The War on Workers’ Comp

Stephen Franklin

(tattoodj / Flickr)

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.

Which way Illinois?

In Illi­nois, the fate of injured work­ers has become hostage to a larg­er polit­i­cal squab­ble that has left the state with­out a bud­get since last July.

Reform­ing work­ers’ com­pen­sa­tion is part of a broad pack­age of anti-union mea­sures from Rauner, poli­cies that have had no trac­tion in the Demo­c­rat-dom­i­nat­ed state legislature.

Rauner’s work­ers’ com­pen­sa­tion pro­pos­al isn’t as dra­con­ian as some of his oth­er poli­cies aimed at work­ers, such as let­ting com­mu­ni­ties strip out numer­ous issues from col­lec­tive-bar­gain­ing argu­ments, killing the Illi­nois Pre­vail­ing Wage Act, and allow­ing local com­mu­ni­ties to set up right-to-work rules. His cost-cut­ting pro­pos­al would mir­ror the nation­al down­ward trend in work­ers’ com­pen­sa­tion — but he isn’t propos­ing (yet) the squeezes that states like Indi­ana, Flori­da and Okla­homa have put on injured and dis­abled workers.

But state Democ­rats think it’s only a mat­ter of time.

There isn’t much sup­port for end­ing the work­ers’ com­pen­sa­tion sys­tem, which is where the gov­er­nor is going,” said Steve Brown, spokesman for State Rep. Michael Madi­gan, the pow­er­ful speak­er for the State House.

The think­ing of the Democ­rats, and the state’s tri­al lawyers, is that Illi­nois has already opened the door to reforms and cost cut­ting for the work­ers’ com­pen­sa­tion sys­tem with the 2011 reforms and they should be allowed to roll out.

And the fig­ures reflect­ing the impact of a 2011 reform by the state are sig­nif­i­cant, as report­ed by the Illi­nois Work­ers’ Com­pen­sa­tion Com­mis­sion. The state’s work­er com­pen­sa­tion pre­mi­ums dropped from the nation’s fourth high­est to the 7th high­est between 2012 and 2014 — the largest decline among all states. So, too, ben­e­fits pay­ments fell by 19 per­cent between 2011 and 2015.

What­ev­er Illi­nois’ pri­vate car­ri­ers lost in pre­mi­um income seems to have more than off­set by the sav­ings on ben­e­fit pay­outs. After loss­es in 2009 and 2010, state insur­ers broke even in 2011 and have since seen prof­its climb steadi­ly, accord­ing to data from the Nation­al Asso­ci­a­tion of Insur­ance Com­mis­sion­ers. Accord­ing to Menchet­ti, it seems that some of the deci­sion-mak­ers would like stricter scruti­ny [of the indus­try], evi­dent in a pro­vi­sion in House Bill 1287 that has to do with how the Depart­ment of Insur­ance would reg­u­late exces­sive premiums.”

So it appears that the new law has been a boon for both employ­ers and insur­ance com­pa­nies — if not workers.

And if employ­ers’ costs have been drop­ping, Is there real­ly need for more reform?” Menchet­ti asks.

The wrong kind of reform

There’s a case to be made that work­ers’ com­pen­sa­tion needs to be reformed in a dif­fer­ent way — to help work­ers get on their lives, not to force them down the eco­nom­ic lad­der and into a bureau­crat­ic hell. Even in rel­a­tive­ly work­er-friend­ly Illi­nois, Steve Emery saw first­hand the deter­mi­na­tion of employ­ers and insur­ance car­ri­ers not to give up a cent they don’t have to.

Before his hands failed him, Emery worked six or sev­en days a week, 12 to 16 hours a day, and was tak­ing home as much as $80,000 a year. He worked at a num­ber of mines across south­ern Illi­nois, and the last was the Wil­low Lake mine, owned by a sub­sidiary of the Peabody Ener­gy Corp., which calls itself the world’s largest coal pro­duc­er. It recent­ly declared bankruptcy.

The com­pa­ny shut­tered the mine and laid off 400 work­ers in the fall of 2012. The shut­down took place soon after a work­er died, and the com­pa­ny said it had dif­fi­cul­ties meet­ing safe­ty and per­for­mance stan­dards there. The Mine Safe­ty and Health Admin­is­tra­tion (MSHA) had put the mine on notice in 2010 for repeat safe­ty violations.

After fil­ing for work­ers’ com­pen­sa­tion, Emery fought the com­pa­ny for four years. Despite the fact that his excep­tion­al­ly pun­ish­ing job had left his hands vir­tu­al­ly frozen, his attor­ney Steve Hana­gan says, the coal com­pa­ny con­sid­ered his injuries not job-relat­ed. It is a typ­i­cal dilem­ma” that applies to many,” he said. The bat­tle over cau­sa­tion is very common.”

Emery appealed his case to the Illi­nois Work­ers’ Com­pen­sa­tion Com­mis­sion, which found that his his injury was job-relat­ed and hin­dered his abil­i­ty to work.

He essen­tial­ly used his hands more than you can imag­ine, hav­ing bangs and jolts and all kinds of trau­ma,” said Hana­gan. The cau­sa­tion is quite evident.”

Con­front­ed by mon­ey prob­lems as he wad­ed through his work­ers’ com­pen­sa­tion bat­tle, Emery’s mar­riage broke up. His wife just couldn’t take it” and they couldn’t keep the house. He moved into a small apart­ment and start­ed learn­ing how to cope on his $1,815 a month ben­e­fits. He nev­er qual­i­fied for a pen­sion or had a pen­sion plan despite decades of work in most­ly non-union mines.

Emery, whose father and both grand­fa­thers were min­ers, nev­er expect­ed things to end this way.

I lost every­thing, man. My whole life changed.”

Stephen Franklin is a for­mer labor and work­place reporter for the Chica­go Tri­bune, was until recent­ly the eth­nic media project direc­tor with Pub­lic Nar­ra­tive in Chica­go. He is the author of Three Strikes: Labor’s Heart­land Loss­es and What They Mean for Work­ing Amer­i­cans (2002), and has report­ed through­out the Unit­ed States and the Mid­dle East.

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