The General Assembly could not finish up quick enough this Spring when it came to issues impacting merit shop contractors. While it was a mixed bag when the adjournment gavel came down on May 31st, it seemed like we were working up stream all session. Unfortunately, there are too few lawmakers that understand or worry about how their public policy decisions create uncompetitive incentives and increase the cost of public projects to taxpayers. We are certainly seeing the brunt of the consequences of the 2010 state elections.
Before it concluded business on May 31st, the General Assembly took action to address Illinois' high cost of workers' compensation by passing HB 1698. The Governor signed the measure into law on June 28th. Overall, this is a proposal that improves Illinois' workers' compensation system and will lead to lower costs. It addresses several important elements of the law some of which are retackling the shortfalls made to the law in 2005. This measure makes a down payment on reform, but it is not worthy of being charachterized as bringing significant reform to Illinois' workers' compensation law. It does not refect significant reforms that guarantee employer cost reductions through a higher causation threshold, strict AMA guidelines or strong employer directed medical care networks. As other states are advancing true reform, Illinois workers' compensation system will remain high cost and out of the mainstream of the country.
Last month, the National Council on Compensation Insurance (NCCI) issued an average advisory rate reduction of 8.8% effective September 1, 2011. ABC members, depending on their safety record, should see these savings and perhaps greater on future workers' compensation costs.
Positives to note in the legislation are:
AMA Guidelines: HB 1698 introduces to Illinois statue for the first time AMA guidelines to help determine impairment. AMA Guidelines as used in other states bring greater certainty and objectivity to rulings regarding disability. Unfortunately, HB 1698 adds several subjective factors that will alter the AMA Guidelines severely undermining the goal of objectivity.
PPP Netowrks/Employer Directed Medical Care: The value of employer directed medical care through PPO networks by yielding better medical outcomes which leads to lower disability, quicker return to work and less future medical care has been experienced in a number of other states. HB 1698 allows limited employer direction of care through a preferred provider programs (PPP).
However, HB 1698 dilutes the value of the PPP by allowing an employee to easily opt out of the network care at any time, thus potentially allowing the problem of "doctor shopping" and related out of network referrals for high cost procedures. In addition, it provides for a third choice of doctor outside of the network if the injured worker petitions the Commission claiming the second network provider care is improper or inadequate.
Uitilization Review (UR): UR was first introduced to Illinois' workers' compensation law in 2005, but has proven to be generally ignored by the Commission and not as effective as was intended. HB 1698 strengthens the statutory provisions for UR and may be used to help control out of network medical expenses.
Medical Fee Schedule: Of the cost saving features contained in HB 1698, the bulk of the savings will be experienced by the 30% reduction in the medical fee schedule that is effective September 1, 2011.
Caps wage differential awards: Caps wage differentials at the later of age 67 or five years from date when award becomes final. This is an area of abuse that many construction contractors will now see some relief.
Alcohol & Drug Intoxication: While severl improvements are made in that HB 1698 establishes a standard of 0.08 alcohol and any finding of illicit drugs as a measurement of intoxication and the burden of proof is shifted to the injured employee, the language restricts the finding to "sole cause" instead of "proximate cause" which does not adequately place the responsibility on the employee for their use of drugs or alcohol in the workplace.
Commission Changes: Perhaps the biggest wild card for employers is the changes to the Commission offered by HB 1698. All arbitrators are terminated July 1, 2011. The Workers' Compensation Advisory Board may make recommendations regarding the initial set of arbitrators reappointed or new. The initial set of arbitrators must have advice and consent of the Senate. A minimum of 3 arbitrators may be assigned per site with cases assigned randomly. No more than 2 years of an arbitrator term at 1 site except for Cook County sites. Arbitrator or Commission decisions are to be based exclusively on evidence in the record of the proceeding and material that has been officially noticed.
Carpal Tunnel Injures: Carpal tunnel hand injuries are limited to 15% of 190 weeks except for cause shown by clear and convincing evidence in which case the award may not exceed 30% of 190 weeks.
Fraud: An intentional submission of medical bills for services not provided is added as fraud. It provides for step up of criminal penalties based on severity of crime starting with misdemeanor to Class 1 felony. A concern from the 2005 law was rectified when disclosure of the complainant to the alleged perpetrator will be eliminated. HB 1698 clarifies that restitution may be sought in a civil action regardless of the result in a criminal prosecution.
