August 01, 2017

7-31-2017; NCCI Again Proposes Lower IL WC Advisory Rates--Yawn!!!; National Safety Council Ranks Illinois as the Second-Safest State!! and more

August 01, 2017/ Eugene Keefe

Synopsis: Nat’l Council on Compensation Insurance or NCCI Proposes Their Zillionth IL WC Insurance “Advisory Rate” Decrease.

Editor’s comment: Last week, the World of U.S. Workers’ Comp again noted NCCI always recommends reducing IL WC advisory rates. I have been doing this job and reporting to my readers for almost four decades, I don’t ever remember NCCI recommending anything but lower advisory WC insurance rates. As you can’t buy WC insurance at the NCCI advisory rates, the purpose and reporting of them always seems confusing to everyone.

This year, they suggested a 10.9% advisory WC insurance rate decrease effective Jan. 1, 2018 because of improved experience in policy year 2015 by Illinois insurers and declining lost-time claim frequency. Along with that, NCCI recommended a 7.5% decrease for the “assigned risk” market.

I don’t ever remember NCCI recommending IL WC advisory rates should ever go up. In my view, if the insurance industry closely adhered to NCCI’s recommendations, IL WC insurance would be better-than-free and the insurers might owe their customers money!

The good news, sort of, is since the 2011 Amendments to the IL WC Act became law on Sept. 1, 2011, Illinois’ cumulative voluntary insurance rate level change decreased 36.5%, NCCI said in its advisory voluntary and assigned risk filings.

Those 2011 Amendments reduced medical fee payments across the board by 30% and expanded the use of the American Medical Association guidelines for assessing permanent partial disability. The legislation also limited a worker’s choice of medical providers to one if the employee chose non-emergency treatment from a provider who was not within a WC PPO or preferred provider program, and it cut permanent partial disability benefits for most carpal tunnel cases by 20%. The legislation, signed into law by Democratic Gov. Pat Quinn, also limited an award for a wage differential to when the worker reaches age 67 or five years from the date of the award, whichever is later.

For 2017, NCCI filed a 12.9% rate reduction in Illinois – the third-largest decrease in the 38 jurisdictions where the ratings firm operates. NCCI provides advisory loss costs for 34 states including the District of Columbia, and recommends full rates to regulators in Florida and three other states — Arizona, Idaho and Iowa. In Illinois and Indiana, NCCI provides recommendations for both loss costs and full rates.

That said, please note Illinois WC insurers are not required to follow NCCI’s recommendations and generally ignore them. Beginning this past Jan. 1 in Illinois, all insurers must provide their rate deviations from NCCI when filing their proposed rates, according to an IL Department of Insurance bulletin.

NCCI’s latest advisory rate filings recommended decreases in 36 of its 38 jurisdictions.

The Illinois Manufacturers Association or IMA downplayed the proposed advisory insurance rate decrease, noting since the recession ended in 2009, our State lost more than 2,000 manufacturing jobs and we continue to bleed jobs across our borders. The forces for ITLA or the Illinois Trial Lawyers Ass’n again repeated their party-line, claiming this voluntary rate filing confirms IL WC costs are low and the fault lies with those wealthy insurance companies that somehow horde high profits only in Illinois. In my view, the truth lies somewhere betwixt and between.

I am sure Illinois Gov’t went two years without a state budget before Democrats in the IL General Assembly combined with cross-over Republicans to override Governor Rauner’s vetoes earlier this month and borrowed billions of new dollars and passed record high personal income and corporate tax increases. We already have the highest real estate taxes in the U.S. along with an estate tax that very few states have.

In those two years without a budget, the State of IL continued its inexorable march to Financial Armageddon as we accumulated nearly $14.6 billion in unpaid bills, $251 billion in unfunded/defunded fake gov’t pension obligations and the nation’s worst credit rating—that isn’t yet junk but is soon to get there. No one on either side of the IL political matrix is doing anything to block/stop/slow the financial engines that are bringing us further into an ongoing and informal government “bankruptcy.” Please note the State of IL can’t actually file for bankruptcy, as federal bankruptcy law doesn’t cover State governments. I call it an “informal” bankruptcy because we can’t possibly pay any bills in a timely fashion so all State creditors have to deal with years of waiting and begging to eventually get paid.

