Tennessee Vies To Follow Texas And Oklahoma To Opt-Out Of State Workers' Compensation Program
By Lonce LaMon - February 24, 2015
A proposal to allow employers to opt out of Tennessee's workers' compensation program and design individual plans that meet minimum requirements has been filed by Sen. Mark Green and Rep. Jeremy Durham.
This bill would make Tennessee the third state to give employers the option to set up individual workers' compensation programs. Texas and Oklahoma are the only two states that have opt-out programs.
SB 0721 in the Tennessee Senate and HB 0997 in the Tennessee House, would cap benefits to 156 weeks or three years unless medical expenses hit $300,000. The current program allows for coverage for as long as treatment is needed. The bill is scheduled to be heard in the Senate Commerce and Labor Committee on March 10, 2015 according to Mark Green, R-Clarksville.
Minimum benefits under the proposal would be:
•Temporary disability starting on the fourth day of disability of at least 70 percent of the employee's average weekly wages but up to 110 percent of the state's average weekly wage for at least 156 weeks.
•Medical expenses covered for up to 156 weeks or three years, up to $300,000 per employee.
•Death and scheduled dismemberment benefits up to $300,000 per employee.
•A combined single limit that is at least $750,000 per employee and $2 million per occurrence.
For the right to create an individual plan, an employer would have to prove it is financially capable. The bill — unlike Texas — delineates the minimum benefit requirements for an employer-designed program. The proposal is more like Texas than Oklahoma, according to the legislators as well as workers' compensation experts.
Both Green and Durham said Texas employers see workers' compensation costs that are roughly half of what Tennessee employers pay. "It gives Tennessee businesses the same chance to save money on workers' compensation," said Jeremy Durham, R-Franklin.
Tennessee's workers' compensation program saw substantial legislative reforms in 2013. The reforms were designed to make the benefit system equitable for both employees and employers, and as part of the reform cases are now heard by judges who only hear workers' compensation cases. However, the bill would change the legal recourse for those who work at companies that design their own programs: with employers deciding the rules of the benefits they offer to employees, they would not go to the workers’ compensation court.
The new proposal would allow an employee to bring a legal suit against the employer. Employees could bring a tort because the feeling is if employers are able to lower the minimum benefits, they need to be held accountable.
Municipalities, counties, and school boards are able to opt out of the workers' compensation program. However, about 98 percent of municipalities do participate in the program.
Sen. Mark Green and Rep. Jeremy Durham want the ability to opt out to extend to private employers. The proposal stemmed from conversations with employers in the legislators' districts. Green said he has had conversations with employers who do business in both Texas and Tennessee, who say there is greater employee satisfaction and cost savings for the company. One reason is that employees feel better taken care of because the employers have more input into medical care causing employees to get back to work in a shorter period of time.
"This is about both the employer and the employee. If we can decrease costs, the employer will be able to pay higher wages and take better care of the employee," Sen. Mark Green said.
Rep. Jeremy Durham, R-Franklin, said in addition to supporting programs that decrease costs for employers, he is co-sponsoring the bill after hearing from employers who were dismayed over the 2013 reforms.
Durham added that employers in his district want the same flexibility on workers' compensation as they have in offering health insurance. Companies can offer health insurance through a third-party insurance company, such as BlueCross BlueShield of Tennessee, or self-insure.
Employers in the state can currently self-fund workers' compensation programs as long as they have a contractual agreement with an insurance company that can be shown to state officials. This practice is known as "fronting" because the employer fronts its contract with the insurer to officials. Fronting is costly for companies because it requires collateral and fees paid to the insurance company.
The proposal will likely find opposition from a variety of entities such as insurance companies and labor unions.
lonce@adjustercom.com; Lonce LaMon, journalist
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