8-10-2015; Can IL WC Reforms Sought By New Governor Rauner Break the Budget Deadlock?; Will Obamacare Influence Workers Compensation?; Will “Killer-Math” of Gov’t Pensions Kill Illinois? and much more

Synopsis: All Eyes Turn to Springfield--Can IL Work Comp Reform Agreement Break the Deadlock?


Editor’s comment: Our Governor is keeping the state on the “verge” of disaster to try to force the other side to make progress in lots of pro-business areas. Most media sources indicate the State of Illinois financial and budgetary situation remains a mess with Gov. Bruce Rauner, a Republican, and House Speaker Mike Madigan and Senate President John Cullerton, Chicago Democrats battling over the state budget with a deadlock that has left Illinois without a spending plan since June 30. Last week, it was reported Madigan, Rauner and Cullerton indicated workers’ compensation reform was a legislative area where compromise was possible. We consider the following to be important developments for our IL WC readers to follow closely. It seems to us the two sides remain fairly distant, as you will read.


Governor Rauner sent a five-page letter to the General Assembly, thanking legislators for their willingness to potentially compromise on proposed reforms to workers’ compensation laws, outlining areas of agreement, disagreement and issues to discuss. In response, the IL State Senate elected not to act on House Bill 1287. We felt HB 1287 was and is a kooky bill passed by the IL House of Representatives on June 4 that included a provision to prohibit insurers from charging "excessive rates." As we reported when we saw this bill in June 2015, we consider this legislative effort counterproductive to the important progress made in cutting workers’ comp costs and litigation.


In response to Governor Rauner’s letter, the IL Senate approved its own version of workers' comp reform, SB 162, which included some of the ideas contained in Rauner’s memo and missed on others. After Senate passage, the next day the IL House referred it to its Rules Committee where it currently sits. This new IL Senate bill contains a definition of causation Governor Rauner finds objectionable, but creates a WEAR or Workers' Compensation Edit, Alignment and Reform Commission to further review existing laws. As we have advised our readers, the role of the WEAR Commission is identical to that of the existing Illinois Workers’ Comp Commission that already has ten members. There are already lots of advisory panels for the IWCC—do we really need a sixth/seventh blue ribbon WC panel so our legislators feel like they have done something?


SB 162 also moves the IL Workers’ Compensation Fraud Unit from the do-nothing IL Department of Insurance to the IWCC. A recent media report indicated the IL WC system had six convictions in a year where other states our size get that many WC fraud convictions in a month. We agree something needs to be done to actually have WC fraud investigations occur and mean something to this industry.


What Important Things are Changed In SB 162?


Traveling Employee WC Coverage Expanded--the prior limitation or proposed reform of the concept of “traveling employees” is not limited at all but greatly expanded to cover most activities when an employee “travels away from the employer’s premises.” Basically, anything a worker in transit does is going to be fully covered under Illinois workers’ comp with dramatically higher costs. Police officers, firefighters, truckers, bus drivers, garbage handlers, anyone who works behind the wheel of a vehicle would now be wholly covered all day for anything they might “reasonably” be expected to do or mis-do. We urge our leaders to jettison this massive expansion of workers’ comp benefits that is confusing, contradictory and unneeded. If an accident doesn’t arise out of and occur in the course of employ, it shouldn’t be covered—this legislation completely contradicts that basic concept and greatly, almost wildly expands WC coverage. If you don’t understand how and why, send a reply.


The Proposed 30% IL WC Medical Fee Schedule Cuts are Dropped In this New Senate Bill--What our physician, hospital and healthcare givers among our readership may note is the proposed deep cuts to the IL WC Medical Fee Schedule have been redacted, dropped and omitted. As Dr. David Fletcher of SafeWorks Illinois and others have noted, these changes might have resulted in healthcare givers turning down work comp patients, as WC care comes with more required documentation and the higher charges for such care allow healthcare providers to make up the difference. As you may read below, Governor Rauner hasn’t given up trying to get these cuts into place.


