Tenn. Opt-Out Bill Draws From Existing Alternatives

Supporters say Tennessee's proposed Employee Injury Benefit Alternative could save employers up to 50 percent on their workers' comp costs.
By: | February 23, 2015

Calling it a free market alternative that could save employers up to 50 percent on their workers’ comp costs, lawmakers in Tennessee introduced legislation allowing an opt-out provision. If passed, Tennessee would join Oklahoma and Texas as the only states that would not require employers to adhere to the traditional workers’ comp system.

Called the Employee Injury Benefit Alternative, the Tennessee option combines aspects of both the Oklahoma and Texas laws. Similar to Oklahoma’s law, S.B. 721 would require employers who choose to opt out to be designated “qualified employers” and provide a set of benefits. However, as with the Texas system, employees would still be able to sue their employers if they can prove negligence. Damages for such a suit could range up to $1 million per employee and $5 million per occurrence.

“The core focus of the Tennessee option is to help injured employees get back to work faster,” said state Sen. Mark Green. “Making that happen requires good benefits, strong communication, and will lead to higher employee satisfaction.”

Green, a physician and vice chair of the Senate Commerce and Labor Committee, sponsored the legislation in that chamber. House Majority Whip Jeremy Durham introduced the measure there.

Employers could become qualified and eligible to opt out of the system by applying to the commissioner of commerce and insurance, paying an annual $500 fee, agreeing to establish a written benefit plan, notifying each covered employee, and providing proof of financial ability to cover its employees’ injuries.

The benefit plan must include the following minimum amounts:

  • Medical expenses for at least 156 weeks and $300,000 per employee.
  • Temporary total disability benefits starting on the fourth day of disability of at least 70 percent of the employee’s average weekly wages, up to 110 percent of the state AWW, for at least 156 weeks.
  • Death and scheduled dismemberment benefits up to $300,000 per employee.

The plan could have a combined single limit for all benefits payable due to an occupational injury if the limit is at least $750,000 per employee and $2 million per occurrence. Injuries that occur while the employee was intoxicated or under the influence of drugs would not need to be covered.

Supporters said key to the Tennessee option are employee accountability, medical management, employee-employer engagement, and free market competition, according to a statement released by the Association of Responsible Alternatives to Workers’ Compensation. Rather than replacing workers’ comp, it will put competitive pressure on the system for better outcomes for employees and employers.

Labor representatives were reviewing the legislation and planned to speak with the bill’s sponsors. A.J. Starling, secretary-treasurer of the Tennessee AFL-CIO, said the state recently went through a “two year ordeal” changing Tennessee to an administrative workers’ comp adjudication system from a combination court and administrative process.

“On the surface, I’m skeptical,” Starling said of the opt-out bill. “Our main concern is making sure the injured worker is covered.”

Nancy Grover is the president of NMG Consulting and the Editor of Workers' Compensation Report, a publication of our parent company, LRP Publications. She can be reached at [email protected].

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