Illinois Lags the Nation in Providing Economic Opportunities: Illinois ranks 48th in economic performance for the period 1997-2007 according to the “Rich States, Poor States, ALEC-Laffer State Competitiveness Index, Second Edition”. The same index also ranked Illinois 44th in “2009 Economic Outlook” while neighboring states, Indiana, Missouri, Wisconsin and Iowa rank 17th and 23rd, 27th and 35th respectively.
A September 2007 Illinois Commission on Government Forecasting and Accountability (COGFA) report, “A Comparative Study of Illinois Economy”, found, “While Illinois has done well in absolute terms (high GDP, high wages, and high personal income), the state has experienced poor rates of growth in these categories over the past decade.” The COGFA comparative study pointed out:
- Illinois had the 5th largest workforce in the country at just under 6 million nonfarm employees in 2006. Though this employee workforce is large, it was the 3rd slowest growing workforce in the country.
- The people of Illinois enjoyed the 13th highest personal income per capita at $38,215 in 2006. Similar to GDP growth, Illinois has lagged behind the country in this category, averaging growth of only 3.83% over the last decade, which ranked Illinois 44th.
- Illinois had the 18th highest standard of living as measured by real GDP per capita in 2006 at $41,026. Once again, Illinois lagged in the growth of this economic indicator, growing only 1.13% per year over the last decade, placing it at 37th.
Illinois Also Lags the Nation in Reducing Workers’ Compensation Costs to Employers: The National Council on Compensation Insurance (NCCI) has recommended since 2006 a total average increase in Illinois workers’ compensation rates of 16.4%, 6.3% in 2009 alone. During the same period, average rates for workers’ compensation across the country decreased 17.1%. For its 2008/2009 rate filings, 30 states saw average rate reductions while Illinois joined only four other states that had an average recommended rate increase. (Source: NCCI Illinois State Advisory Forum, October 7, 2009)
A number of states that Illinois competes with have addressed or are addressing their workers’ compensation cost issues and employers in those states are experiencing significant reductions in costs. Florida’s workers’ compensation rates fell over 18% in 2009. Florida businesses have seen an average decrease in workers’ compensation costs of over 65% since 2006. Colorado businesses experienced a 16% reduction for workers’ compensation in 2009, will see an additional 9.7 decrease in 2010 and have seen a 36.2% reduction since 2006. Arkansas workers’ compensation rates decreased nearly 20% the past two years and Pennsylvania has experienced a 19% reduction since 2006 as well. New York average rates dropped nearly 22% since 2006. (Sources: NCCI State Advisory Forums for Florida, Colorado and Arkansas; Pennsylvania Compensation Rating Bureau; New York Compensation Rating Bureau Bulletins)
A 2008 analysis by Actuarial & Technical Solutions, Inc indicated that Illinois jumped the highest in ranking of workers’ compensation costs in the year. The comparative costs in each of 45 states were ranked from 1 to 45 with “1” indicating the state with the lowest relative workers’ compensation cost. In 2007, Illinois was ranked by this group at 31st highest cost of the 50 states. In 2008, that ranking went to 38th highest cost.
The Oregon Department of Commerce & Business Services provides a biannual “Premium Rate Ranking. In 2008, Illinois’ index rate of 2.79 placed our state as 11th highest cost of 51 jurisdictions analyzed. The previous study by Oregon in 2006 had placed Illinois at 21st highest.
Surrounding States 2008 Workers’ Compensation Premium Rating*
| State |
2008 Ranking |
2006 Ranking |
2008 Index Rate |
| Illinois |
11 |
21 |
2.79 |
| Missouri |
28 |
25 |
2.20 |
| Wisconsin |
34 |
35 |
2.12 |
| Iowa |
41 |
34 |
1.86 |
| Indiana |
50 |
50 |
1.23 |
(*source: 2008 Oregon Workers’ Compensation Rate Ranking Summary, Table 2)
Surrounding States Have An Economic Advantage with Lower Workers’ Compensation Costs: States in our region tout their workers’ compensation cost advantage constantly to Illinois employers and businesses that are planning job expansions in the region. The 2008 Actuarial & Technical Solutions, Inc State Rankings of Workers’ Compensation Comparative Costs for Manufacturers ranks Indiana 2nd, Wisconsin 14th, Iowa 15th and Missouri 31st. As previously indicated Illinois was ranked 38th highest by this organization.