ABC members will want to continue press their state legislators to address Illinois' low "causation" standard to better assure that the employement actually caused the injury and not just may have aggravated a prior condition.
The Governor signed HB 2987 into law which authorizes a State department, agency, authority, board, or instrumentality under his control to include a project labor agreement (PLA) on a public works project. While we disagreed with the Executive Order that essentially accomplishes what HB 2987 achieves now in statute, we argued that the Executive Order is viewed differently by job creators and taxpayers thatn if these provisions are part of Illinois' statues.
In our letter asking the Governor to veto HB 2987, it was pointed out that the US Chamber of Commerce recently graded Illinois as one of the worst states in the country to do business in because of regulation like that imposed by HB 2987. Only one state, New Jersey has a statute allowing the use of PLAs on state projects. ONly two others provide for PLAs by Executive Order. In fact, more states, prohibit the use of PLAs by law or Executive Order.
HB 2987, sponsored by Rep. Pat Vershoore (D-Milan) and Sen. Toi Hutchison (D-Chicago Heights), passed the House 69-49 and the Senate 33-26. It is now Public Act 97-199 and became effective July 27, 2011.
Another measure, HB 1091, sponsored by Re. Elaine Nekritz (D-Northbrook) and Sen. Heather Steans (D-Chicago), also requires the use of PLAs if a developer decides to use a potentially new economic development tool for infrastructure improvements. Called the Public-Private Partnerships for Transportation Act, it awaits signature by the Governor.
State legislators continue to approve organized labors' agenda to change the Illinois Prevailing Wage Act.
ABC unsuccessfully pushed for passage of SB 1389, sponsored by Sen. Dale Righter (R-Mattoon), in the Illinois Senate. SB 1389 would have prevented frivolous complaints at the Illinois Department of Labor and protected contractors from having their bids thrown out because of one violation of the Act. We were unable to move the bill out of the Senate Labor Committee.
However, lawmakers did send to Governor Quinn HB 3237, sponsored by Rep. Brandon Phelps (D-Eldorado) and Sen. Dave Koehler (D-Pekin). An Attorney General Lisa Madigan initiative, HB 3237 initially established felony criminal penalties for a contractor that willfully failed to provide payroll information as required under the Act. After passing the House 67-49, ABC and other contractor groups were able to convince the members of the Senate Labor Committee that the bill was over the top. An amendment was added in the Senate that reduced the penalty to a Class A misdemeanor.
Responsible Bidder Changes: HB 1375, sponsored by Rep. Dan Beiser (D-Alton) and Sen. James Clayborne (D-Belleville) requires a bidder on a public works project to submit a signed affidavit stating that the bidder will maintain an office in Illinois as the primary place of employment for persons employed in the construction authorized by the contract. It awaits the Governor's approval.
State Construction Building Contracts: SB 1352 which requires state building construction contracts to specify the 5 subdivisions of work to be performed has been signed by the Governor into law as PA 97-182 and became effective July 22, 2011. The legislation was sponsored by Sen. Jeff Schoenberg (D-Skokie) and Rep. Barbara Flynn Currie (D-Chicago) provides that certain requirements do not apply to certain construction projects for which the Capital Development Board is the construction agency and the project budget is at least a specified amount.
Elevator Mechanics Licensing: SB 2037, sponsored by Sen. John Sullivan (D-Rushville) and Rep. Sandy Pihos (D-Glen Ellyn), provides that the provisions of the Performance-Based Safety Code for Elevators and Escalators shall be included in the standards and criteria for licensing of elevator mechanics, inspectors and installers of elevators. In addition, a certificate of operation is renewable every specified number of years, rather than annually, for conveyances of certain structures used for religious worship. SB 2037 was sent to the Governor.
Most politicians tell small business owners that one of their highest priorities when they get to Springfield is to tackle the high cost of health insurance. But when they get elected they often do not heed the concerns of small business when it comes to healthcare mandates. Healthcare mandates drive costs for employers. And as the cost of health insurance benefits has increased so has the number of small employers that no longer offer coverage to their employees. The Kaiser Family Foundation recently reported that only 39% of employers in Illinois with less than 50 employees offer health insurance to their employees. ABC of Illinois argues that it is better to keep health insurance affordable for small businesses and allow their employees to have some coverage than to cause increased costs by government that leads to more small businesses to drop their health benefit plan entirely because it is no longer affordable. ABC of Illinois communicated with the Governor on these key issues.
