Workers' Compensation Revisited

Saturday, January 13, 2007 | 0

By Doug Whitley

Workers' compensation is a near crisis issue in Illinois, with fraud and abuse costing private sector employers and taxpayers and damaging our economy.

The Chicago Sun-Times recently published an excellent investigative series that exposes workers' compensation fraud and abuse that is familiar to employers but rarely acknowledged or discussed in public forums. A team of reporters led by Tim Novak and Art Golab pursued the employment records of people with clout who have worked for the city of Chicago. Their investigations provide an insightful picture of widespread abuse of the workers' compensation system that should offend every honorable worker and taxpayer. (A link to the Sun-Times series appears at the bottom of this column.)

This investigative series should be a rallying cry for all employers to demand the attention of our governor, state legislators and members of the Workers' Compensation Commission to fix the Illinois workers' compensation system.

Governments Are a Target for WC Benefits

When excessive fraud and abuse are tolerated by government officials and rewarded by the Workers' Compensation Commission, taxpayers shoulder the costs of this multi-million dollar scandal. Indeed, it may be the very nature of government that makes it an overly vulnerable target for abuse because managers are elected stewards, the treasury is unlimited, true owners -- taxpayers -- are dispersed and anonymous, contentious labor relations are avoided and as the Sun-Times points out, political considerations are often a factor.

The campaign for significant progress in controlling Illinois' workers' compensation costs could be strengthened if elected officials accept responsibility to protect taxpayers from improper and excessive costs. Mayors, county board chairmen, school boards, park boards, other local government leaders and even the director of the Illinois Department of Central Management Services who is responsible for the state employee system should bond with private sector employers to confront the unacceptably high costs attributed to workers' compensation in Illinois by championing changes to address a weak system that is overly biased against management.

WC Fraud Finally Acknowledged in Statute

Illinois law recognized the existence of workers' compensation fraud for the first time last year when the Department of Financial Institutions and Professional Regulation's Division of Insurance was given authority and funds to create a unit to investigate fraud. In the subsequent year little has happened. Despite lauding the introduction of a fraud unit as a major accomplishment when signing the 2005 legislation Gov. Blagojevich's administration has failed to adequately fund and implement the law. Pursuit of fraud obviously remains a low governmental priority.

The Illinois Chamber recently wrote every county state's attorney to inform them about the new law that makes workers' compensation fraud a felony offense. Our letter encourages the 102 state's attorney offices to be more attentive to fraud, accept their responsibility to prosecute perpetrators and send a clear signal that Illinois does not tolerate people who seek to scam the system. The new fraud statute is meaningless until it is vigorously applied. The actions of county state's attorneys are vital to deterring fraud and providing both public and private employers relief.

Disability Payments Ripe for Abuse in Illinois

First, we must recognize it is appropriate for the workers' compensation system to provide long-term benefits for employees who are truly "permanently and totally disabled." Such benefits were intended to apply only to the very limited number of cases where employees can no longer work.

The Sun-Times series reveals the folly of rationally defending a system providing "permanent and total disability" tax-free benefits to injured individuals who are engaged in other gainful activity. Evidence suggests similar examples can be made with lengthy periods of tax-free "temporary total disability" payments routinely afforded to injured employees under the current system. It also appears true in calculating the nature and extent of any permanent disability.

This is not to suggest all workers' compensation claims are fraudulent or that no employees are entitled to disability benefits. Employers know that quite the contrary is true. But to re-establish credibility for Illinois' workers' compensation system we must focus on the original goals of coverage for medical expenses and fair compensation for lost wages, actual and future. The employer's goal is to restore the employee's health and see them return to productive work. The disability designation was never intended as an alternative welfare system to provide tax-free money for individuals who would prefer not to work.

2005 Law Brought Changes, But Not Reform

Well-intentioned legislation enacted last year increased benefits to injured workers. It was expected to also curb abuse and hold down rising workers' compensation medical costs for employers. While the benefit increases have taken full effect, costs controls to hold down medical fees have yet to be fully implemented.

