Tennessee Workers’ Comp Market Looks for Answers

As agents search for the best way to market workers’ compensation coverage in Tennessee, several with industry expertise on the subject, spoke with Insurance Journal Southeast on what needs to be done to make for a competitive and healthy market for independent agents.

According to Paula Flowers, commissioner of Tennessee’s Department of Commerce and Insurance, “This is really a jobs issue rather than an insurance issue. Tennessee’s current system is causing us to lose our competitive edge in job recruitment, and is hampering business expansion in the state. More than once, large multi-state businesses have considered expansion here, but chose to expand in another state citing Tennessee’s higher workers’ comp costs. While our costs are in the middle of the road nationally, we are high relative to our surrounding states, particularly in the manufacturing sector.”

David Reddick, Tennessee state affairs manager for the National Association of Mutual Insurance Companies (NAMIC) said “the state’s workers’ compensation system is unlike any other in the country.” According to Reddick, a study of 15 states in 2003 by the non-profit Workers’ Compensation Research Institute reported that the average medical payment per claim in Tennessee was $7,218, ranking second only to Texas. NAMIC would prefer to see Tennessee form a better system for reviewing workers’ comp claims, a more orderly system for determining disability benefits and a medical fee schedule to help contain costs.

Another problem, Reddick added, is a 1992 law that allows judges in workers’ comp cases to increase a physician’s determination of impairment by up to 2.5 times for an injured worker able to return to the same or a similar job. This “multiplier” also can be increased by a factor of six in cases where an employee is permanently disabled. “While some judges may view themselves as being omnipotent, this law is really allowing judges to practice medicine without a medical license,” Reddick added.

Asked for solutions, Flowers noted, “We are developing the legislation now, but there are clearly several areas of concern that need to be addressed and balanced against each other. Tennessee is one of only two Southeast states [Alabama] that handle workers’ compensation strictly through the courts, which drives up costs. The system for handling PPD payments is unpredictable and inconsistent. There is little medical cost containment in our system. And there is little protection for employees whose employers self-insure.”

According to Chuck Bidek, executive director of Insurors of Tennessee, “Agents seem to have difficulty in certain areas, mostly construction and things like small contractors. The smaller you are, the bigger the problems seem to get in placement. They go to alternative markets and the number of those has decreased. The governor has asked the Legislature to come up with some reforms, but he has not directly suggested any reforms.”

Bidek went on to say that driven by the Chambers of Commerce in the state, respective towns have been “whipping the issue” and everybody seems to want reform.

“I think it will be interesting to see if the Legislature chooses to do anything this year. I think a little bit of everybody’s perception is there are just a lot of people sitting on the bench waiting for something to happen.” When asked if this being an election year factors into any reforms getting through, Bidek noted “It factors in two ways. First, it is usually a shorter session. Second of all, they don’t look to do as many study committees and that going forward. Another part of it is that there seems to be the question of ‘Do you really want to tackle that issue from a political perspective?’

“One thing about workers’ comp is that you have some pretty big interest groups involved. Along with the lawyers, you have the doctors and hospitals, the labor contingent, the business owners and of course the insurance industry. It is a pretty heavyweight battle. For a legislator trying to get everybody to vote for him in his district, how do you manage those concerns? To some extent, they are all valid.”