Whether successful compromise effort on workers’ compensation reform can break the IL budget stalemate or not is challenging to predict. Gov. Rauner said he supports a spending plan that includes a moderate tax increase if Democrats agree to a list of to-do items, including workers’ compensation reform. A related concern is whether SB 162 is “enough”—have IL State Democrats handed our Governor a workers' comp reform bill he feels is bona fide and worth ending the battle?


Jay Dee Shattuck, a lobbyist for the Illinois Chamber of Commerce is quoted as confirming our view rising IL workers’ compensation benefits could cause Illinois to lose business to neighboring states. Jay feels legislative compromise could help, but he does not like either bill. He is quoted as saying “(HB) 1287 is a terrible bill and (SB) 162 is a bad bill”. “They both drive up the costs of doing business in the state." The defense attorneys at KCB&A wholeheartedly agree with this knowledgeable leader.


Other issues Gov. Rauner told lawmakers he was willing to discuss or has to have included are the use of electronic billing records, limited coverage for injuries to employees incurred while traveling for work, reducing medical fees for specialties like surgery whose permitted fees far exceed Medicare costs, a proposal for an ombudsman to help guide people through the IL WC process, more prompt payment for medical expenses and use of AMA guidelines when determining impairment. In contrast to SB 162, Governor Rauner wants to limit the “traveling employee” concept “The travel must be necessary for the performance of job duties and the employee must receive reimbursement for the travel,” Gov. Rauner said in his letter. "We are seeking to clarify that injuries sustained while traveling to or from work and injuries that occur while running a personal errand or on break are not compensable.” We strongly agree with our new Governor’s approach to the ‘traveling employee” concept.


Gov. Rauner continues to seek a reduction of allowable fees for medical specialties that are substantially higher than the payment allowed under Medicare. He has backed off from an earlier suggestion to cut medical fees by another 30% across the board. Medical rates were already cut by 30% in the 2011 reform legislation. “Surgery costs are the most egregious WC fee schedule abuses, with rates 300% to 400% above Medicare rates and 100% to 200% above group health rates,” Rauner said in his letter.


We will continue to watch and report what is happening in our State Capitol. We appreciate your thoughts and comments. Please feel free to post them on our award-winning blog.




Synopsis: The Patient Protection and Affordable Care Act or PPACA--Will Obamacare Influence Workers Compensation?


Editor’s comment: John Campbell and Gene Keefe will be criss-crossing Illinois this week presenting to various audiences about the PPACA. If you have interest in such a presentation for your company or local industry or business group at a future time, send a reply.


We note the blog of Joe Paduda called Managed Care Matters accurately points out Obamacare appears to be embedded in our country with minimal debate or movement to dramatically change it among the Republican party leaders on the topic:


[D]uring the GOP Presidential candidate debate last week, there were fewer mentions of Obamacare than there were candidates on stage. Over the two hour debate, the biggest change to the American health care system in fifty years was mentioned 8 times. Abortion, Planned Parenthood, ISIS, immigration, Mexico, Russia all garnered more time than health reform. If there was any doubt whether the Affordable Care Act is here to stay, the lack of attention paid to PPACA by the moderators and candidates should lay that to rest.  That’s not to say all is bright and cheery in health reform land; rates are going up (albeit at much lower rates than predicted); there are still millions of Americans without coverage; and the wrenching changes in our health care delivery system (some – but by no means all – resulting from PPACA) are being felt far and wide. While almost all of the 17 GOP candidates have positions on health care, health reform, and PPACA, health care reform is no longer an issue worthy of debate.


Perhaps the most telling evidence that PPACA is here to stay is this: Sen. Marco Rubio purchased health insurance thru the D.C. Exchange (and took advantage of a $10k federal subsidy), a decision that seems stunning but wasn’t worthy of mention by any of the moderators or fellow candidates.


What does this mean for you? PPACA is here to stay. See more at: http://www.joepaduda.com/#sthash.NrRtE9yC.dpuf


In our view, all WC participants need to have a basic understanding of the PPACA to get an idea how it may change your jobs and goals. Please remember Obamacare for some workers has moderate to high deductibles with some subsidies. We still feel most U.S. citizens aspire to 100% on-demand coverage of all conceivable medical care and prescription drugs—that model isn’t going to work indefinitely. One has to wonder if deductibles will ever come to the workers’ comp arena to try to make the injured worker join, even minimally, in the cost or cost-effectiveness of their extended medical care.


