Another State Opts-Out?

nashville skylineCould another state be joining the ranks of the “opt-out” states? Yesterday, a bill was introduced to the Tennessee state legislature that would create an alternative to the state’s workers’ comp insurance.

The idea is called the Tennessee Option, introduced by Senator Mark Green and Representative Jeremy Durham. While it would not replace the entire workers’ comp system, it would allow employers to create their own fully-insured or self-insured plan for workers’ comp insurance. The plans would have to be approved by the state’s Department of Commerce and Insurance. Companies would have to show proof that they can afford self-insurance and they would have to set up a guaranty fund that would still pay benefits in the event they are not able to afford to pay benefits anymore.

Certain industries will not be able to opt-out, like industries who have certain requirements like construction and mining. Small businesses with less than five employees and cities, counties and school districts can already opt-out under current laws. Opting-out will be be on a year-to-year basis, so if an employer decides it is not for them they can go back to the traditional work comp system. Employees will have to be notified if their workplace is operating under the opt-out plan, but will not have to pay for any of the new coverage. If injured, they can sue their employer if they are under the opt-out system.

Senator Green said he thinks the option will save employers more than 50 percent on their workers’ comp costs, so they can use that money to invest in their business and encourage job growth. He cited the Oklahoma and Texas model in his proposal, saying that they have seen increased employee satisfaction rates and lower costs.

The option is meant to act as competition to the system, to hopefully drive prices down and produce better outcomes.

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