
Comment by Ricardo Wednesday, Feb 3, 16 @ 12:46 pm
whetstone’s right. Mass doesn’t value workers body parts. Arms are worth much there. Just look at the Red Sox starting rotation.
Comment by Michelle Flaherty Wednesday, Feb 3, 16 @ 12:51 pm
Texas creates more jobs in one week than Illinois does in a year.
Comment by Doug Wednesday, Feb 3, 16 @ 12:53 pm
Agree with Harry, Texas is a whole different animal. Across the board comparisons are worthless, such as what the bus groups and Biss are trying to do.
Comment by mcb Wednesday, Feb 3, 16 @ 1:02 pm
>> Why isn’t Illinois using a Minnesota model?
Because it’s unconstitutional here.
MN has a progressive income tax, IL can’t have one until we amend the Constitution. (Which we should).
Comment by ZC Wednesday, Feb 3, 16 @ 1:14 pm
The elephant in the room here, one that Rauner and the Chicago Tribune board work very hard to not mention, is that Illinois is and remains a very good state (outside the NE at least) to be rich in. Still better to be rich and retired in.
Comment by ZC Wednesday, Feb 3, 16 @ 1:15 pm
Interesting study by the federal government observes that the costs of weak workers comp laws are passed on in large part to the federal government. They characterized it as a sort of taxpayer subsidy to unsafe employers. When a worker becomes disabled due to injury or illness caused by their job, often the W.C. insurance company gets out of paying. These disabled workers then end up on Social Security disability.
As the state’s continue to further weaken worker’s compensation laws, the public costs will continue to increase. The feds suggest the best way to lower costs would be to step-up enforcement of OSHA and other federal worker safety laws, reducing the injuries and illnesses that occur.
http://www.dol.gov/osha/report/20150304-inequality.pdf
Comment by DuPage Wednesday, Feb 3, 16 @ 1:18 pm
Michelle - as a Sox fan, that made me chuckle.
Senator Biss’s larger point is good because it highlights what can happen when an executive of an opposite party works with a legislature of an opposite party.
The unemployment rewrite last year was a pretty good indication that common sense reforms can be passed and put into play immediately.
Comment by Team Sleep Wednesday, Feb 3, 16 @ 1:26 pm
Has anyone else seen this article going around today comparing state budgets to populations? http://mischafisher.com/state-budgets-and-populations-aka-why-illinois-is-in-the-shape-its-in.html
Comment by Homer J. Simpson Wednesday, Feb 3, 16 @ 1:36 pm
Deval Patrick was the first Democratic governor in Massachusetts since Michael Dukakis in the mid 80’s. “Bastions of liberalism” dont regularly elect conservative chief executives.
Comment by Anonymous Wednesday, Feb 3, 16 @ 1:38 pm
For what it’s worth, the Pew Hispanic Center estimates that 4.1% of Illinois residents are unauthorized immigrants & 6.7% of Texas residents are unauthorized immigrants. The highest are Nevada at 7.2%, California at 6.8%, then Texas. Illinois is 12th highest. States with under half a percent being unauthorized immigrants include Maine, Montana, North Dakota, Vermont, & West Virginia.
http://www.pewhispanic.org/2011/02/01/appendix-a-additional-figures-and-tables/
Comment by Nick Wednesday, Feb 3, 16 @ 1:40 pm
Batnick,
How many in Massachussetts end up on welfare?
/s
Comment by Miami Wednesday, Feb 3, 16 @ 2:08 pm
Great! Pass these reforms then give us a budget.
Comment by Try-4-Truth Wednesday, Feb 3, 16 @ 2:10 pm
If Rep. Batnick wants cases to be processed as speedily as in Massachusetts, will he support sufficient state workers to do it? Or does it expect it to be done while reducing the state workforce?
Comment by anon Wednesday, Feb 3, 16 @ 2:11 pm
Are there any reports on insurance rates, and how insurance companies can be reformed to lower they rates?
Comment by Mama Wednesday, Feb 3, 16 @ 2:18 pm
Ooops…
the above post should state their rates.
