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States consider workers compensation reform

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Illinois and Wisconsin are expected to lead the way in state legislation proposed in 2015 to reduce workers compensation system costs, though sweeping comp reforms are not expected in most states this year.

Greg McKenna, counsel and head of governmental affairs for Itasca, Illinois-based third-party administrator Gallagher Bassett Services Inc., said Illinois and Wisconsin appear to be gearing up for debates on reducing system costs.

“I think they're starting to see what the rules of engagement are going to be and how they're going to be working together,” Mr. McKenna said.

First-term Illinois Gov. Bruce Rauner indicated in his recent State of the State address that he supports “much-needed reforms that address the shortcomings of the workers compensation law that was passed in 2011.”

Illinois reforms from 2011 include a 30% reduction in the state's workers comp medical fee schedule, a requirement that comp arbitrators use the American Medical Association Guide to the Evaluation of Permanent Impairment when determining disability ratings, establishment of workers comp-specific medical provider networks and requiring medical utilization reviews.

Experts and business advocates are waiting to see what specific proposals Gov. Rauner has in mind. They're hopeful reforms can reduce comp costs after Illinois was named the No. 7 costliest workers comp state in the 2014 Oregon Workers' Compensation Premium Rate Ranking Summary.

“Past legislatures made some changes, but (those changes have) been nibbling around the edges of our tremendous cost problem here in Illinois,” said Todd Maisch, president and CEO of the Illinois Chamber of Commerce, alluding to 2011 changes in Illinois.

Several workers comp-related bills have been submitted for consideration with the Illinois chamber's backing. Proposals in those bills include limiting comp benefits for traveling workers unless the injury arises in the course of their employment.

“Right now, the bar is so low that if the workplace contributes even less than 1% to an injury, it's still 100% compensable under workers compensation,” Mr. Maisch said. “Illinois is a terrible outlier in that way, and we very much need to get in line with other states where the workplace has to be the major contributing factor for it to be a workers compensation injury.”

Observers acknowledge that the Republican governor has a tough road ahead of him in pushing workers comp reforms through a Democrat-controlled Legislature.

“I'm not going to minimize the Legislature is still going to be somewhat of an obstacle, but I do think with the governor's help, we have a fair shot” at passing workers comp reforms in Illinois, said Joe DiGiovanni, senior vice president of state affairs with the at American Insurance Association in Washington.

Mr. Maisch said the chamber hopes that bills already introduced in Illinois will be packaged together and get Gov. Rauner's backing.

In Wisconsin, observers expect to see the reappearance of a workers comp reform bill that has been approved by the Wisconsin Worker's Compensation Advisory Council, which has labor and business members who advise Wisconsin legislators.

The bill, which failed to pass last year, included implementing a workers comp medical fee schedule — something comp watchers have supported since Wisconsin is one of only five states that don't set prices for comp-related medical services.

Missouri, New Jersey, Iowa and Virginia also do not have workers comp medical fee schedules.

“We definitely need to be able to control the medical costs there, but we have to work through the (legislative) process,” said Rita Nowak, vice president of commercial lines and research for the Property Casualty Insurers Association of America in Des Plaines, Illinois.

Though they say it's unclear whether a similar bill would have a chance of passing this year in Wisconsin, sources say they're hopeful it would have a chance considering the support it previously had from stakeholders.

Steve J. Piette, director of global risk management at Quad/Graphics Inc., said he would like to see Wisconsin adopt a medical fee schedule. The Sussex, Wisconsin-based printing company has 26,000 employees worldwide.

“In our experience, prices in states without fee schedules are consistently higher and outpace the price growth of states with fee schedules,” Mr. Piette said. “So not only are Wisconsin employers bearing the higher costs associated with the current system, but the pricing trends are still outpacing those of our peer states.”

Aside from Illinois and Wisconsin, states generally are expected to consider “isolated fixes” to workers comp-related issues that may arise from court decisions rather than major reform packages that typically need a coalition of worker comp stakeholders to gain traction, Gallagher Bassett's Mr. McKenna said.

He said New Mexico will look at ways to limit employer liability for medical marijuana payments under workers comp. For instance, New Mexico H.B. 238 would reduce workers comp wage benefits in proportion to a worker's level of intoxication at the time of injury or death.

The bill was introduced in January after the New Mexico Court of Appeals ruled in January this year and May last year that medical marijuana is compensable under the state's “compassionate use” law. Mr. McKenna said the intoxication legislation could allow employers to limit liability for medical marijuana regardless of whether the drug is considered legal in the state.

Observers say they're also watching for possible workers comp reforms in Texas, where the Legislature meets every other year and began its most recent session in January.