Bill would reshape workers' comp landscape

More than 1 million people in Tennessee work for employers offering workers' compensation benefits that meet state law, but some employees could find themselves navigating new rules if companies get the chance to create individual policies.

Sen. Mark Green, R-Clarksville, and Rep. Jeremy Durham, R-Franklin, want employers that meet certain financial requirements to be able to craft individual, self-funded injury benefit programs rather than offer insurance coverage under the state's law.

There are 84,942 employers in Tennessee reporting to Tennessee's workers' compensation division, covering 1.06 million employees. Municipalities don't have to participate in the workers' compensation program although 92 percent do. Chattanooga, Memphis and Nashville each has its own system. Knoxville has opted in for the past 30 years.

The bill, SB0721 in the Senate and HB0997 in the House, would require that benefits extend for at least 156 weeks or three years and cover medical expenses of at least $300,000. The current program allows for coverage for as long as treatment is needed.

Opting out would be most attractive to employers in industries that have lower frequencies and severity of injuries, said officials. Retail, food service, hospitality, health care and trucking are among those most suited to opting out. Companies that are in heavy industry or manufacturing are less likely to take on greater financial risk when it comes to injury benefits because accidents can lead to severe injuries.

Texas and Oklahoma are the only states that have opt-out programs in place. Green and Durham's proposal is akin to the Texas system although the bill puts in place minimum benefit requirements whereas Texas has none.

Employee advocates oppose the bill because, they said, privatizing workers' compensation shields employers from oversight and gives too much control to employers.

"You're basically turning yourself over to a dictatorship in the workplace. In some cases, it may be a benevolent dictatorship," said Richard Levy, general counsel for the Texas AFL-CIO, who has represented employees in claims against employers who write their own policies. Texas was the first to allow employers to write their own policies.

Gary Moore, president of the Tennessee AFL-CIO Labor Council, would like to see reforms have time to take effect before another set of changes get introduced. Tennessee passed reforms to its workers' compensation program in 2013. Most took effect on July 1, 2014.

Employees would continue to pay taxes as well as make 401(k) contributions on wage replacements from their employer before returning to work. Wage replacement benefits are not taxed under the traditional programs.

"I think they should wait and see how the last set of workers' compensation reforms is going to work," Moore said.

Whether employers participate in the Tennessee Option, as the alternative program is being called, is just that — a choice. Even companies that are interested in crafting their own policies might not opt out of the traditional program immediately, said Barry Moscowitz, a partner with law firm Thompson and Coe in Dallas, who represents Texas employers that create their own policies.

"Most (big companies) are risk averse to sticking their toe in the water to be the first to test it," Moscowitz said, explaining there are likely to be legal challenges in the initial years.

Employees, too, are risk averse and will probably be unsettled by potential changes that place greater autonomy on employers.

"A lot of employees are nervous initially. It's not even playing the devil's advocate — I can see reasonably how the employee would be nervous about the changes," Moscowitz said.

Given the optionality of the program, many employers and industry groups are not taking a stance on the legislation. The Tennessee Chamber of Commerce has taken a "deep dive" into the bill but is remaining neutral on it, said Bradley Jackson, vice president of government affairs and community outreach for the Chamber.

More than 50 percent of the Chambers' investors are manufacturing, so it's likely that many would not change the system they have in place even if given the chance. Jackson declined to comment on members' opinions on the legislation.

National campaign

Workers' compensation costs have not been managed as effectively as health care costs and there is a growing "national energy" to find better ways to control costs, said Larry Van Horn, associate professor and executive director of health affairs at Vanderbilt University's Owen Graduate School Management.

Support for Tennessee Option is being rallied by Association for Responsible Alternatives to Workers Compensation, a national organization based in Austin, Texas, that champions private workers' compensation initiatives. The association worked on the passage of the option in Oklahoma and has had conversations and meetings with business leaders, including the Tennessee Chamber of Commerce and lawmakers in Tennessee.

The organization provides advice on passing legislation in states that meet its criteria. It looks for states with high workers' compensation costs, as well as the political environment. Legislation is expected to be announced in a few more Southeast and Midwest states in the coming weeks, said association spokesman Brent Buchanan.

The organization's secretary, Bill Minick, is also the president of PartnerSource, a Dallas-based company that designs, implements and administers injury benefit plans.

Minick said he has spoken with companies with operations in both Texas and Tennessee that would like to see flexibility brought into the Volunteer State's workers compensation program. Minick, who has worked with Green and Durham, plans to be at the legislature when the bill is in the senate committee. The bill was originally set for Tuesday but has been pushed to later this month so the sponsors can make some changes, Green said.

Companies that chose to participate in the Tennessee Option would no longer be factored into how workers' compensation insurance premiums are calculated.

It's too early to tell whether removing companies with lower risk of employee injuries would make workers' compensation insurance premiums more expensive for companies that choose to participate in the existing program, said Mike Shinnick, manager of workers' compensation at the Tennessee Department of Commerce and Insurance

"You're cherry-picking so to speak — you're picking out the lower-risk employers from the marketplace. You're leaving those with higher risk, higher frequency, higher severity," Shinnick said. "We don't know what it's going to be until it gets here."

Reach Holly Fletcher at 615-259-8287 or on Twitter @hollyfletcher.

By the numbers

•84,942 employers reported to Workers' Compensation Division in 2013 with 1,068,438 employees

•2,700 self-insured entities, including groups and individual self-insured employers, according to the division.

•8,429: Total number of workers' compensation cases for 2013

There are currently 104 self-insured licensed employers, according to the Tennessee Department of Commerce & Insurance:

•23 handle their own claims

•81 contract with third party administrators, which handle claims but do not provide "coverage."

Injuries by age

Average age of injured workers has been on the rise:

2004: 43.2

2005: 44.0

2006: 44.6

2007: 45.2

2008: 45.3

2009: 45.3

2010: 45.8

2011: 46.4

2012: 46.5

2013: 46.8

Source: Tennessee Workers' Compensation Division

Injuries by education level

In the last decade the number of injured workers with high school and post-secondary education has increased.

2004:

Less than high school: 18.7 percent

High school: 58.2 percent

More than high school: 23.1 percent

2013:

Less than high school: 10.4 percent

High school: 63.3 percent

More than high school: 26.3 percent

Source: Tennessee Workers' Compensation Division



Top 10 nature of injuries in 2013:

Strain/Tear -- 24.6 percent

All other specific injuries, not otherwise classified

Fracture

Multiple physical injuries

Contusion

Sprain or Tear

Dislocation

Laceration

All other cumulative injuries, not otherwise classified

Carpal Tunnel Syndrome

Source: Tennessee Workers' Compensation Division



Top 5 body parts injured in 2013:

Shoulders, 17.5 percent

Knee

Lower back area

Multiple body systems

Fingers

Source: Tennessee Workers' Compensation Division