Workers Comp Reform Could Help Business, Unions

It could also help the state budget. So why haven't Republicans embraced the idea?

By - May 5th, 2015 11:22 am
Sign-up for the Urban Milwaukee daily email
Wisconsin State Capitol Feature

Wisconsin State Capitol Feature

One of the biggest economic issues in Wisconsin may or may not be addressed in this legislative session.

That would be the staggeringly high medical costs under the state’s workers compensation program. It’s about a billion dollar annual program to protect workers injured on the job, with roughly $300 million for disability damages and $700 million for medical treatments.

It’s the medical piece that begs for reform and may not see it. All sides concede that medical prices under workers compensation are two to three times higher than those paid by insured health plans in the private sector.

Let’s do the math on the potential savings: Using Serigraph (the West Bend-based company which I served as CEO for 20 years) as a starting point, we spend $300,000 per year on about 600 employees — about $500 apiece. If we are average, we are spending $350 of the $500 on medical. And, if we could use our normal health plan rates, we would save at least one-third of the $350. Let’s call it $120 per employee per year.

That $120 saving per employee would benefit every employer in the state. Serigraph, for example, would save about $75,000.

It’s not an enormous amount, but applied across all companies in Wisconsin, it could be a bigger positive impact on the business climate than the right-to-work. It could match the $200 million-plus impact of the removal of the corporate income tax on manufacturing and agri-business.

It would even be a positive for the state budget. With 65,000 employees and $120 in savings for each, the state could cut its annual workers compensation bill by almost $8 million. That would be $16 million over the 2015-2017 biennial budget. (Yes, this is swag, but it can’t be way off.)

So why isn’t this a no-brainer for reform in the legislature?

Well, the $200 million in savings has to come from somewhere, and that would be the doctors, hospitals, and other providers like chiropractors.

It’s a sweet slice of business that they don’t want to give up. The providers argue that Medicare and Medicaid grossly under-pay, so they deserve to make it up on workers comp.

I’m not buying that disconnected argument. If they have a problem with the federal government’s price controls, take it up with our congressional delegation, not private payers.

Here’s the political reality that stops reform cold. The providers write big campaign checks, big enough to give pause to legislators, including Republican legislators who are friendly to business and taxpayers.

There is still hope, though, for reform. In the last session of the legislature, the unions in the state lined up with business to support a lower fee schedule for medical costs. It’s not often those two sides agree on a major economic issue.

Union leaders know their troops could come out ahead if a bill were passed and signed, because there would be extra money from the medical savings for beefing up the indemnity payments to injured workers. (FYI: Wisconsin rates high for getting workers fixed and back to work, with provider help, but that’s not the issue.)

Union-management agreement points to bipartisan support from Democrats and Republicans. If a reform bill on the bloated medical costs could get to the floor, it would have a good shot at passage.

John Torinus is the chairman of Serigraph Inc. and a former Milwaukee Sentinel business editor who blogs regularly at johntorinus.com.

Categories: Business, Politics, Torinus

2 thoughts on “Workers Comp Reform Could Help Business, Unions”

  1. Jodi Mathy says:

    The Agreed Bill process in WI can be very frustrating for all parties. The Agreed Bill AB-711 that was introduced in early 2014 did have some elements that would have been good for businesses. But it was also flawed and included proposals that could have had a costly impact on most small and mid-size organizations. The bill proposed a fee schedule that would be equal to the average group health payment plus 10%. It also included a provision which would require employers to continue group health coverage during a period of temporary disability without regard to the employee’s employment status. In most situations the overall premium savings isn’t reflected dollar for dollar due to the experience modification rating. Employer’s in guaranteed cost insurance programs may not see much premium relief from the fee schedule proposed. Those same employer’s could be responsible to maintain group health insurance, as it was at the time of injury, for the complete duration of an injured employee’s disability. The average employer contribution for single health coverage is $401.80 a month and for family $967.73 a month. This could mean thousands of dollars in health insurance premiums not to mention claims associated with those covered. And the future impact on health insurance renewals… It certainly became a no win situation last cycle. I hope that more businesses speak up about the need for medical fee limits in Wisconsin with no strings attached to other concessions. Only time will tell…

  2. Bill Kurtz says:

    Interesting observation, that revisions to workers comp “could have a bigger positive impact on the business climate than right to work.” But making this change doesn’t damage unions (and presumably their ability to help Democratic candidates). That’s what Act 10 and right to work were really about. Since workers comp revisions don’t weaken unions, the current GOP leadership may not be willing to go against the providers. And if there’s anything we know about the current crop of Republicans, they’ll never go against their contributors.

Leave a Reply

Your email address will not be published. Required fields are marked *