An NCCI circular explaining the proposed WC advisory rate decreases is here.

Synopsis: The National Safety Council ranks Illinois as the United States’ Second-Safest State!

Editor’s comment: The National Safety Council’s report gave Illinois an overall B grade with an A for Workplace Safety. No state received an overall grade of A.

Please note when States have relatively generous workers’ comp systems, employers create safer workplaces to avoid those costs. We also feel very few national blogs/writers note newly litigated IL WC claims have dropped dramatically over the last decade due in part to employer safety programs.

As we have advised our clients and readers, if you want aggressive defense attorneys that can close pending claims within your authority and reserves, send a reply. We hate badly aging IL WC claims and will work hard with you and your claims staff to close with lots of great techniques to do so.

Other B states were Maryland, Maine, Oregon, Connecticut, California and Washington. Eleven states got F grades: Kansas, Oklahoma, Arkansas, Arizona, South Carolina, South Dakota, Montana, Wyoming, Mississippi, Idaho and Missouri.

“The State of Safety: A State-by-State Report” is here.

Illinois ranked first for maximum duration of temporary disability benefits, second for lifetime permanent disability benefits and fourth for maximum weekly benefits for permanent disabilities at $1,398 a week. (That number was for 2016; the current maximum is $1,441.)

From their report:

WORKPLACE SAFETY | Grade A | Rank #1 | 2015 Work Fatalities - 146

· Prevention, Preparedness and Enforcement Developing

· Safety and health program for employers required (partial credit for incentivized)

· State/local government employee OSHA coverage

· State workplace safety committee law/mandate (partial credit for conditional, incentivized or recommended)

· State workplace violence law (partial credit for minimal or partial coverage)

· State enhanced 911 program for employers

· Workers’ Compensation On Track

· Maximum length of benefits in weeks (temporary disability)* Duration / Rank #1

· Maximum weekly benefit (permanent disability)** $1,398 / Rank #4

· Maximum length of benefits in weeks/amount (permanent disability)*** No Limit / Rank #2

· Worker Health and Wellbeing On Track

· Drug-free workplace law State Grants / Service

· Contractors

· Workplace anti-smoking law (partial credit for partial ban)

· Workplace wellness law

The complete benefit schedule is here.

July 24, 2017

7-24-2017; Clock ticking to Noon Today on Possible IL WC Reforms; Mike Lucci Joins Governor Rauner’s Team; Wassup with “Loss of Trade” in Reserving/Settling IL WC Claims? and more

July 24, 2017/ Eugene Keefe

Synopsis: Clock Ticking to Noon Today on Possible IL WC Reforms; WC Expert Mike Lucci Joins Governor Rauner’s Team.

Editor’s comment: Governor Rauner on Friday gave IL Senate Democrats a deadline of noon today to end a procedural maneuver and send him Senate Bill 1 for signature so he can sign an amendatory veto that would allow Illinois’ public schools to open in August 2017.

Our IL State budget that passed last month appropriates money for K-12 schools but did not include a legislative mechanism or formula to distribute school funds. Senate Bill 1 contains the mechanism, but it also includes an amendment that says the state will pick up the annual employer contribution for Chicago Public Schools’ pensions and the Chicago Public School’s unpaid pension debt.

Yes, if you haven’t been sleeping for the last six months, you might notice our IL General Assembly has already created massive state debt and is now adding even more billion-dollar debt to take over the existing and future debt of the Chicago Public Schools and their de-funded gov’t pensions. When it comes to debt, there doesn’t appear to be anyone in Springfield that doesn’t want more and more until the financial rubber-band on unlimited gov’t borrowing breaks and they can’t borrow any more, forcing punitive taxes on you and me.

