The War on Workers’ Comp

From In These Times:

by Stephen Franklin

For nearly a century, millions of workers have endured punishing jobs in construction, mining and factory work—jobs with high levels of work-related disability and injury. As a tradeoff for the dangers, they’ve had the assurance of workers’ compensation if injured permanently on the job. Employers accepted this deal, albeit sometimes grudgingly, because it  removed the possibility of being sued over work-related injuries. 

But as labor has weakened and Republicans have won control of more and more statehouses, states have slowly chipped away at workers’ compensation benefits.

Since just 2003, more than 30 states have passed laws that have “reduced benefits for injured workers, created hurdles for medical care or made it more difficult for workers to qualify,” according to a recent investigative series by ProPublica and NPR. Some of the harshest cuts came in California, Arizona, Florida, Oklahoma, North Dakota, Kansas, Indiana and Tennessee. Today, according to the federal Occupational Safety and Health Administration (OSHA), many injured and disabled workers “never enter the workers’ compensation system.” OSHA also estimates that workers’ compensation covers only about 21 percent of the lost wages and medical bills encountered by injured workers and their families.

Illinois, long a union stronghold, could nevertheless join the pack of those closing the doors for some to workers’ compensation if right-wing millionaire Gov. Bruce Rauner gets his way.

Traditionally, when companies hired workers, they bought their work histories. That is, they assumed responsibility for the physical problems employees developed over years of difficult work. But Rauner wants to narrow eligibility for compensation dramatically, requiring an injury to account for at least 50 percent of the claim.

Rauner’s argument is that workers’ compensation was designed for “traumatic” injuries, and that including repetitive injuries which accrue over time, effectively requires employers  to pick up non-workplace injuries. He contends that changing this standard would put Illinois on the same track as many other states.

John Burton, a veteran workers’ compensation industry expert, disagrees.

“What the governor is proposing is to take a lot of cases that have been compensable for the last 50 years and to throw them out,” he said.

One of these is Steve Emery.

The third-generation coal miner rode the wave downward, working in one mine after another as the industry collapsed. Then his hands, once powerful enough to manage the grueling job of breaking up large chunks of coal with a sledgehammer, failed him.

The spiraling numbness in his wrists and hands ended with a doctor saying he would never work in a mine again. He was 50 years old and had spent more than 30 of them in southern Illinois mines.

After a four-year battle with insurance companies arguing that Emery’s injuries were not job-related, he received $1,815 a month in workers’ compensation—enough to live on, but one just about one fourth of what he used to earn

Under Rauner’s proposed rules, Emery might not have received workers’ compensation at all. Democrats asked Emery to tell his story at an Illinois State House hearing last year as an illustration of the workers who would be left out in the cold under Rauner’s plan.

Dave Menchetti, a veteran workers’ compensation attorney in Chicago, adds that the shift proposed by Rauner would be “extremely difficult for doctors,” who are not trained to quantify the causes of injuries. “It would severely prejudice older workers and workers in heavy industries because those are the kind of workers who have pre-existing conditions.”

So what happens when business-minded workers’ compensation reformers get their way?

What the bottom looks like

A federal commission that examined workers’ compensation laws in 1972 was “disturbed” by the wide divergence of rules between states, and an “irrational fear” driving states and employers to search for “less generous benefits and lower costs.”

“We were talking about a race to the bottom,” explains Burton, a Republican, lawyer and economist, who led the groundbreaking study.

The study recommended mandatory federal standards; none were ever put in place.

And the race hasn’t abated, Burton says.

Indiana offers an example of what happens when a state wages the race to the bottom.

Starting decades ago, as Indiana’s leaders sought out factory jobs to supplant the state’s mostly rural economy, they embraced  a low-cost, employer-friendly workers’ compensation system. And it has stuck, as the state’s Senate has largely stayed under control of the GOP.

Workers in Indiana must wait seven days before receiving benefits (as opposed to three in Illinois). While permanently disabled workers in Illinois can receive benefits for life, Indiana caps benefits at 500 weeks, just under 10 years.

To qualify for permanent total disability in Indiana, workers must meet a “pretty high bench.” as Terry Coriden, a former chairman of the Worker’s Compensation Board of Indiana, describes it. “If you can be a greeter at any type of store, then that type of employment could be deemed to be reasonable, which would preclude you from total permanent disability,” he says.

Only 45 workers out of 597,058 who filed claims between 2005 and 2014 received permanent total disability status in Indiana, according to statistics from the Worker’s Compensation Board of Indiana. The rate was twice as high in Illinois, according to data from the National Council on Compensation Insurance provided by Burton. Only 13 percent of the Indiana workers who filed claims over those years qualified even for permanent partial impairment.

And the system simply pays out less.

Consider the case of a steelworker in northwest Indiana who suffered third- and fourth-degree burns over two-thirds of his body after being hit by hot metal and slag from a blast furnace.

In the nine years since, he has undergone 38 surgeries and still has no feeling in parts of his arms and legs.

Before the injury, he was earning as much as $130,000 year because of extensive overtime. Today, he gets $600 a week in workers’ compensation as a totally disabled individual, as well as $2,200 monthly in Social Security Disability income. In order to stay afloat, he has dipped heavily into his savings and his wife has picked up low-wage part-time jobs.

The worker did not want his name used because he feared that the company would retaliate. “I don’t want any blowback from the company until my workers' comp ends,” he says. “I don’t want them kicking me out of it.”

