Illinois Workers’ Compensation Reform as a Result of Enactment of HB 1698

Illinois has had one of the highest state workers’ compensation cost levels in the country.  The state has also been a cause of poor results for insurance companies in recent years.  In an attempt to reduce these high costs on Illinois businesses, the state recently passed House Bill 1698 to reform the workers’ compensation system in the state.  Based on its initial analysis of the bill, the NCCI (which estimates expected loss costs for much of the insurance industry) is projecting a decrease in overall costs of 8.8%. 

A summary of some of the major provisions of the bill are included below:

Existing medical fee schedule and rates for non-fee schedule reimbursement to be reduced by 30%.  Medical Implants to be reimbursed at 25% over invoice, non-implant devices at 65% of actual charges.  Non-Pharmacy dispensed drugs to be reimbursed at no more than 100% of Actual Wholesale Price (AWP) plus $4.18.  The NCCI expects these provisions related to the medical fee schedule to lower overall system costs by 7.4%.

• Existing medical fee schedule and rates for non-fee schedule reimbursement to be reduced by 30%.  Medical Implants to be reimbursed at 25% over invoice, non-implant devices at 65% of actual charges.  Non-Pharmacy dispensed drugs to be reimbursed at no more than 100% of Actual Wholesale Price (AWP) plus $4.18.  The NCCI expects these provisions related to the medical fee schedule to lower overall system costs by 7.4%.
• Employers may utilize PPOs and require employees to choose from providers in network. 
• Employees still can choose between two doctors, but not using the preferred choice will result in the loss of one of these choices.  A restriction in choice has been shown to have a significant reduction in medical costs in other states, but the NCCI has not included a decline in costs for this provision.
• For wage differential benefits, award to be effective until age 67, or for five years after initial award, whichever is later.  The NCCI estimates savings of 0.8% of total losses.
• Permanent Partial Disability (PPD) to be determined by physicians using the AMA Guides.
  Allow employers to review the utilization of medical procedures.
• Carpal Tunnel Syndrome (CTS) injuries to be awarded at schedule PPD, capped at 190 weeks at 15% loss of use (extended to 30% for some extreme cases).  NCCI’s estimated impact of this provision is for a decrease in losses of 0.8%.
• Temporary partial disability (TPD) benefits to be awarded at 66 2/3% of difference between pre-injury wage and current gross wage using gross wages instead of net wages.
• Injuries where intoxication is the proximate cause to be non-compensable.
• Employee has burden of proof to show that accident arose out of employment.

While the NCCI has included reductions in loss estimates for three of these nine areas, it is either difficult to estimate savings or savings are expected to be minimal in the other six.

Many questions remain about the actual short-term and long-term impact of these reforms.  Will the initial impact be greater than or less than expected by NCCI and the industry?  What will be the savings related to preferred provider networks and employee choice?  Will holes be found in the bill that will negate the impact of some of the provisions?  Will the courts strike down any provisions of the bill?  Will insurance industry loss ratios improve with the reform?  Will additional reform be needed for the states’ workers’ compensation costs to come down to the desired level? Tell us what you think.