Legal News and Views

New Illinois Workers’ Compensation Statute Limits Medical Fees

By: Michael Fritz

Kavanaugh Scully, Sudow, White & Frederick, P.C.

On May 28, 2005, the Illinois legislature passed House Bill 2137, signifying the most far-reaching revisions to the Illinois Workers’ Compensation Act in over 30 years. Among the many changes and revisions contained in the House Bill 2137 is Section 8.2, which establishes a medical fee schedule rate. Section 8.2 is designed to prevent area medical practitioners from charging excessive fees to exploit the Workers’ Compensation system. This provision also aims to limit overall employer expenses while protecting injured workers from liability for medical payments and disputes. When this Act becomes effective (the earliest date is July 15, 2005), Illinois will adopt what is called a "balanced billing prohibition." Prior to the enactment of these revisions, the Illinois Workers’ Compensation Act limited the amount doctors and hospitals could charge to what was considered reasonable and necessary. If a dispute arose concerning the necessity of the billed procedure, the employer or carrier would pay the provider what it considered reasonable and necessary and the patient would be billed for the balance.

Section 8.2 of the Act will impose a set fee schedule for medical providers under the new law, for any claims filed on or after February 1, 2006. "The maximum allowable payment for procedures, treatments, or services covered by this Act shall be 90% of the 80^th percentile of charges and fees as determined by the Illinois Workers’ Compensation Commission (IWCC) utilizing information provided by employers’ and insurers’ national databases." The IWCC will determine the maximum allowance based on billed amounts (not discounted charges) as shown in the Consumer Price Index.

The IWCC will annually adjust the maximum fee for various medical treatments according to similar rates in surrounding communities called "geozips." Geozips are the first three digits of a zip code within Illinois based on demographic and geographical similarities. The Commission is supposed to approve those fees that are less than or equal to 80% of the fees charged by the medical providers within that geozip region. Any fee that exceeds the 80^th percentile of fees charged for a particular geozip region will be disallowed and adjusted by the Commission. If the geozip lacks the required information to calculate a valid percentile, the IWCC will compile the data from four similar geozips to estimate a reasonable rate. If the IWCC is still unable to find sufficient data, or if the treatment is from an out-of-state provider, the Commission has the authority to set the maximum rate in a manner consistent with the Act. The IWCC also has the authority to modify the maximum allowable fee if there is a "significant" limitation on quality healthcare in a specific medical field or region or if the medical case involves "extraordinary" treatment.

After February 2006, medical providers will no longer be able to hold an employee liable for any non-disputed treatment in connection with a compensable injury. If the employee’s claim is covered by a health group plan, the employee will only be responsible for applicable deductibles, co-payments, or co-insurance. Section 8.2(d) states when the employee seeks medical treatment for a work-related injury, the medical provider must bill the employer directly. The employer must pay a bill within 60 days so long as it contains "substantially all the required data elements necessary to adjudicate the bill." Employers will incur a 1% interest rate per month on balances owed on valid claims not paid within 60 days. However, if the employer disputes the compensability of the injury, or if the employer notifies the medical provider that it will only pay a portion of the bill, the medical provider may then seek payment from the employee.

If an employee files an application with the IWCC to resolve a dispute over the payment of medical charges, and the employee notifies the medical provider of that pending application, the medical provider must cease "any and all efforts to collect payment for the services that are the subject of the dispute." The medical provider may then require the employee to provide information regarding the pending application, and the employee has 90 days to comply with the request. If the employee fails to provide the requested information within those 90 days, the medical provider may resume its efforts for collection of payment against the employee. Upon final award or judgment between the employer and employee, the medical provider may seek payment from the employee for the balance due for medical services rendered plus interest. The medical provider may only recover for fees predetermined by the fee schedule.

Section 8.2 provides a new paradigm governing medical services payments and collections. Section 8.2 is only one of several significant changes to the Act. Employers, insurers, medical service providers should begin the process of planning for and implementing the changes required by the Illinois Workers’ Compensation Act.