High Benefits are not Necessarily the Problem in Illinois: While a comparative ranking of workers’ compensation average statutory benefit provisions (wage replacement benefits) shows that Illinois has generous indemnity benefits, the four states with even higher benefit structures have lower costs than Illinois.
* 1 equals lowest benefit structure; # 1 equals lowest cost
(source: Workers’ Compensation State Rankings Manufacturing Industry Costs & Statutory Provisions, 2008 Edition by Actuarial & Technical Solutions, Inc.)
What Changes are Needed to Illinois Workers’ Compensation Laws
Protectors of the status quo and many Illinois politicians will claim workers’ compensation was “reformed” in 2005 and all is well for employers. As noted above, the 2005 changes have not lowered costs and are not worthy of being characterized as “reform”. While other states have aggressively addressed their workers’ compensation costs by reducing costs for their businesses, Illinois policy-makers so far have been satisfied with slowing down the growth of costs for workers’ compensation. This is not enough if Illinois wants to retain and attract good-paying jobs.
Chamber members doing business in other states consistently advise us that Illinois is their highest cost state when it comes to workers’ compensation. A number of other states have adopted far more sweeping changes. In 2005, Missouri lawmakers enacted reforms and have seen their costs drop over 20% since 2005. Until we address critical cost drivers, the states that border Illinois will continue to flaunt their lower workers’ compensation costs.
Requiring the workplace to be the principle cause of an injury: Missouri law only allows compensation if the accident was the prevailing factor in causing the condition. Illinois’ standard is that the workplace needs to merely aggravate a prior injury. Missouri law also limits benefits for pre-existing conditions in cases where a work-related injury causes increased permanent disability and reduces compensation by the amount of permanent partial disability that was pre-existing. These are areas of constant abuse in Illinois.
Specifically, Illinois must address the following:
- Require the workplace to be the “primary” cause of the injury instead of just a “contributing” factor when determining eligibility for benefits.
- Allow credit for previous man as a whole claims to same body parts and limiting permanent partial disability to 100% of man as a whole.
- Allow reopening of wage differential cases for changes in economic circumstances, provide credit for previous wage differential claims and cap benefits to retirement age instead of lifetime.
Achieving balance, understanding, and efficiency in the workers’ compensation process: Many employers perceive the Illinois workers’ compensation system is so biased against the employers that it effectively serves as an alternative social welfare system or additional employment benefit.
To achieve greater balance, efficiency and understanding of the process, we propose:
- Requiring nationally-recognized, medically-defined, objective evidence for disability determinations that include, but are not limited to, the following: loss of range of motion; loss of strength; measured atrophy of tissue mass consistent with the injury.
- Enhancing the impartiality of the Illinois Workers’ Compensation adjudication system by:
- Merit review of all future Arbitrators by the Workers’ Compensation Advisory Board requiring a majority vote of the Advisory Board for appointment as an Arbitrator.
- A requirement that all future Commissioners have ten years of experience in workers’ compensation and all future Arbitrators have seven years of experience in workers’ compensation.
- Apply to all Arbitrators and Commissioners impartiality and demeanor ethics similar to those found in Illinois courts
Acknowledging workers have responsibilities to be alcohol and drug-free in workplaces: A number of states, including Missouri, eliminate or dramatically reduce benefits when a worker’s injuries are caused by their intoxication.
Fully Implement 2005 Fraud Provisions: One of the key components of the 2005 changes to the workers’ compensation law was establishing civil and criminal penalties for fraud related to workers’ compensation and the establishment of a fraud investigation unit at the Illinois Department of Insurance (DOI). Unfortunately, the budget for the fraud unit was dramatically cut for FY 2009 and FY 2010 and the follow-through to prosecute cases has been very limited. The fraud unit budget must be restored.
The most recent report from DOI made on July 22, 2008 indicated that in 2007, 47 cases of alleged fraud were referred for prosecution. Only seven of these referred cases have been advanced by state’s attorneys. Special prosecutors must be established in the Fraud Unit to provide focus and commitment to prosecute these crimes.
(White Paper courtesy of the Employment Law Council of the Illinois Chamber of Commerce)