Mental Health Coverage Mandates: HB 1530, sponsored by Rep. Lou Lang (D-Skokie) and Sen. William Delgado (D-Chicago), requires employer health plans providing mental health and substance abuse coverage limits to be the same as those provided for other diseases. One carrier has indicated that these changes will increase the cost of mental health coverage for small employers by 25%. HB 1530 also removes any flexibility for businesses with 50 or fewer employees to structure their mental health and substance abuse program in a manner that they can afford. Such a plan must either reject coverage or provide coverage at full parity. The federal law protects a business' health benefit plan from unreasonable cost increases. HB 1530 does not extend any such protection. For these reasons, ABC is seeking the Governor's veto of HB 1530.
Health Insurance Exchange: SB 1555, sponsored by Sen. William Haine (D-Alton) and Rep. Frank Mautino (D-Spring Valley), is an ABC-supported proposal to establish a legislative study group to provide recommendations in the establishment of a state health insurance exchange. A state exchange could provide significant market help to small business owners if it is properly structured. The federal Affordable Care Act requires every state to have a fully operational health benefits exchange by January 1, 2014. The federal law further requires states, by January 1, 2013, to demonstrate to the Secretary of the Health and Human Services that a state-level exchange will be operational by 2014. In order to meet the federal deadlines and keep Illinois eligible for additional federal funds set aside for exchange implementation activities, the state must act on basic authorizing legislation in 2011. ABC blieves that Illinois should implement its own health benefits exchange in order to adequately address the coverage gaps and market needs that are unique to this state. Should Illinois fail to move forward with the implementation of its own Exchange, then the federal government will be foreced to establish and operate the Exchange in Illinois. State policymakers have a tremendous task ahead of them as they move forward with the implementation of a state-level health benefits exchange that is both sensitive to the vast number of stakeholders impacted by this exchange and complaint with federal regulations. While the federal law has outlined basic requirements of the Exchange, federal regulations that will address these requirements more explicitly are not schedule for publication until later this year with additional regulations to be issued as late as 2012. ABC believes SB 1555 allws the state to take a careful approach to the creation of a state-level health benefits exchange and asked the Governor to sign it into law. The Governor did sign the measure as PA 97-142.
The General Assembly has set the veto session for October 25, 26, and 27th and November 8, 9, and 10th.
Negotiations to address Illinois $2.5 billion unemployment insurance debt to the federal government have commenced.
Illinois employers already were called upon when PA 97-1 was approved earlier this year to resolve the payment of interst on the state's outstanding unemployment insurance debt owed to the federal government. Nearly $70 million in interest will be paid by Illinois employers on September 30th.
Illinois' business groups will seek solutions to the elimination of the $2.5 billion shortfall in Illinois' UI Trust Fund attempting to minimize the impact on an already weak economic footing. With no resolution, Illinois employers in 2012 will pay nearly $750 million more in taxes and federal penalties than was paid in 2011.
ABC of Illinois should push for the enhancing of the integrity of payment of benefits, suggest reemployment incentives and discuss fair wasy to distribute any potential tax increases.
Senate President John Cullerton and House Speaker Michael Madigan have created a joint House-Senate Revenue Committee to review the state's business tax structure. The joint effort is being led by Rep. John Bradley (D-Marion) and Sen. Toi Hutchinson (D-Olympia Fields).
Input is being provided from groups such as the Illinois Chamber of COmmerce, Illinois Manufacturers' Association, Illinois Retail Merchants Association, National Federation of Independent Business, Chicagoland Chamber of Commerce, and the Civic Committee of The Commercial Club of Chicago.
The issue of tax policy in Illinois continues to make headlines as breaks and exemptions for major businesses have come under scrutiny from both the media and within the business community. CME Group Executive Chairman Terrence Duffy and Caterpiller CEO Doug OBerhelman have been among the business leaders who've expressed concerns with the state's existing business tax structure.
In addition, more than $100 million worth of state tax exemptions for numerous companies will expire over the next three years.
Following this summer's hearings, legislation is expected to be offered in the fall veto session.