Governor Rauner, who has line-item veto power, wants the CPS pension provisions removed from the bill and placed in separate legislation to ensure all IL schools open as taxpayers expect.

Business advocates say they have renewed optimism for reforms because Rauner recently replaced most of his staff with solid, knowledgeable candidates, including Mike Lucci, a Notre Dame grad and a workers’ compensation policy expert. Mr. Lucci, who was a vice president of the Illinois Policy Institute, a conservative think tank, joined Rauner’s staff as deputy chief of staff for policy and legislative affairs. Mr. Lucci advocated

· Modest reductions in indemnity payments;

· Better wage-replacement ratios;

· a stronger IL WC medical fee schedule and

· Abolition of physician dispensing of opioids.

I support the majority of his efforts. I also point out we can bring IL WC to the main stream by simply tweaking the system mildly. I also feel sure Mr. Lucci doesn’t want to win “the race to the bottom” to be hilariously cheap to leave IL widows/widowers and seriously injured workers on welfare in a few years after being killed at or disabled from work, as our cheap-o neighbors in Indiana WC do.

Per the 2016 State of Oregon WC Premium Rankings, Illinois is tied with Oklahoma for the nation’s seventh-highest premiums, at $2.23 per $100 of payroll. The Alabama WC system is smack dab in the middle at $1.85 per $100 of payroll—using simple math, we need to cut about .40 cents per $100 of payroll to win what I call the “race to the middle” of U.S. WC Premium rankings. We can do it or something close to it, if we feel growing better jobs and enticing new business to this State is important.

The Democratic majorities in the IL House and Senate passed two workers’ compensation bills during recent regular and special sessions, but I join with business and insurance spokespeople to characterize their efforts “fake reforms.” Governor Rauner has vowed to veto both bills but hasn’t yet. Under the state’s Constitution, the governor has 60 days to either sign or veto a bill, or it automatically becomes law.

House Bill 2525 calls for a drug formulary and would stop insurers from charging “excessive rates” that produce “unreasonably high” profits and to submit their rates to regulators for prior approval. That bill was delivered to Governor on June 29, so he has until Aug. 28 to sign or veto it.

HB 2622 would require the Workers’ Compensation Commission to take $10 million from its operations fund to create the comical and tiny “Illinois Employers Mutual Insurance Co.” to supposedly get started as a mono-line carrier at some future date and then immediately compete against multi-zillion-dollar global WC insurance carriers. We are sure everyone in the WC insurance industry is enjoying a wonderful belly-laugh to consider that effort as “real.” You might note that bill, if signed by the Governor would require cutting the IL WC Commission’s budget by about 1/3, generating the need for as many as 50 IWCC workers being fired. That bill was delivered to Rauner on June 23, so he has until Aug. 22 to sign or veto it.

Neither bill outlined above contains provisions sought by IL Republicans — a Medicare-based fee schedule instead of a charge-based formula, and a four-year freeze on maximum weekly benefits at $775.18.

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

Synopsis: Wassup with “Loss of Trade” in Reserving/Settling IL WC Claims?

Editor’s comment: We were asked by a reader about the concept of “loss of trade” and how to reserve/settle IL WC claims using it. We wanted to provide a couple of thoughts.

“Loss of trade” as a permanency concept in IL was first used to provide large amounts of PPD to police officers and firefighters who would receive line of duty disability pensions under the Pension Code. When a police officer or firefighter can no longer do their job due to life-changing injuries, they can’t simultaneously receive both the line of duty disability pension and a total and permanent disability award or wage loss benefits under the IL WC Act—the Pension Code bars that double recovery. I agree with that approach.

What I feel liberal hearing officers did it cook up the concept of “loss of trade” to justify large “going away presents” to seriously injured police officers or firefighters where they suffered life-changing injuries to then receive only a line of duty disability pension. I remember one claim where a now retired firefighter was seriously burned and it was felt the lifetime benefit wasn’t “enough” so the very liberal Arbitrator added 80% BAW or about $200,000 as a going away present for the seriously injured firefighter.

