Illinois Supreme: Medical Providers May Not Attach Injured Workers’ Awards in Bankruptcy Court

Medical providers cannot use bankruptcy court to collect unpaid bills owed by bankrupt injured workers, the Illinois Supreme Court ruled in a decision published Thursday.

A three-judge panel of the high court, answering a certified question by the 7th Circuit Court of Appeals, found that the Illinois Workers’ Compensation Act creates an exemption that protects injured worker’s monetary awards from attachment by creditors during bankruptcy proceedings.

Three medical providers, who collectively say they’re owed $137,772 by workers’ compensation claimant Elena Hernandez, argued that 2005 workers’ compensation reform legislation created an exemption to a statute that otherwise protects workers’ comp awards from garnishment.

“If the existing statutory scheme is susceptible to abuse at the expense of medical providers, as the health care providers here charge, that is a matter they must take up with the General Assembly,” the court said.

Ambulatory Surgical Care Facility, Marque Medicos Fullerton and Medicos Pain and Surgical Specialists asked the court to declare that they have a private right of action against workers’ compensation insurers if they are unable to attach work comp awards in bankruptcy court. The panel refused because the question had no relevance to the case at hand.

“Any opinion we expressed on the matter would therefore be both advisory and gratuitous,” the opinion says.

Hernandez suffered work injuries from 2009 to 2011 and was treated by the three medical providers. In December 2016, she filed a Chapter 7 bankruptcy petition. She reported to the Bankruptcy Court unsecured claims by Ambulatory Surgical for $28,709.60, Marque Merdicos for $28,709.50 and Ambulatory Surgical for $58,901.20. There were no other creditors. Hernandez’s listed assets consisted of $1,300 in the bank and some inexpensive jewelry.

Two days after filing the bankruptcy petition, Hernandez settled her workers’ compensation employer for an amount “that appears to have been $30,566.33,” the court opinion states.

A bankruptcy judge ruled that the medical providers are allowed to attach Hernandez’s workers’ compensation award because of the 2005 reform legislation.

The legislation created a fee schedule that capped prices for services, required medical providers to bill employers or their insurers directly and prohibited “balance billing” — meaning providers could not attempt to collect the difference between the provider’s charge for a service and the amount paid by the employer or insurer.

The legislation allows medical providers to bill an employee directly only if the employer finds that the injury was noncompensable and the employee fails to contest that finding before the Workers’ Compensation Commission or loses the case. The act states specifically that medical providers can resume efforts to collect from an employee “upon a final award or judgment by an arbitrator or the commission, or a settlement agreed to by the employer and employee.”

Hernandez appealed the bankruptcy judge’s ruling to the U.S. District Court in Chicago. Judge Jorge L. Alonso in Chicago found that taken as a whole, the reform bill makes no sense unless medical providers are allowed to attach injured workers’ awards during bankruptcy proceedings.

“The debtor interprets the statute to specifically provide that medical providers may collect payment for their services from the injured employee after her disputed claim has been resolved—except when they have to resort to legal process to do so. This interpretation is not reasonable,” the Alonso said in his ruling.

Hernandez appealed again. The 7th Circuit found it impossible to decide the case without hearing from the Illinois Supreme Court.

On the one hand, Illinois’ bankruptcy statutes don’t contain any exemption that shields workers’ compensation settlements from assets available to creditors, the appellate panel said in its opinion. On the other hand, Section 21 of the Workers’ Compensation Act states that work-injury awards are not “assignable or subject to any lien, attachment or garnishment.”

Hernandez’s medical providers argued that new billing and payment procedures created in a 2005 workers’ compensation reform bill implicitly voided the bankruptcy exemption for health care providers.

But the Supreme Court said it is unwilling to interpret the meaning of law by inference. The court said the Illinois legislature is clearly capable of writing an exemption from the exception into law if it chose to.

“To be sure, continuing to construe section 21 according to its plain and unambiguous language may make it more difficult for medical providers to obtain full recovery of the amounts they are owed than would otherwise be the case,” the court said. “Weighing such considerations, however, is the responsibility of the legislature, not the courts.”