Tennessee Workers Comp Opt-Out Legislation Revised, Ready for Next Session

Legislation seeking to provide Tennessee employers with an option to the current workers’ compensation system has been amended and deferred to the next legislative session.

State Sen. Mark Green, who authored the Senate version, SB721, anticipates it will eventually pass.

“The bill is now in its ready state and when the committees open in the House next year we should get it through,” he wrote in an email to Insurance Journal.

Republican lawmakers Green and Rep. Jeremy Durham introduced Senate Bill 721 and House Bill 0997, respectively, in February. The legislation seeks to establish the Tennessee Employee Injury Benefit Alternative (TEIBA), which would provide a “free-market alternative to traditional workers’ compensation insurance offerings in the state,” according to the Association for Responsible Alternatives to Workers’ Compensation (ARAWC), which worked on the bill with the lawmakers.

The legislation would allow private employers to opt-out of private insurance plans and implement their own either fully insured or self-insured occupational injury benefit plans for their employees.

Tennessee law requires businesses with five or more employees to carry workers’ compensation either through a private carrier or the Tennessee Workers’ Compensation Insurance Plan, the residual market for firms that can’t obtain coverage in the private market.

When the option legislation was first introduced, Green said it would put competition into the Tennessee system and “significantly decrease the cost of workers’ comp.”

However, not everyone was on board with the bill’s initial provisions. The State Workers Compensation Board, which voted not to recommend the passage of the bill in its original form, questioned if employers would run responsible workers’ compensation programs. Other arguments included the amount of the lifetime injured employee medical benefits ($300,000) and the lack of a provision for permanent partial disability benefits.

To address some of the concerns, amendments to the bill were introduced at the Senate Labor and Commerce Committee hearing on March 17. Some of the amendments include:

• Enabling the Commissioner to continually monitor compliance of qualified employers
• Medical benefits minimum increased from $300,000 to $500,000
• The addition of permanent partial disability benefits
• The addition of permanent total disability benefits
• Death benefit minimums added; reduced by disability benefits paid; allowing lump sum or monthly payments; requirement of representative, dependent, or next of kin waive cause of action, the same for all “permanent benefits”, similar to workers’ compensation “exclusive remedy” rule
• Removal of the $2 million per occurrence limit to no total benefit cap per occurrence for multi-employee events

Knoxville workers’ compensation Attorney Mary Beth Maddox, who testified before the Senate committee in March, acknowledged the amendments but said that she still disagrees with the premise of the bill. “I don’t think we can assume that everyone is going to do the right thing. … If we made that assumption we wouldn’t need laws, we wouldn’t need courts. It’s just not the reality we are dealing with,” she said.

Maddox also noted that there was recently a constitutional challenge to Oklahoma’s opt-out option, one of two other states that utilizes an opt-out system.

Green said 13 prior challenges to Oklahoma’s system so far have all failed.

Ron Jackson, VP for the American Insurance Association, echoed Maddox’s concerns. “When that catastrophic injury occurs, there may be a cost-savings realized by that particular employer, but the costs of that catastrophic injury – they don’t go away, and we are not sure exactly where they are going to go in this system,” he says.

Green said the new amendments address many of the concerns. “Take all these benefits that are the same or better in many cases, add to it the fact that the employer can be sued up to $3.75 million … the employers who opt out and take that risk will work themselves to the bone to make sure their employees are well taken care of,” he said at the hearing.

Green said the opt-out system would take care of employees and provide cost-savings to employers, which will ultimately bring more employers to Tennessee.

The amendments were enough to get the bill through the Senate Commerce and Labor Committee, which recommended it for passage 6-0. It was then moved by the Senate Finance, Ways and Means Committee.

“It is not unusual for complex legislation to take longer to pass, and the Tennessee Option will continue to gain momentum in the second half of the 2015-2016 legislative session,” said Brent Buchanan, communications director for ARAWC.