In fact, employers are facing higher costs for medical care under the 2005 changes. The National Council on Compensation Insurance (NCCI) established their 2006 advisory rate with a 9.2% increase, and a proposed 2% increase for 2007. NCCI also indicated earlier this year that the fee schedule implemented as of February 1, 2006 only produced a one tenth of one percent savings. Employers are far from achieving medical savings necessary to offset the agreed to benefit increases. We believe the true spirit of the 2005 workers' compensation agreement has not been met for the business community. More must be done.

Workers' Compensation Commission's Fee Schedule is Insufficient & Incomplete

A medical fee schedule adopted earlier this year by the Workers' Compensation Commission failed to appropriately cover services commonly associated with workers' compensation claims. As a consequence, higher reimbursements are being paid for ambulatory treatment center services, dental services, emergency facility services and outpatient hospital services than employers expected. Our intention was that the medical fee schedule was to apply 90% of the 80th percentile of charges for most medical services.

In particular, it is stunning that outpatient services, a major component of workers' compensation expense, would be ignored.

If employers are to benefit from long-sought medical fee schedules that exist in practically every other state, the Commission's "default" schedule of 76% of the provider's charge must be revisited to reflect the spirit of the 2005 legislative agreement. The Commission must find a single data source or use subsets to create a data set to bring these services under the medical fee structure as soon as possible.

The Commission exceeded its statutory authority by allowing a generous approach to reimbursements for "pass-through charges" where the price of service is left to providers without regard for reasonable reimbursement level established by the medical fee schedule that was enacted into law. The Commission chose to provide no restraint on costs to employers of prosthetics/orthotics, pacemakers, lens implants, implants, ambulance fees, investigational devices, and drugs requiring detailed coding.

The newly created Medical Fee Advisory Board to the Workers' Compensation Commission has not yet addressed the matter of "cost outliers." Instead of using Advisory Board guidance on extraordinary treatment and appropriate adjustment to maximum fee schedule payments, the Commission has applied a blanket approach measured by the dollar amount of charges rather than focusing on the injuries requiring extraordinary treatment. Reimbursements to specialized rehabilitative hospitals to treat unique, severe and unusual injuries are undermined by this approach.

The Workers' Compensation Commission is obligated to focus on the important unresolved details, obtain better data, and address these shortcomings without legislative intervention.

Unfinished Legislative Agenda

Based on responses to a member survey and the work of our Workers' Compensation Committee, several key areas of reform are being promoted by the Illinois Chamber for 2007. They are:

1. Require the workplace to be the principle cause of an injury. Abuse of the permanent partial disability and body as a whole payment concept will be greatly curbed with a clearer and more concise definition of "accident" and "injury".

2. Achieve balance, understanding, and efficiency in the workers' compensation process leading to greater impartiality and fairness.

3. Involve employers in selecting medical providers. Illinois' current employee choice approach encourages doctor shopping, causes unnecessary disputes between employer and employee and discourages return to work. Too often the emphasis is not on getting the injured worker healthy and back to work.

4. Acknowledge workers have responsibilities to be alcohol and drug-free in workplaces.

5. Allow alternative benefit delivery systems, more commonly referred to as collectively bargained or jointly negotiated (labor and management) workers' compensation systems.

6. Amend the medical fee schedule adopted in 2005 to reduce the number of medical fee geo-zip codes from 29 as currently appears to five, as established by the Medicare system.

What Is the Illinois Chamber Doing About WC?

The Illinois Chamber's Employment Law Council is the center of activity for all human resource issues. The ELC is the forum for activist members who are eager to influence and lead the Illinois Chamber's efforts to influence workers compensation laws, rules and bureaucracy. You may learn more about the ELC by visiting the Chamber website, www.ilchamber.org.