Sorry
Comment by Mama Wednesday, Feb 3, 16 @ 2:19 pm
Did Rauner or Batinick mention that the burial allowance in Massachusetts for a worker killed on the job is $4,000? The typical funeral expenses here are between $7k to $10k.
Comment by 360 Degree TurnAround Wednesday, Feb 3, 16 @ 2:20 pm
Mama, yes. You can create a state work comp insurance fund, one that does not operate for profit. However, big business and the Illinois Chamber don’t want this brought up because they have ties to the insurance industry. That is why the work comp argument is all made up.
Comment by 360 Degree TurnAround Wednesday, Feb 3, 16 @ 2:22 pm
===Great! Pass these reforms then give us a budget.===
Meh. If everything is on hold because of the “turnaround agenda,” then I say, let’s not do anything until there is a budget. If the hostage strategy succeeds, there will be duplication. Heck, if it fails there may be duplication. No reforms until we have a budget.
To the Mass. Model; I like it.
Comment by Ducky LaMoore Wednesday, Feb 3, 16 @ 2:25 pm
==When I look at their model I see a system that focuses on the worker getting paid and healed as fast as possible.==
That was Batinick’s quote above, for which he has studied “a long time”. This is from the Massachusetts work comp Q & A, tell me if you notice a discrepancy in what Batinick said:
15. I am back to work after receiving workers’ compensation benefits. However, I am still undergoing treatment for my injury, and I must take time off from work to go for my therapy sessions. Does the insurance company, or my employer, have to pay me for the time that I’m out?
If you return to work, but continue medical treatment, your employer would NOT be required to pay you for the time you take off to go for medical visits. The employer is only required to let you have the time off from work, if these visits can not be scheduled outside your normal work hours. The insurer must reimburse you for reasonable travel expenses. You are compensated for lost work time only if you are going for a medical evaluation at the insurer’s request and the appointment conflicts with your normal, scheduled working hours.
Comment by 360 Degree TurnAround Wednesday, Feb 3, 16 @ 2:29 pm
Um, Illinois is now tied for the 4th highest tax burden in the nation.
http://taxfoundation.org/article/state-local-tax-burden-rankings-fy-2012
Comment by Tone Wednesday, Feb 3, 16 @ 2:41 pm
Um, Tone, that link is for FY12. Any idea what happened since then taxwise here?
Comment by Rich Miller Wednesday, Feb 3, 16 @ 2:47 pm
Rauner uses Red states to justify his own model - he has no interest in actually following how they do things at all.
Rauner has no interest in governing using any state government models. He is only interested in exercising his personal power to destroy our current government.
If Rauner had a model, he wouldn’t be doing what he is doing. He would have a real plan and a real ability of explaining what he is doing.
He is the arsonist with the gasoline and the matches - he doesn’t know how to put out the fires he starts, has no idea what is going to be build to repair or replace what he destroys, but he does know how to start fires and all he believes is that the current barn needs to be burned down in order to save the farm.
Comment by VanillaMan Wednesday, Feb 3, 16 @ 2:52 pm
Homer J Simpson, I read that article, and some of the numbers are simply incorrect. A couple of important notes to highlight. The charts indicate that the budgets are each state’s operating budget. However, the number that is being used for the State of Illinois includes both the operating and capital budget, which includes $20 billion of capital expenditures.
Also, looking at figures for New York, it appears that because of how Gov. Cuomo refers to it as the 2015-2016 budget that an assumption is being made that it is a two year budget, when that is not in fact the case. It is simply a recognition that the FY 2016 year budget goes from April 1 to March 31, but it is a one year budget, so that figure should not be divided in half. https://www.budget.ny.gov/budgetFP/FY16FinPlan.pdf
And two things stand out with regards to California. One, the number being used refers only to their general funds budget, not all funds as is the case with Illinois and New York (which puts the budget at $170 billion) http://www.ebudget.ca.gov/2016-17/pdf/BudgetSummary/SummaryCharts.pdf. And two, if you look at their sources of revenue, no federal funds are included, again, unlike the numbers for New York and Illinois, which would further drive down the numbers by billions of dollars.
