Act 111 Passed to Respond to Pennsylvania Supreme Court Invalidation of IREs

On October 24, 2018 the Governor of Pennsylvania approved former H.B. 1840 and enacted Act 111, which provides a fix to the State Supreme Court Decision of Protz v. Derry Area School District, 161 A.3d 827 (Pa. 2017) (“Protz II”) which on June 20, 2017 invalidated the entire Impairment Rating Evaluation process(Section 306(a.2)) of the PA Workers' Compensation Act (WCA).  IREs have been in place since 1996 when significant changes were made to the WCA by way of Act 57.  IREs provide a structured process for Commonwealth-designated physicians to determine an injured workers’ percentage of whole body impairment and limit the duration of payment of wage loss benefits.

As a result of the holding in Protz II, the PA Compensation Rating Bureau took the unprecedented action of filing for a mid-year loss cost increase which industry experts have estimated will cost PA employers $300 million per year in higher insurance costs.

Act 111 was enacted on October 24, 2018, effective immediately, and reinstates the IRE process with key components of the bill including:

• IRE physicians designated by the Commonwealth will utilize the American Medical Association “Guides to the Evaluation of Permanent Impairment” 6th Edition (second printing April 2009);
• If an impairment rating is equal to or exceeds 35% impairment, the employee will be presumed to be totally disabled and shall continue to receive total disability;
• If an impairment rating is less than 35% impairment, the employee shall receive partial disability;
• Per Section 306(a.3)(7), in no event shall the total number of weeks of partial disability exceed 500 weeks for an injury or recurrence of the injury, regardless of the change in status in disability that may occur.  Further, in no event shall the total number of weeks of total disability exceed 104 weeks for any employee who does not meet a threshold impairment equal to or greater than 35%;
• For purposes of determining whether an employee has received 104 weeks of total disability and is obligated to submit to an IRE, an employer/ insurer shall be given credit for weeks of total disability compensation paid prior to the effective date of this paragraph (i.e., Section 306(a.3)(1));
• For purposes of determining the total number of weeks of partial compensation payable under Section 306(a.3)(7), an insurer shall be given credit for weeks of partial disability paid prior to the effective date of this paragraph (i.e., Section 306(a.3)(1));
• Within 90 days of passage of the Act, the Pennsylvania Compensation Rating Bureau has been directed to calculate the savings for employers and same shall be used to provide an immediate reduction in rate applicable to employers’ Workers' Compensation policies;
• There are some other non-IRE changes to be implemented under Act 111, including: in death cases, the wages of the deceased shall not be considered less than 50% of the statewide average weekly wage; and reasonable expenses of burial shall be increased from $3,000 to $7,000; and
• Act 111 shall take effect immediately on October 24, 2018.

We do have concerns as to whether use of the 6th Edition of the AMA Guides for determining impairment can survive a constitutional challenge.  The Supreme Court addressed the issue of delegating the legislative role to a private entity in Protz II as follows:

We merely caution that our holding today should not be read as an endorsement or rejection of the Commonwealth Court’s view that the delegation of authority to a private actor is per se unconstitutional.  Nor do we foreclose the distinct possibility that a more exacting form of judicial scrutiny is warranted when the General Assembly vests private actors with regulatory or administrative powers.

The law, as written, strips IRE physicians of discretion and requires rigid allegiance to an impairment standard created and maintained by a private entity.

This could be problematic should a challenge be initiated.

In short, Act 111 will reinstate a statutory tool that will permit PA employers to limit indemnity exposure on Workers' Compensation claims that may otherwise remain open with ongoing total disability with little prospect of settlement or claim mitigation through other statutory options.  We believe the credit provisions are significant and provide for an important consideration for employers evaluating when an IRE is ripe and when the statutory 500 weeks of maximum partial disability has been reached.  Now that Act 111 has been enacted, it should be a helpful development for PA employers in their ongoing battle to limit Workers' Compensation costs. It may also provoke a constitutional challenge.  

Chartwell Law will follow this new law closely and offer practical claims handling strategies for employers.  Further, Chartwell attorneys have handled many of the Protz II cases before the WCJ’s the Appeal Board and the Commonwealth Court so we are prepared to offer further analysis and practical guidance to clients on all the issues that might arise from the legislative fix to the Supreme Court’s Protz II Decision.

‍