Governor Signs Overhaul of Illinois’ Workers’ Compensation System

On June 28, 2011, Illinois Governor Pat Quinn signed House Bill 1698, ushering in a comprehensive overhaul of Illinois’ workers’ compensation system and the Illinois Workers’ Compensation Commission. Under the newly reformed workers’ compensation system, Illinois businesses are expected to save up to $500 million on workers’ compensation premiums and injured workers are provided with additional protections. These reforms will take effect on September 1, 2011.

Reduced Financial Burden on Employers

The newly enacted law endeavors to reduce the onerous workers’ compensation premiums employers in Illinois have been required to pay by providing various reforms designed to reduce the burdens on employers. These reforms include:

• A 30 percent reduction in the medical fee schedule, which is expected to save employers as much as 14.9 percent in premiums.
• The creation of workers’ compensation provider networks, to ensure that employees receive cost-effective treatment that improves outcomes.
• A requirement that physicians and arbitrators use standards set by the American Medical Association when determining impairment and disability.
• A cap on carpal tunnel permanent partial disability payments, which is expected to save employers as much as $19 million.
• A denial of claims by intoxicated workers injured due to their own inebriation.
• A cap on wage differential awards at the age of 67 or five years post-accident, whichever is later, which is expected to save employers as much as $87 million.
• Increased utilization review to reduce unnecessary treatments, which is estimated to save employers as much as $16 million if costs decrease as much as five percent.
• Enhanced authority to investigate and prosecute workers’ compensation fraud.

Added Protections for Injured Employees

The law also provides several additional protections for injured employees. Under the new law, insurers and employers are now required to pay providers on a timely basis or face interest and penalties payable to the providers. The law also provides enhanced enforcement against employers that fail to maintain proper workers’ compensation coverage. Furthermore, injured employees are safeguarded against treatment disruption by the creation of a process for electronic billing from providers. The rules governing this electronic claims process are required to be proposed on or before January 1, 2012, and all employers and insurers are required to accept electronic claims for payment by June 30, 2012.

Reform of Illinois Workers’ Compensation Commission

In addition to the various reforms HB 1698 sets forth to protect employers and employees, the new law introduces measures to restructure the Illinois Workers’ Compensation Commission, the body responsible for operating the state court system for workers’ compensation cases.

The new law requires that the terms of the current arbitrators on the Commission, the individuals responsible for first trying workers’ compensation cases, will end, and all arbitrators will be subject to performance evaluations before being considered for re-appointment. Arbitrators are limited to serve three-year terms, during which they are required to act in an unbiased, impartial manner and follow the same ethical rules that apply to judges. Any new arbitrators that are appointed also are required to be licensed attorneys. These changes to the Commission became effective on July 1, 2011.

Practical Impact

Arthur Smith, a shareholder in Ogletree Deakins’ Chicago office noted: “Although some significant Illinois employers have applauded the reforms included in the legislation, others have criticized them as not going far enough to contain one of the most expensive workers’ compensation programs in the country. One definitely positive change is the new law’s requirements seeking to enhance the impartiality of the Workers’ Compensation Commission through a series of structural and operational changes, especially the requirement that arbitrators be licensed attorneys subject to performance evaluations, required to abide by state court ethical standards and to serve in an ‘unbiased, impartial manner.’”

According to another shareholder in Ogletree Deakins’ Chicago office: “The ‘hoped for’ practical impact of this compromise legislation lies almost entirely in the potential savings to Illinois employers, where medical costs and recoveries for worker injuries are substantially higher (sometimes by as much as one-third or more) than neighboring states in the Midwest. The changes imposed by these reforms are not without controversy, but there was substantial agreement that action had to be taken and allowing the creation of workers’ compensation provider networks is a long overdue reform.”