Overview: Illinois Workers’ Compensation Changes (HB 1698)

June 1, 2011

General Assessment: Overall, this is a proposal that improves Illinois’ workers’ compensation system and will lead to lower costs. It addresses several important elements of the law some of which are retackling the shortfalls of the 2005 revisions. This measure makes a down payment on reform, but it is not worthy of being characterized as bringing significant reform to Illinois’ workers’ compensation law. It does not reflect significant reforms that guarantee employer cost reductions through a higher causation threshold, strict AMA guidelines or strong employer directed medical care networks. Thus, three of the four Illinois Chambers’ major recommendations for achieving truly substantive reforms were inadequately addressed. As other states are advancing true reform, Illinois WC system will remain high cost and out of the mainstream of the country.

The Chamber did not support HB1698 because it does not meet the test of truly reforming the state’s workers’ compensation laws, but we did not oppose the legislation as it represents positive, incremental change. The Chamber is officially neutral on the bill.

Causation: Our highest priority to change the “causation” standard to make the workplace the major contributing cause of an accident or injury fell 5 votes short in the Illinois Senate (SB 1349). HB 1698 merely codifies current case law regarding proof by the preponderance of the evidence by the injured worker that the injury was "arising out of" and "in the course of" employment.

AMA Guidelines: HB 1698 introduces to Illinois statute for the first time AMA guidelines to help determine impairment. We had sought AMA Guidelines as a means to introducing greater certainty and objectivity to Commission rulings regarding disability. Unfortunately, HB 1698 adds medical based records to age, occupation and future earnings as an additional subjective factor for consideration by non-medically trained arbitrators.  We are concerned that the goal of AMA Guidelines will be severely undermined.

PPO Networks/Employer Directed Medical Care: Our goal was to strengthen the value of employer directed medical care through PPO networks. While HB 1698 allows limited employer direction of care through a PPO, it falls woefully short of our objective. Employer directed health care is proven to save costs by yielding better medical outcomes which leads to lower disability, quicker return to work and less future medical care. HB 1698 dilutes the value of a PPO network by allowing an employee to easily opt out of the network care at any time, thus potentially allowing the problem  of “doctor shopping” and related out of network referrals for high cost procedures.  In addition, it provides for a third choice of doctor outside of the network if the injured worker petitions the Commission claiming the second network provider care is improper or inadequate.

Utilization Review (UR): UR was first introduced to Illinois’ workers’ compensation law in 2005, but has proven to be generally ignored by the Commission and not as effective as was intended. This proposal strengthens the statutory provisions for UR and may be used to help control out of network medical expenses. It is the only major priority that we believe has been adequately addressed in HB 1698. A provider is required to make reasonable efforts to provide timely and complete reports of clinical information needed to support request for treatment. If the provider fails to make such reasonable effort, the charges for service may not be compensable or collectable from the employer or the employee.

A written notice of UR decisions including clinical rationale and references to applicable standards of care or evidence based medicine be provided to provider and employee is required. HB 1698 shifts the burden to the employee by a preponderance of evidence that the variance of care from the standard of care used by the UR entity is reasonably required. A deposition procedure to allow deposition of reviewers outside of Illinois is created. HB 1698 provides that an admissible utilization review must be considered by the

Commission, along with all other evidence and in the same manner as all other evidence, and must be addressed along with all other evidence in the determination of the reasonableness and necessity of the medical bills or treatment.

Medical Fee Schedule: Of the cost saving features contained in HB 1698, the bulk of the savings will be experienced by the 30% reduction in the medical fee schedule that is effective September 1, 2011. For out of state medical services, the reimbursement rate paid is the lower of the other state fee schedule, the charge or the region fee schedule rate where the employee resides. Four non-hospital regions and 14 hospital regions are to replace the 29 geozips effective January 1, 2012. If a medical claim does not contain data elements to adjudicate the bill, within 30 days, an employer/insurer must provide the basis for denial and describe any additional data elements needed. Any interest penalty for nonpayment of medical bill are to be paid within 30 days of bill payment. A prescription drug fee schedule for drugs dispensed outside of a licensed pharmacy at no more than average wholesale price (AWP) plus a $4.18 dispensing fee is created.

Caps wage differential awards: Caps wage differentials at the later of age 67 or five years from date when award becomes final. Estimated savings is $23-87 million depending on the percentage change in non-schedule PPD benefits.

Alcohol & Drug Intoxication: While several improvements are made in that HB 1698 establishes a standard of 0.08 alcohol and any finding of illicit drugs as a measurement of intoxication and the burden of proof is shifted to the injured employee, the language restricts the finding to “sole cause” instead of “proximate cause” which does not adequately place the responsibility on the employee for their use of drugs or alcohol in the workplace.

Commission Changes: Perhaps the biggest wild card for employers is the change to the Commission offered by HB 1698. Standards for the ethical conduct of Commissioners and arbitrators are set. All arbitrators are terminated July 1, 2011. The Workers’ Compensation Advisory Board may make recommendations regarding the initial set of arbitrators reappointed or new. The initial set of arbitrators must have advice & consent of Senate. Arbitrator terms are staggered every 3 years with 12 subject to reappointment by Commission on July 12012, 12 on July 1, 2013 and the remainder on July 1, 2014. Training requirements for Commissioners and arbitrators in the areas of ethics, fraud detection, improving health care outcomes, AMA Guidelines, UR practices and aspects of black lung are added. A minimum of 3 arbitrators may be assigned per site with cases assigned randomly. No more than 2 years of an arbitrator term at 1 site except for Cook County sites. Newly appointed arbitrators must be an attorney. Current non-attorneys are grandfathered. Commission employee claims are to be handled by an independent arbitrator not employed by the Commission. Arbitrator or Commission decisions are to be based exclusively on evidence in the record of the proceeding and material that has been officially noticed. A new section prohibiting an attorney appearing before the Commission from providing compensation or any gift to any person in exchange for the referral of a client involving a matter to be heard before the Commission has been added.

Carpal Tunnel Injuries: Carpal tunnel hand injuries are limited to 15% of 190 weeks except for cause shown by clear and convincing evidence in which case the award may not exceed 30% of 190 weeks.

Fraud: An intentional submission of medical bills for services not provided is added as fraud. It provides for step up of criminal penalties based on severity of crime starting with misdemeanor to Class 1 felony. A concern we had back in 2005 was rectified when disclosure of the complainant to alleged perpetrator will be eliminated. HB 1698 clarifies that restitution may be sought in a civil action regardless of the result in a criminal prosecution. The ability to subpoena medical provider and a requirement for the Department of Insurance to purchase a fraud system also are added.

Collectively Bargained Workers’ Compensation: The voluntary option to allow collective bargaining for workers’ compensation was emasculated by making it a pilot program limited to Operating Engineers and Steelworkers.

Other changes affecting employers:

• Requires electronic medical payment system rules from Department of Insurance by July 1, 2012 and compliance with acceptance of electronic billing by payers on or before June 30, 2012.
• Employee Leasing Company reporting to the Commission
• Employer non-compliance fines for lack of insurance coverage of $500-$2500
• For determining temporary partial disability benefits changes "net" amount of  earnings in modified job to "gross" earnings
• Workers’ Compensation Advisory Board terminated as of effective date with new Board appointed within 30 days
• Requires NCCI recalculation of rates on or before September 1, 2011
• Department of Insurance reporting requirements that require insurers to report specific items to DOI.