Why the Illinois Policy Institute is wrong about workers’ comp costs

Trial lawyers aren’t the cause of the state’s manufacturing woes

There’s a myth that trial lawyers are destroying the infrastructure of Illinois because of their greedy, nefarious ways. Once again, that myth rears its ugly head.

On Friday, we came across an article with this headline: Political Cowardice on Workers’ Compensation is Destroying Blue-Collar Jobs. In it, Austin Berg, senior writer for the provocative think-tank Illinois Policy Institute, argues that Illinois’ workers’ comp laws are woefully inefficient and enacted strictly for the purposes of the “powerful trial lawyer lobby” to get rich off local businesses, which in turn stagnates the state’s manufacturing industry.

“The real problem with the system,” according to Berg, “is that the interests of workers and businesses take a back seat to those of trial lawyers and doctors who profit off the system.”

Berg goes on to cite the “flawed” math of trial attorneys, who he says consistently use the insurance industry as a scapegoat for their profiteering ways. He bases part of his logic on new findings from the 2016 Workers’ Compensation Insurance Report from the Department of Insurance, along with four cost drivers that supposedly make state laws so inadequate:

No. 1: The system is a cash cow for trial lawyers

Illinois’ wage replacement rates, which govern the size of settlements, are some of the highest in the nation. Lawyers profit both from the size of those settlements and the generous formula that calculates their share of the prize.

No. 2: Medical benefits are way too expensive

Most states tie their medical fees under workers’ compensation to Medicare. But in Illinois, special interests set prices. As a result, major surgery in Illinois is three times more expensive than the same surgeries under Medicare. Pain management injections are twice as expensive. This is way out of line with other states.

No. 3: Doctors have a financial incentive to overprescribe dangerous drugs 

Illinois allows doctors to not only prescribe painkillers out of their offices, but to sell them directly to injured workers at big markups. When doctors are allowed to do this, they prescribe three times as many opioids as they would otherwise. And workers are off the job for 85 percent longer. This drives up the cost of workers’ compensation insurance. It’s also a major worker health issue.

No. 4: Many workers have a financial incentive to stay off work

There are some workers’ compensation cases in which Illinois workers can make more money off the job than on the job. That gives a strong incentive to play up an injury in the first place, and then extend it as long as possible.

But Berg’s argument is odd when you consider that the very insurance report he mentions points to a startling upswing in workers’ compensation profits, practically cementing what trial lawyers have been saying all along: that insurance companies are, in fact, making money off the small businesses they’re supposedly entrusted to protect.

As the Department of Insurance pointed out in its report, workers’ comp insurers saw profits rise by 22 points between 2010 and 2014—from negative 11 percent to a positive 11 percent. The profit from within Illinois jumped by 1.7 percent between 2013 to 2014, compared to just 1.5 percent nationwide during the same stretch of time. To quote the report: “the workers’ compensation market profit within Illinois has demonstrated a significant increase since 2010, virtually matching the countrywide profit in 2013 and 2014.”

In October of 2016, the National Academy of Social Insurance noted that between 2010 and 2014, total workers’ compensation benefits paid per $100 of covered wages actually decreased by $0.23, while employer costs per $100 of covered wages dropped by $0.06 in Illinois, making it the second most profitable line of insurance after auto insurance.

Setting aside the rising bottom lines of insurance providers, we should also look at the workers’ comp system more broadly. Back in 2015, the Washington Post went out of its way to point out statistics from the Department of Labor showing that the country’s legal structure was broken—not with respect to lawyers but the manner in which injury victims are subsequently being driven into poverty for lack of fair compensation. Illinois may be among the country’s leading states paying out for claims, but it’s hardly for unjustified reasons.

Furthermore, from what we can tell, Berg neither cites nor quotes a single trial attorney, medical provider, or victim of a workers’ comp-related case that he so adamantly believes is the root of all that is bad, making his argument ostensibly one-sided and skewed to match a warped degree of the facts.

There are hundreds, if not thousands, of cases going on right now in which state laws work contrary to the needs of those who have suffered life-long, debilitating injuries while simply doing their job.

The state of Illinois certainly has economic and financial problems. Manufacturing is one of them. But for Berg to make such broad characterizations about lawyers, doctors, and injury victims without telling the whole story is its own kind of abuse.