He is especially concerned, he says, because despite having his employer authorize and provide the majority of his treatment, several recommended procedures were not authorized In Indiana, workers must go to the company’s doctors and follow whatever they prescribe. If they don’t, they lose their benefits.

Steve Emery, in Illinois, saw what happened when he visited a company physician.

His hands were “killing” him when he saw a local Southern Illinois physician of his own choosing in 2010. “The doctor said, ‘We’ll have to do surgery and you’ll never do work again,’ ” he recalled.

Peabody Energy, however, said he had to see the company’s physician in St. Louis. “[The doctor] said, ‘Mr. Emery, did you hurt this way when you was a kid playing baseball or mowing grass?’ ” Emery recalls. “I told him I didn’t play baseball and didn’t push a push mower “ Nonetheless, he says, “They denied my claim ASAP.” Peabody officials in St. Louis did not reply to requests for comment.

Fortunately for Emery, Illinois workers typically have the right to choose their doctor as well as their treatment (unless their employer has set up a “preferred provider” network, in which case they have the right to choose any two doctors within the network). Illinois also allows workers to seek a boost in their payments if they can show that they will suffer from a marked decrease in earnings. Indiana lacks both of these rights.

Low workers’ compensation payouts mean that workers in the state may even have more difficulty getting a lawyer to help them pursue a claim, given that legal fees are set according to the settlements received. 

“The well-known truth is that it is hard to make money doing the work,” said Kevin Betz, an Indianapolis lawyer.

The business argument

To justify his plan, Gov. Rauner blames the “high costs” of workers’ compensation with driving jobs to other states, including Indiana.

“Employers are flat-out leaving the state, and they are saying it is because of the workers’ compensation policy,” says Michael Lucci, an official with the Illinois Policy Institute, a conservative think tank that has received financial support from Gov. Rauner and also supports Rauner’s anti-union right-to-work drive.

There’s no disputing that nationwide, the downward race has paid off financially for employers. Workers’ compensation costs as a percent of payroll fell in 2014 to the lowest figure since 1986, Burton notes. Some of the decline has come from improved safety, but some, he says, has come from restrictions on workers’ compensation.

Lucci’s organization has churned out reams of information backing up the argument that Illinois’ workers’ compensation’s costs are uncompetitive as compared to its neighbors, especially Indiana. For Illinois steelmakers, workers’ compensation costs account for about 7.3 percent of their payrolls, for example, as compared to only 1.3 percent in Indiana, according to the Illinois Policy Institute.

That’s just as Indiana intended it. The logic behind its laws is “inducing businesses from other states to Indiana,” explains Coriden.

Experts say that the idea that high costs are actually driving companies to relocate, however, may be little more than a myth.

West Virginia is one of those states that have slashed benefits to drive down costs for employers. But Emily Spieler, a former head of the state’s Workers’ compensation Fund, says it didn’t boost business much in the economically troubled state. Similarly, Spieler, a professor at Northeastern University’s School of Law, says she has yet to see any studies showing a positive financial impact for states. She is also dubious that workers’ compensation is a large enough factor to lead a business to change locations.

Asked for evidence that workers’ compensation costs may be driving firms out of state, officials from the Illinois Governor’s office cited their contacts with employers and site selectors and suggested contacting business groups for more information.

But when In These Times posed that question to the Illinois Chamber of Commerce, which has been outspoken about the need to drive down workers’ compensation costs in order to remain competitive, Jay Shattuck, a contract lobbyist for the group, said he was not aware of any studies specifying that workers’ compensation alone made Illinois noncompetitive. (He also notes that the Chamber, while supporting most of Rauner’s plan, doesn’t see Indiana’s low payout system as the ideal.)

Victor Bongard, a lecturer in Indiana University’s Kelley School of Business, is familiar with Indiana’s pitch about attracting businesses through its low-cost workers’ compensation. He agrees that it is one factor in where businesses choose to settle, but “not a determining factor,” he says. He points to California, which “draws business to relocate there and manages to foster lots of new businesses despite its high workers’ compensation costs.”

Cost-shifting—but to whom?

With employers and the states’ workers’ compensation systems paying less, who picks up the bill?

In addition to workers themselves, the federal government is on the hook. These changes shift injured workers from state workers’ compensation programs to the government’s Social Security Disability Income (SSDI) system, as the federal Occupational Safety and Health Administration (OSHA) pointed out in a June 2015 report. OSHA estimated that in 2010, SSDI picked up as much as $12 billion to cover injured and ill workers.

Looking at the District of Columbia and 45 states, where the ranks of workers receiving compensation fell by 2.4 million between 2001 and 2011, researchers at the Center for Economic and Policy Research said last year that more than one-fifth of the rise in disability income payments appeared to be linked to cuts in workers’ compensation.

The calculations were age-adjusted to take in the growing ranks of elderly receiving the federal Social Security Disability Insurance (SSDI) benefits.

“The logic of cutting back on workers’ compensation is that we’ll be tough on these workers,” says Dean Baker, an economist and co-director of the organization. “But if you are just shifting the cost from workers comp to disability, you aren’t saving public money.”

Shifting the financial burden raises another problem. The workers’ compensation system was created to make employers responsible for the problems encountered by their employees. The shift to SSDI not only frees them from any financial accountability, but makes it harder for public officials to spot troubled workplaces and jobs.

In Indiana, because worker compensation payments are so low, attorney Richard Swanson said that injured workers who can’t return to their jobs “often make SSDI their first choice for income replacement.” That’s especially the case for older factory workers used to higher wages. “That’s their first question if they cannot return to work due to their work injury. You see it constantly,” he says.

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