We note the WCRI or the stat-rats at the Workers Compensation Research Institute are closely watching the development and implementation of the PPACA and how it is going to influence all U.S. workers’ comp programs. Obviously, the expanded access to group healthcare with substantial government subsidies is going to be felt as the years roll on. In line with the WCRI’s ongoing analysis of the PPACA and its impact on workers’ compensation systems throughout the United States, everyone in our industry will be watching for cost shifting of medical care to workers’ comp insurers from private and public group health insurers.


Certainty of healthcare coverage for lots more folks under Obamacare should prevent questionable or fraudulent workers comp claims from being “created” and/or filed with a goal of insuring full coverage of medical care under workers’ comp.


Some national commentators have speculated because PPACA promotes an increase in technology such as wearable monitoring devices, telehealth Google Glass, 3-D printing, internet connected sensors, robotic devices and other additional technological advancements. Workers’ comp insurers and TPA’s who have been slow to sign off on healthcare technology may be amenable to doing so if such innovations lower the overall cost of work-related treatment. There is a defined variance in state laws with respect to introduction of healthcare technology solutions. National research indicates forty-three states and the District of Columbia do provide Medicaid reimbursement for telehealth services.


There is no question PPACA has very limited WC references in the entirety of the PPACA—if you look carefully, there are only two specific references to work compensation in the PPACA. The first reference is found in Section 2401, which deals with providers of home and community based attendant services. The second reference is where the federal legislature seeks guidance with respect to how the Social Security Act applies to automobile and work compensation healthcare cases.


Most commentators feel the PPACA is still way too new to truly analyze how heavily it will influence workers’ compensation claims in the United States. As more studies are published, if they demonstrate more people get more access to better health coverage under the PPACA, workers’ compensation claims and costs of medical treatment associated with claims may go down.


We appreciate your thoughts and comments. Please post them on our award-winning blog.




Synopsis: Will “Killer-Math” of Gov’t Pensions Kill Illinois?


Editor’s comment: We saw an amazing article in Crain’s Chicago Business from the legendary Dave McKinney titled—The Illinois Pension Disaster, What Went Wrong? Take a look http://www.chicagobusiness.com/section/pensions


We don’t mean to unfairly criticize Mr. McKinney but we hate the term "unfunded pensions" because it sounds to our readers like there are no "funds" to pay the retirees. To the contrary, IL government fake pensions are "back-funded" because we end up waiting until after the worker is no longer working to find all the money needed to pay their fake pensions via borrowing or new taxes. The “back-funding” of government fake pensions is why we call them fake—most folks think of a “pension” as being front-funded. The “back-funded” monies are eventually paid by taxpayers to gov’t retirees years and decades after retirement because there isn't nearly enough money set-aside up front to cover their retirement needs.


We feel Illinois is the land of the “government-double-salary”—one job with a salary while a gov’t worker is working for us; one salary with giant increases outlined below after they have stopped working in government but were vested in the fake gov’t pension program. We know at least three friends in their early 60’s who are basically on the dole because of limited government service but they and thousands more like them will be paid by you and me for the rest of their lives with annual 3% fake pension raises.


Please note what we consider simple and immutable “killer-math” that isn’t going to truly allow Illinois to recover with the current fake gov’t pension programs in place. Unlike many states where pensions are at 60% of the highest salary, most IL gov’t retirees start at 85% of their highest salary with 3% compounded annual increases. Do the killer-math with us for a second in your mind—after one year, they are making 88% of their highest gov’t salary, in the second year, they are at about 91%, third year 95%, then 99%.


Please don’t stop there—math is math, folks. At about their 23d year out, at 3% compounded increases, they will have doubled their initial annual pension. Around the 37th year, their post-employment pension payments will have tripled and continue to rise. Don’t trust us, you can do the calculations here: http://www.moneychimp.com/calculator/compound_interest_calculator.htm


Ballotpedia indicates there are over 962,000 folks currently in IL government fake pensions programs. They indicate our state has 656 fake government pension plans. This growing problem is causing businesses and individuals to leave the state in droves because I/we don’t want to owe government workers these fake pension benefits for the rest of their lives. http://ballotpedia.org/Public_pensions_in_Illinois


Please also note there are thousands of participants that are double- and triple-dipping to have two or three or more fake pensions, so their doubled fake pension income is going up 6% each year.


