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August 3, 2016

Fixing Illinois’ Outdated Workers’ Comp

Summary:

Illinois’ system has not evolved to meet the modern workplace; it works more for special interests than employers and employees.

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The American workplace has changed dramatically since Illinois created its workers’ compensation system in 1911. But the workers’ compensation system, especially in Illinois, has not kept pace. Not only does the current system do a poor job of serving the majority of workers, especially parents and other workers who need flexibility to work hours outside the traditional workday and in off-site locations such as their own homes, but it also prioritizes the financial interests of groups such as lawyers and workers’ compensation doctors over the needs of both workers and employers.

The system needs to be reformed. Illinois policymakers should allow workers and employers to opt out of the state-run workers’ compensation system and to craft their own agreements around their particular circumstances – rather than forcing all workers and employers to adhere to rigid regulations that often no longer serve their purpose.

The early 20th century origins of workers’ compensation

At the turn of the 20th century, increasing numbers of Americans found themselves in new, hazardous working conditions in the jobs created by the Industrial Revolution. But few protections existed for workers who might be unable to support their families if they became injured at work. Workers’ compensation was designed to remedy that situation by providing medical care and income replacement to injured workers. The system, however, has not evolved to meet the needs of today’s workers and employers and is ill-suited to address the problems of the modern workplace.

Changes in the modern workplace

Far fewer people work in inherently risky jobs today. The industrial sector employed nearly a third of the workforce in 1900, but employed just 19% in 1999. And even today’s dangerous jobs have become less hazardous. Deaths per 100,000 workers fell more than 93% to just four by the end of the 20th century, down from 61 deaths per 100,000 workers at the start.

But workers also face new challenges. In the middle of the 20th century, just 30% of women were part of the workforce. That number has risen to nearly 60%. Increasing numbers of Americans must now balance work responsibilities with caring for a child or elderly relative: 82% of parents are in families where both parents work. Many employers have met those challenges by offering more flexible work environments such as telecommuting and flexible schedules. But workers’ compensation – a system supposed to protect workers – increasingly stands in the way of new work arrangements to meet workers’ needs.

See also: How Should Workers’ Compensation Evolve?  

Workers’ compensation was designed for an industrial workplace. Yet, it applies equally to a telecommuter working from home. A professor who slips on papers in his home office or an interior designer who trips on her dog can claim workers’ compensation.

That makes businesses less likely to give workers flexibility to work at home or, when employers do, to let workers set their own hours. A worker who answers email at night, after taking time to pick up children from school and prepare dinner, could still be considered in the workplace as though the distinction between work and home could be drawn as simply as when workers punched a time card. Employers have little control over possible costs if the employee is injured at home, and the broken workers’ compensation system gives employers an incentive to take away flexible working arrangements for fear of legal liability.

These problems are not unique to Illinois, but the Prairie State is unusual both in having one of the most costly workers’ compensation systems in America and in not having exemptions for small businesses or domestic workers. The absence of an exemption for domestic employees hurts increasing numbers of workers who must balance work with child or elder care. As with telecommuting, this can affect all workers, but it disproportionately affects women, who tend to spend more time caring for children. And, while not everyone can afford a live-in nanny, reducing impediments to hiring domestic help makes it easier for women to hold more senior positions.

Opting out of the state-run workers’ compensation system

While Illinois has one of the most restrictive workers’ compensation systems, Texas has one of the least restrictive, even allowing employers to opt out entirely. Critics of the Texas system allege this has led employers to cut services, but the evidence suggests employers prefer to save money by cutting areas prone to fraud, while often increasing benefits that employees value. Employers often provide better benefits than required for the same reason they offer flextime: to recruit the best employees at the lowest cost.

Special interests benefit from the current workers’ compensation system to the detriment of workers and employers

The government-imposed workers’ compensation system has also been far more susceptible to co-option by special interests. While workers and employers use the workers’ compensation system only when there is an injury, lawyers interact with workers’ compensation every day. As a result, although the workers’ compensation system is supposed to provide quick resolution to workers’ claims, the powerful lawyers’ lobby helped create a system that can stretch claims out over years. This costs businesses money and denies injured workers rapid settlement of their medical bills.

Medical providers, too, have benefited from a system that unnecessarily prolongs treatment and facilitates the overprescription of certain medications, including addictive opioids.

See also: The Pretzel Logic on Oklahoma Option  

Employers and workers both have an incentive to design a better system, but the false presumption that the government-run system is better prevents them from doing so. Interestingly, Texas employers who opted out of the state-run workers’ compensation system have all but eliminated opioid overprescription.

Fixing Illinois’ workers’ compensation system means government must step back and allow workers and employers to reach agreements that make sense in their specific situations – arrangements that suit the needs of workers and employers, rather than line the pockets of special interest groups benefiting financially from the current system.

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About the Author

Mark Adams is the director of regulatory reform at the Illinois Policy Institute. He is working to find solutions to legal, economic and regulatory problems in Illinois with a focus on identifying alternative approaches to policies that disproportionately affect opportunities for low-income, working families.

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