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Illinois workers compensation reforms result in limited cost savings

Illinois workers compensation reforms result in limited cost savings

With data showing mixed results on how reforms to Illinois' workers compensation system have played out, observers say the state is seeing reduced costs in spite of the need for additional revisions.

A Workers Compensation Research Institute report released last month shows that the reforms led to higher medical cost containment expenses and workers comp litigation costs shortly after their implementation in 2011, but the chairman of the Illinois Workers' Compensation Commission said the reforms have moderated permanent disability awards and helped reduce some medical costs.

“The 2011 reforms are working. The question is: Are they working significantly enough?” said Steve Schneider, Deerfield, Ill.-based vice president of the Midwest region for the American Insurance Association.

Several bills have been introduced that would make further changes in the state's system.

Changes that Illinois implemented in 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 a provision requiring medical utilization reviews.

According to the Cambridge, Mass.-based WCRI study, medical payments per claim with more than seven days of lost time decreased nearly 5% in 2011, while prices paid for professional services decreased 24% in 2012 vs. 2010. Those decreases were attributed largely to Illinois' fee schedule rate reduction.

However, the WCRI also said that medical cost containment expenses increased more than 5% during the study time frame, and legal expenses related to workers comp medical disputes continued to be “higher than typical” in the 2009-2012 period when compared with other states.


“The growth in (medical cost containment) expenses per claim in 2011 was likely driven by a combination of factors — an increase in bill review expenses and an increase in utilization review,” Evelina Radeva, senior research associate with WCRI and author of the Illinois study, said in an email.

“The increase in bill review expenses might be related to the decrease in the fee schedule rates and, if so, this would have a temporary impact. On the other hand, it is hard to determine whether the increase in expenses for utilization review will continue and, if so, what would be the magnitude of the change,” she said.

However, Michael Latz, chairman of the Illinois Workers' Compensation Commission, said the reforms have had a notable effect in lowering Illinois' comp costs. He pointed to workers comp rate filings from the Boca Raton, Fla.-based National Council on Compensation Insurance Inc., which recommended a 3.8% rate reduction in 2013 for Illinois workers comp policies and a 4.5% rate decrease for 2014.

The medical fee schedule has had the greatest effect in lowering Illinois comp costs, Mr. Latz said during a presentation to Gallagher Bassett Services Inc. employees in Itasca, Ill., early this month.

Still, he said, Illinois continues to pay more for workers comp medical services than several other states, while doctors are being reimbursed “significantly less” than what Medicare pays for “evaluation and management” medical appointments. The reimbursement rates, he said, could reduce the number of doctors who are willing to accept workers comp claims.

“We think some doctors will say, "Look, I'm not going to see patients for workers compensation if I'm going to get 20% less than Medicare,'” Mr. Latz said. “So we might go back and take a look at (the fee schedule) and do the common-sense thing because, ultimately, we want fair compensation for all doctors.”


Meanwhile, using AMA guidelines in disability ratings has helped to somewhat moderate permanent total disability and permanent disability awards in the state, Mr. Latz said.

“I don't think it's been as large a reduction as petitioners' attorneys feared — and as large a reduction as respondents had hoped for,” said Mr. Latz, adding that Illinois is just beginning to see comp claims from post-reform injuries.

Jay Shattuck, executive director of the Illinois Chamber of Commerce's Employment Law Council, said employers have seen some reduced comp costs. However, he said many are disappointed that the savings haven't been as large as originally projected by state officials.

In August, Illinois Gov. Pat Quinn said the 2011 reforms have saved $315 million in comp costs, compared with projections of $500 million to $750 million in savings when the reforms first passed.

“A lot of businesses feel like they've been shortchanged,” Mr. Shattuck said.

Terri Robinson, Little Rock, Ark.-based state relations executive with NCCI, said it's difficult to quantify the long-term effect of some reform provisions. However, NCCI does believe that the 2011 reforms have helped relieve some comp cost pressure, she said.