Comment by Juice Wednesday, Feb 3, 16 @ 2:59 pm
Can someone answer me this question. Don’t businesses write off their workmans comp charged as a business expense? Thus I wouldn’t think the amount would be that terrible if they just use it to reduce their tax burden. Can some please clarify this for me?
Comment by Paul Wednesday, Feb 3, 16 @ 3:02 pm
Paul,
Your post makes wonder if you are confusing tax deductions with tax credits. Deducting workman’s comp as normal business expenses reduces their taxable income. If the state corporate tax rate is 5.25%, then a $10,000 business expense deduction reduces their state taxes $525 (5.25% of $10,000). The federal rate would vary. A tax credit would reduce their taxes more directly, but normal business expenses are deductions, hence reduce taxable income. How much a tax deduction lowers their taxes depends on what tax rate they are paying.
Comment by Nick Wednesday, Feb 3, 16 @ 3:34 pm
Juice,
Thanks for adding. I was looking for a little more info on these.
Comment by Homer J. Simpson Wednesday, Feb 3, 16 @ 4:28 pm
In Massachusetts workers comp rates increased 137.6% over 5 years. A 60% drop still leaves a huge 82.56% increase.
So where does all those extra insurance premiums pay for?
Overhead and Parties.
https://www.propublica.org/article/workers-comp-conferences-expos-and-middlemen
“Last year, workers’ comp insurers in California spent 36 percent of premiums on overhead — more than they spent on medical care. That’s over twice what group health plans can spend on administrative costs under the Affordable Care Act.”
Reforms are needed, cutting workers benefits doesn’t fix the problem.
Comment by Chicago 20 Wednesday, Feb 3, 16 @ 4:40 pm
Thanks Nick!
Comment by Paul Wednesday, Feb 3, 16 @ 5:45 pm
Chicago 20 — “In Massachusetts workers comp rates increased 137.6% over 5 years. A 60% drop still leaves a huge 82.56% increase.”
If something costs $100 then increases by 137% it now costs $237. A 60% decrease would drop the price to $94.80. That’s a drop not a huge increase.
“Last year, workers’ comp insurers in California spent 36 percent of premiums on overhead — more than they spent on medical care. That’s over twice what group health plans can spend on administrative costs under the Affordable Care Act.”
Yep. Let’s not copy a state doing things the wrong way. Let’s copy someone doing it the right way.
Comment by Anonymous Wednesday, Feb 3, 16 @ 5:53 pm
Rauner is no Bill Weld but he’s on the right track in reducing worker comp costs.
No one wants to abuse our workers, but until causation is on the table we will be spinning our wheels.
We need good jobs brought back to Illinois.
Comment by mokenavince Wednesday, Feb 3, 16 @ 6:16 pm
MA has an independent WC rate making organization and does not use NCCI, as IL does. MA pays doctors and hospitals that treat injured workers little more than Medicare rates. These reimbursement rates have been called the worst in the country and raise concerns about access that injured workers have to high quality medical treatment. If WC rates are the main concern, the lowest rates in the USA are North Dakota where there is a state fund. So it seems the prescription for low WC rates is: don’t use NCCI; slash payments to doctors and hospitals; and have a State fund.
Comment by Just Me Thursday, Feb 4, 16 @ 6:50 am
The budget gridlock is a feature, not a bug.
Rauner keeps throwing up roadblocks, tossing grenades, and slipping poison pills in to legislation because he does not want to move forward, he does not want a budget, he has no intention of raising his own income taxes by 100 percent, which is what Leslie Munger says is now necessary to dig us out of the hole he created in just his first year.
The Top 1 percent of households had an income of roughly $20 billion in 2013.
Doubling the income tax would cost them between $2 and $2.5 billion over just the next three years. Rauner will do anything to keep that from happening, including driving the projected bill backlog up to $25 billion by the end of his first term.
If he loses in 2018, he can always move.
Comment by Yellow Dog Democrat Thursday, Feb 4, 16 @ 6:44 pm