The problem with this concept as it relates to police and firefighters is our silly State doesn’t require them to be catastrophically injured to be entitled to a line of duty disability pension. All that is required is someone confirming then can no longer work as a police officer or firefighter. For a simple example, there is an IL firefighter who had poor hearing and was surprised to have the siren/horn on a fire truck go off. He suffered significant hearing loss and everyone agreed he would be a danger to himself, his co-workers and others to be unable to hear commands during a live fire or medical emergency. Rather than have a law that would require the fire district to find him other work where he could have hearing augmentation and actually do something for his pay, he was pensioned off. In my view, that approach directly violates the intent and coverage of the Americans with Disabilities Act but no one is going to bring a claim for it because the worker is getting so much money to not work.

So on top of being paid a line of duty disability pension, how much would you give such a worker for “loss of trade?” In my view, he hasn’t lost his trade, we are simply allowing him amazing largesse to be paid and never have to work again, unless he wants to. In fact, he can find lots of other jobs or start his own business with the money from his pension. Please note lots of firefighters and police do so—happy to provide examples on request.

Does this same “loss of trade” phenomenon apply to other IL workers?

Well, I am sure the term “loss of trade” doesn’t appear and isn’t defined in the IL WC Act. When and if you start to use it, you can give it any meaning or value you like. Let’s take a construction worker who undergoes cervical fusion surgery resulting in lifetime restrictions of no lifting over 50lbs. His employer agrees to accommodate the restrictions and he or she is successfully returned to regular work.

In my view, such a claim has a value between 15% to 30% LOU of the body. What I feel liberals around us will start arguing is the worker is “locked” to that employer as other employers won’t hire him. Please note anyone that won’t hire him with such restrictions is almost certainly violating the federal ADA. Either way, if you start increasing reserves to 40%, 50% or up to 80% BAW, what is that supposed to be formulated on? Why would loss of trade make a claim worth triple its ordinary PPD value?

In summary, my law partners tell our entire team, we have to let you know of litigation/insurance issues like this right or wrong. You have to decide what is best in setting reserves—we only make legal recommendations.

In my view, I routinely fight “loss of trade” as a negotiating concept and trial technique. Again, in my view, to have Claimant attorneys and IL WC Arbitrators start adding language to the IL WC Act that isn’t there and making awards in reliance on such concepts, they are violating the Due Process and Equal Protection provisions of the IL Constitution. As I outline above, they are also ignoring the ADA, as if you can “wish away” federal law.

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

Synopsis: IS IT MID YEAR ALREADY??--NEW IL WC RATES ARE POSTED—UPDATED RATE SHEETS AVAILABLE SOON FOR ILLINOIS WC RATE INCREASE!!!

Editor’s comment: Illinois WC Rates Jump Again So Please Be Aware Of The New Rates or Your Claims Handling Will Suffer and Penalties May Ensue.

Email Shawn at sbiery@keefe-law.com and Marissa at mpatel@keefe-law.com to Get a Free and Complimentary Email or Hard Copy of Shawn R. Biery’s Updated IL WC Rate-Sheet!

We like to hope it’s a sign of a growing economy—even though rates continued to increase almost every cycle as we continue to watch the growth of IL WC rates. As we have mentioned in the past, since in the 1980’s, the IL WC Act provides a formula which effectively insures no matter how poor the IL economy is doing WC rates continue to climb.

We caution our readers to pay attention to the fact the IL WC statutory maximum PPD rate is $775.18. However, this rate is only through June 30, 2017 and the new max PPD will be published in January 2018. When it will be published in January 2018, this rate will change retroactively from July 1, 2017 forward. If you don’t make the change, your reserves will be incorrect--if this isn’t clear, send a reply.

The current TTD weekly maximum has risen to $1,440.60. A worker has to make over $2,160.09 per week or $112,366.80 per year to hit the new IL WC maximum TTD rate.