Throughout this year the Illinois Chamber has worked with local chambers of commerce to conduct outreach sessions to inform and engage employers and community leaders. The Chamber hosted workers' compensation briefings in 13 Illinois cities: Aurora, Chicago, Decatur, Effingham, Fairview Heights, Highland, Jerseyville, Libertyville, Ottawa, Springfield,Sterling, Willowbrook, and Wood River. One remaining meeting is scheduled for Kankakee on November 21.

The Chamber ELC published a mini-guide for employers on the changes effective over the past year, and a comprehensive manual on workers' compensation for employers will be available in 2007. The new manual is being written by experienced workers' comp attorneys and practitioners Marc Cairo, Chris Gibbons, Christina Hemenway, Dwight Kay, John Power and Ed Priz. It will be available for purchase through our HR Illinois products and services division early next year.

The ELC continues to solicit employer medical data and related problems with the WC medical fee schedule implementation to help build the case for adjustments to the Commission's existing policies.

The Chamber is a leading partner in the Joint Employers Working Group that convenes routinely in Springfield to discuss issues and legislative matters that confront employers when the General Assembly is in session.

Along with continuing to press the Workers' Compensation Commission to be more attentive to employers' concerns with the new medical fee schedule, the Illinois Chamber is preparing the legislative agenda for 2007.

What Employers Need to Do

Help us keep workers' compensation issues at the top of Illinois' public policy agenda we expect state legislators to address. Legislators must be constantly reminded that Illinois employers remain dissatisfied with workers' compensation laws, the unsympathetic bureaucracy and excessive and anti-competitive costs they experience when compared with other states where they do business.

Employers know more about workplace experiences than any association executive or lobbyist. Legislators will be most attentive to experiences of their own constituents. Every employer must help their legislators understand that all is not right with Illinois' workers' compensation system. Legislators must be reminded frequently and be well enough informed about situations their constituent employers confront to agree to help champion change. Legislators need to know Illinois' workers' compensation laws are threatening current and future jobs vital to their communities.

It is particularly important Democratic legislators are informed and appreciative of the challenges employers experience. The Democratic Party has the majority in the legislature and dictates the agenda when the General Assembly is in session. The theme employers must stress is that Illinois' reputation for poor workers' compensation laws and high costs affects jobs, especially high-wage jobs that include benefits.

Call to Action

Help us build the case by providing specific examples and facts that clearly demonstrate how Illinois experiences and costs are excessive, offensive or unreasonable. The Illinois Chamber's ability to adequately present the case for continued improvement in workers' compensation laws is dependent upon employers sharing their knowledge and experiences. The Chamber is a vehicle for action and reform, but our effectiveness is totally dependent upon the time, money and expertise of the membership. Anecdotal stories are helpful. Comparative multi-state facts are essential.

Join the Illinois Chamber. Every employer, human resource consultant, defense lawyer, economic development director and concerned citizen who seeks change and improvement in Illinois workers compensation laws and business climate should join the Illinois Chamber.

If you're outraged about your business' workers' comp experiences, if you fear continued trends, if you understand that employers are only going to get satisfaction by joining with other like-minded people who are motivated to challenge the status quo, then you must join the Chamber's Employment Law Council and get engaged in our campaign for reform. We are in this for the long haul, but to be successful more employers must work collectively to affect change.

Share this message with other companies: if you know other employers eager for change, who want to be on top of workers' compensation issues in Illinois, encourage them to join the Illinois Chamber and get involved with the ELC.

Sun-Times Series:

http://www.suntimes.com/special_sections/clout_sick/index.html

Doug Whitley is the president and CEO of the Illinois Chamber of Commerce. He can be reached at dwhitley@ilchamber.org.This column was originally published in the chamber's newsletter, which can be read online at www.ilchamber.org. ----------------------------------------

The views and opinions expressed by the author are not necessarily those of workcompcentral.com, its editors or management.