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SPRINGFIELD, Ill.—Just how much cost savings employers can expect to see from the workers compensation reform bill Illinois lawmakers passed in the final hours of their spring session last week remains to be seen, insurance groups and observers on the issue say.
With two bills on the table—one that would reform the state's workers comp system and one that would abolish it—the Illinois House passed the previously rejected H.B. 1698 late Tuesday on a 62-43 vote to reform a troubled workers comp system.
A spokesman for Gov. Pat Quinn's office said that the governor will sign the reform as it is one that he initially proposed, but some insurance groups said that while the reform is a step in the right direction for Illinois, it falls short in some areas and cost savings are difficult to determine.
“Proponents claim adoption of (the bill) will produce cost savings of nearly $700 million in reduced expenses, but these figures have yet to be independently verified through credible actuarial analysis,” said Steven Schneider, Midwest region vp of the Washington-based American Insurance Assn. in a statement. “That analysis and the manner in which these changes are implemented will govern whether the expectations of its proponents will be fulfilled or whether the 2011 "reforms' like the 2005 "reforms' will end up disappointing stakeholders.”
The bill, which was sponsored by state Rep. John E. Bradley, D-Marion, said it would save businesses $500 million to $700 million per year by reducing medical provider rates by 30%.
The bill also imposes the use of the American Medical Assn. Guide to the Evaluation of Permanent Impairment, something for which the AIA advocated. It caps carpal tunnel awards, reducing the benefit period for carpal tunnel syndrome injuries from 40 weeks to 28 weeks. Also, it allows health care networks for workers comp that will help employers direct worker care.
Democrats touted the measure as a significant reform. Republicans, however, said the bill fails to address the causation standard for injuries, which business groups argued needs to change to help control system costs.
“I think the reform is a step in the right direction for Illinois,” said Rita Nowak, vp of commercial lines and research for the Des Plaines, Ill.-based Property Casualty Insurers Assn. of America. “How it will place Illinois in comparison to other states is hard to tell at this point, but we do acknowledge there are going to be some cost savings for employers.”
Illinois' workers comp system is the third-most expensive in the United States, Ms. Nowak said. She added that she could not yet determine if rates would drop as a result of the measure, but reiterated that employers should see some cost savings.
Several Illinois employers, including Hyatt Hotels Corp., Ford Motor Co., Navistar Inc., the City of Chicago and Wal-Mart Stores Inc., backed H.B. 1698, said Mark Denzler, vp of government affairs and chief operating officer of the Illinois Manufacturers' Assn. in Springfield.
“I think the bill is a great starting point for some real reform in Illinois and I think businesses will see that,” he said. “I think it's a major step forward.”
For risk managers such as Donald Sullivan, vp of risk management for Baxter International Inc. in Deerfield, Ill., the impact of the bill on workers comp insurance rates and costs has yet to be discovered. Mr. Sullivan said he and members of his department are trying to determine how much cost savings they actually will have, but overall said the reform looks “beneficial.”
He said the opposing bill, S.B. 1933, which would have abolished the workers compensation system and forced claims to be handled by the courts, would have been much more harmful to Illinois businesses.
“I think the (House) bill is a good concept and will make Illinois more competitive for businesses,” Mr. Sullivan said. “There are a lot of choices out there for companies looking to build warehouses and plants. and I think this will help keep the state competitive for those businesses.”
The Illinois Chamber of Commerce, which held a neutral position on the House bill, said in a statement that the bill offers employers a better situation than they have in Illinois with no negative impact on them, but it is “not worthy of being characterized as bringing significant reform to Illinois workers compensation law.”
The chamber went on to say that substantive reforms that could change the culture and administration of the state's workers comp system were “inadequately addressed” and that, relative to other states, Illinois' system will “remain high-cost and out of line.”
“The leadership of the Illinois chamber recognizes this measure as a positive step, but challenges the state's political leadership to recognize the competitive business climate is an evolving process that requires continued attention for the need to change,” the chamber said in a statement. “We interpret this bill as a down payment towards achieving more reforms.”