The new IL WC minimum death benefit only increased by about $5 but we have now cracked the $700k ceiling. That amount is now 25 years of compensation or $540.23 per week x 52 weeks in a year x 25 years or $702,299.00! The new maximum IL WC death benefit is $1,440.60 times 52 weeks times 25 years or a lofty $1,872,780.00 plus burial benefits of $8K. IL WC death benefits also come with annual COLA increases which we feel can potentially makes Illinois the highest in the U.S. for WC death claims.

The best way to make sense of all of this is to get Shawn Biery’s colorful, updated and easy-to-understand IL WC Rate Sheet. AGAIN—If you want just one or a dozen or more, simply reply to Shawn at sbiery@keefe-law.com and Marissa at mpatel@keefe-law.com They will get a copy routed to you once we get laminated copies back from the printer—hopefully before they raise the rates again! Please confirm your mailing address if you would like laminated copies sent to your home or office!

July 18, 2017

7-17-2017; State of Illinois Gets a Budget But No Need to Celebrate; IS IT MID-YEAR ALREADY??--NEW IL WC RATES ARE POSTED by Shawn Biery; John "Jack" McAuliffe, Rest in Peace and more

July 18, 2017/ Eugene Keefe

Synopsis: State of Illinois Gets a Budget But No Need to Celebrate--We Continue the Inevitable Approach to the Financial Abyss of Governments Like Detroit, Puerto Rico and Greece.

Editor’s comment: Governor Bruce Rauner has tried to forestall the never-ending financial crisis caused by Speaker Madigan and other IL legislative leaders. If you aren’t sure, Moody’s indicates we have $251 Billion—yes, a Quarter of a Trillion(!) dollars in gov’t pension debt! As I advised last week, our IL State legislators can pay in about $32,000 in fake gov’t pension contributions to get millions upon millions of dollars for the rest of their lives. Former U.S. President Barack Obama and former Chicago Mayor Richard M. Daley are both eligible for this “impossible to fund” largesse. Our IL judiciary can similarly contribute about one years’ pay to their fake gov’t pension program to then get $5-10M in benefits, all from IL taxpayers. Those “doomsday engines” and others like them are pointing our State to the bottom of the financial ocean if someone doesn’t do something about spiraling fake gov’t pensions, overspending and waste.

I read a very defiant article by House Speaker Madigan castigating Governor Rauner for trying to straighten out our State’s impossible financial situation. The problem I have with Speaker Madigan’s point of view is the multi-billion-dollar financial problems occurred on his watch while he played a leading role in creating his impossible-to-stop power base that was built on skyrocketing compensation for all IL state gov’t workers, unmanageable fake gov’t pensions and duplicative/wasteful use of our tax dollars. I feel our IL State WC defense program for State workers continues to be run poorly in part due to the role of Speaker Madigan. In my view, our great-great-great-grandchildren will be paying off the mistakes of this generation of IL legislative leaders for decades to come. If Speaker Madigan wants real and lasting reform to cut spending and waste, combine/streamline state agencies and make financial sense of IL State government, go-for-it--he doesn’t need the Governor’s help; no one can stop him. To me, it is part of the tragedy of our lifetimes he won’t do it and may be dedicated to blocking any real IL gov’t reform while taxes and debt spiral.

Governor Rauner devoted this part of his life and work to trying to find solutions to the morass. He offered an IL State budget proposing $37.3B in spending, but included no correlating revenue or tax increase. After the failure of the General Assembly to enact a state budget by the end of this past May, the Governor called lawmakers back to Springfield for a special session in July. As part of this call for a special session, he joined with GOP Leaders announcing "The Capitol Compromise" which included an IL State income tax increase to achieve a balanced budget. In addition, the Capitol Compromise included spending caps, property tax relief, workers' compensation reform, government consolidation, education reform, term limits and gov’t pension reform. Governor Rauner tried to wedge the Compromise through, as the Democrats needed Republican support to pass any budget—instead, as you will read, the Republicans blinked.

Earlier this month the IL House took the final votes to override Governor Rauner's veto of the bills that constitute the fiscal year 2018 budget

· SB9, the revenue portion of the budget;

· SB6, the spending portion; and

· SB42, the budget implementation portion.