We repeatedly point out you can’t and shouldn’t blame participants. They didn’t cause or contribute to the disaster. But there remains lots of uncertainty for participants that is unfair to them—they are paying what they were told to pay and no one knows what may happen with the money runs out—the Chicago Tribune made this chilling point about City of Chicago fake pensions in their editorial column today. We hope the participants start to understand killer-math in gov’t fake pensions and reach out to their legislators and Governor along with the rest of us. We need a united front to make sense of these issues moving forward.

In the similar vein, the so-called "pension clause" in the IL Constitution is a "protect-government-retirees-from-legislators-and-the-Governor-at-the-expense-of-taxpayers" clause. Understanding you probably can’t change existing pension benefits, if we want a clause to protect-future-taxpayers-from-legislators-and-the-Governor, we suggest a state constitutional amendment limiting government retiree pension pay to the sum of three things


  • Their pension contributions during their service,
  • Whatever the government put into the program for them while they were employed for us and
  • Investment income at any time.

From the perspective of what we have said above, we feel there are at least three government pensions that are virtually "impossible-to-prefund."

1. Chicago school teachers put 2% of their annual pay into their pensions. After twenty years, they are fully vested but have only contributed 40% of one year’s pay—they get all that money back in the first six months of retirement. To “pre-fund” an 85% pension with 3% compounded increases based on the killer-math above, we think a CPS teacher would have to put their entire salary into the pension program and the CPS would have to more than match their salary. That is clearly a fake pension program requiring enormous pre- and post-funding challenges that city taxpayers shouldn't have to eat.

2. Full Circuit Court judges currently make $203K a year with 3% annual increases guaranteed in the IL Constitution. They only need 9 years of service with limited contributions to be fully funded and receive 85% of their highest pay the first year with guaranteed 3% compound raises for life. They start their pensions at $170K a year. As we outline above, after 23 years, a retired judge would be getting close to $400K a year. We assure you a vested IL Circuit Court judge can receive as much as $9M from their fake pensions, if they live long enough, for just nine years of service. In our view, based on the killer-math, such a pension truly can't be "pre-funded" without having judges contribute their entire salary for the nine years and then “matching” that by giving judges the equivalent of about $700K a year in salary and government pension matching contributions. Do you understand this immutable math and how crazy the numbers are?

3, Finally, IL legislators are vested in only four years of part-time service. They clearly don't contribute one full year of pay to then get paid for the rest of their lives. The late Judy Baar Topinka worked for six years as a legislator and contributed about $36K to the pension program. When she passed at age 70 earlier this year, her pension payout was $150K a year. If she had lived 20 more years, she would have received over $4M for her contribution of $36K. As I indicate throughout this article, we think IL legislators would have to contribute their entire salary and the state might have to quadruple what they are paid to pre-fund what they receive in retirement. Do we understand how nutty it is to pay a lifetime pension to a part-time legislator after only four years of service needed to become vested?

Our challenge to our readers is to tell us the options to get out of this business-busting pension disaster before everyone and every business moves elsewhere as is happening right now.


Here are some quick options that need lots more thinking:


  1. An emergency “Con-Con” or constitutional convention to completely rewrite the whole thing for existing and new workers.
  2. A constitutional amendment to try to do the same thing.
  3. End/abolish the Judicial Retirement System and the Legislative Retirement system for new judges and legislators because they are already well-taken care of.
  4. Consider terminating or re-starting all state workers and rehire them with new and less-fake pension agreements.
  5. Consider outsourcing lots of state jobs to staffing companies so pensions aren’t owed.

We hope you have better and less-controversial thoughts—send them along. We don’t see a realistic financial future for this state if the gov’t fake pensions aren’t changed in some fashion. You have our permission to use any or all of these ideas whenever you want. We appreciate your thoughts and comments. Please post them on our award-winning blog.