The Illinois General Assembly has passed House Bill 1698 reforming the state’s workers’ compensation system. Governor Pat Quinn applauded the bill’s passage, saying that it would achieve significant savings and attack fraud and abuse. “We have fundamentally changed our system, allowing Illinois to become more competitive and a better place to do business,” said Quinn, who was expected to sign the bill shortly following passage.

The legislation establishes a new workers’ compensation advisory board within the Illinois Department of Central Management Services. It calls for the termination of all present advisory board members effective July 1, 2011, to be replaced by advisory board members appointed by the governor.

The new advisory board is charged with submitting a report to the governor and the legislature by September 30, 2011 recommending best practices for the workers’ compensation program. The board will submit annual reports in July of each subsequent year including detailed financial performance analysis and recommendations for improvements to the system. Advisory board members will serve 3-year terms.

The legislation also stipulates that members of the board must abide by the state’s judicial code of conduct; undertake training every 2 years; refuse gifts from workers’ compensation attorneys; and have their own claims heard by independent arbiters.

Other provisions of the law include the following:

• Reduces the workers’ compensation medical fee schedule by 30 percent.
• Allows employers to create networks of doctors for workers’ compensation claims similar to preferred provider healthcare networks to prevent “doctor shopping” by claimants.
• Requires doctors to follow American Medical Association guidelines for determining levels of disability, and creates a list of criteria to be used when deciding final disability determinations.
• Limits carpal tunnel awards to 15 percent loss of use, or 30 percent for exceptional cases.
• Makes it easier for employers to deny claims for injuries resulting from intoxication.
• Establishes new criminal penalties for fraud, including Class 1 felony charges for fraud seeking $100,000 or more.
• Requires the state to purchase workers’ compensation insurance from a third party rather than self-insure, which is the current practice.

According to Michael McRaith, director of the Illinois Department of Insurance, savings resulting from this reform could result in more than $650 million per year and bring down insurance premiums by 12 to 18 percent.

The law will take effect upon signing.

Reaction. State Senator Dave Koehler said, “We all understand that the system needs to be fixed. It costs businesses too much money, and I’m not convinced that it even serves injured workers as well as it could. This bill, while not perfect, addresses some of the worst problems.”

Steve Schneider, Midwest region vice president for the American Insurance Association, said that ambiguities in the bill made it “unlikely to produce the much-needed outcomes to ultimately reduce the costs of Illinois’ overly expensive system.”