All three bills were vetoed by the Governor and the General Assembly quickly overrode his veto. The bipartisan package spends over a billion less than what the Governor proposed in February, and $3B less than what was spent in FY 2017.

This new State budget increases the individual income tax rate from 3.75% to 4.95% and from 5.25% to 7% for corporations. While several states have no income tax at all, our State is now just under 5% on top of the levy of the federal gov’t. For Illinois Department of Revenue guidance on income tax withholding go to:http://tax.illinois.gov/AboutIdor/PressReleases/PR-2017-07-11.pdf)

The new budget increases funding for K-12 education over FY17 levels by approximately $700M, relying on a more equitable school funding formula that benefits low-income school districts like Chicago's. A drafting glitch in the budget regarding school funding will require lawmakers to return to Springfield before the school year starts next month.

This State budget plan includes paying down a little more than half or $8 billion of our State's enormous backlog of overdue and unpaid bills. The State of Illinois currently has about $15 billion in unpaid bills. The devices being used to pay the late bills and fees will be with a combination of borrowing and fund “sweeps.”

Please Note This State Budget Has No Reforms—It is Basically Higher Taxes and More Borrowing to Try to “Tread Water” While IL State Government Continues to Approach The Financial Abyss

The biggest objection to the income tax increase from Governor Rauner and legislators voting against it was the lack of any reforms to prevent a reoccurrence of the overspend-and-tax-and-borrow approach to clunky/junky/poorly run IL State Government. Consequently, it is expected Governor Rauner may again be calling our General Assembly back to Springfield later this month to see if we can develop reforms to gov’t pensions; state employees' group health insurance; procurement; a real estate property tax freeze; workers' compensation reform and term limits.

What's Next for IL Workers' Compensation Reform?

Our industry continues to ask is there an opportunity for IL workers' compensation reform and hopefully lower costs?

The challenges to getting IL WC reforms have changed. Approximately $6 billion in education spending is in limbo due to an obvious/glaring glitch in the State budget. Legislation has to be presented and pass to resolve the mistake. The question is whether the Governor will use this problem to extend his never-ending efforts for WC reform. Whether Gov. Rauner leverages the budgetary problem beyond education needs does not mean IL WC reform is forever off the table. Gov. Rauner along with Republican Leaders Sen. Bill Brady and Rep. Jim Durkin are committed to pursuing a WC reform agenda that includes improving workers' compensation. Insiders believe Gov. Rauner will call the General Assembly back to Springfield, possibly during July, to deal with the continuing need for reform.

The challenge will be whether House Speaker Madigan and Senate President Cullerton are dug in or could they have interest in allowing a modest and meaningful workers' compensation proposal to be presented and passed. Of the two, Senate President Cullerton has been the most willing to negotiate—we salute him for doing so. Speaker Madigan has made it clear his only acceptable path for “reform” is regulating workers' compensation insurance rates. We and lots of business observer don’t consider his position a “reform” at all. I personally think of it as a fake and intentionally confusing WC “deform” effort that won’t happen even if passed. At minimum, it will infuriate the WC insurance industry that doesn’t need the interference, just to make the General Assembly feel like they did something.

We have pointed out easy and simple reforms that are certain to save IL WC costs and hope all sides consider them—one easy way to cut PPD is to go back to the PPD values for body parts before the Blagojevich era. This is sort of like what Senate President Cullerton called a “hair-cut” that should be acceptable and a positive development.

I want my readers to know the Illinois State Chamber of Commerce is committed to achieving workers' compensation reform—they aren’t giving up the fight to get us back to the middle of the U.S. WC pack. IL WC Reform grows in importance as other costs for employers via tax changes make Illinois even less attractive to invest and grow job in. Without legislative changes that demonstrate our political leaders are interested in advancing economic opportunity as much as they are on a spend/borrow and tax agenda, Illinois will continue to lag in job growth and the revenues necessary to sustain the growth of State government. I hope my readers will join and support the Chamber—for more information go to their website at www.ilchamber.org.