TN S.B. 721 Proposing “Opt-Out” From Traditional Workers Comp Coverage

Senate Bill 721 has been introduced in the Tennessee legislature by State Senator Mark Green (R) from Clarksville. If passed and eventually enacted into law, many Tennessee employers would be allowed to “opt-out” of the state’s traditional workers’ compensation system, by replacing it with private benefit plans, somewhat like those chosen by some Texas and Oklahoma employers for their employees. Green is a doctor, with specialized training in emergency medicine. The Bill would enact a new Chapter 50 to the State Code to be known and cited as the “Tennessee Employee Injury Benefit Alternative.”

The relevant provisions of this Bill, if it is enacted into law in its present form, are as follows:

  • It would apply only to employers with five (5) or more employees
  • It would exclude construction and some other service providers, as set out in TN Code Ann. § 50–6–106(1)-(7)
  • It would require the employer to adopt a written benefit plan that provides at least the following:
    • Medical expense coverage for at least 156 weeks and $300,000 per employee
    • Temporary Total Disability benefits of at least 70% of AWW up to 110% of the state AWW for at least 156 weeks
    • Death and scheduled dismemberment benefits of up to $300,000 per employee
    • A combined single limit for all benefits payable due to an occupational injury, provided that the combined limit is at least $750,000 per employee and $2,000,000 per occurrence
    • It would not generally limit the right of the employee to recover under a cause of action for employer negligence.

 As mentioned above, an employer who utilizes proposed Chapter 50 to “opt-out” of the traditional workers’ compensation system, will generally forfeit the exclusive remedy defense in any civil action filed by an employee against the employer. The plaintiff in such a civil action must, however, prove negligence of the employer. Damages, however, in such civil actions would be limited, as follows:

  • Economic damages in an amount not to exceed $1,000,000 per employee and $5,000,000 per occurrence
  • Non-economic damages as determined under TN Code Ann. § 29–39–102
  • Punitive damages as determined under TN Code Ann. § 29–39–104

In any such civil action brought under this proposed Bill, the employer would not be able to defend on the ground that the injury was caused by a co-employee’s negligence. The employer would be able to defend on grounds that the employee’s injury was caused by the employee’s sole negligence, by the failure of the employee to follow known safety rules, or that the injury was occasioned by the employee’s willful act or due to the employee’s intoxication.

Under this proposed Bill, a qualified employer’s injury benefit plan established in compliance, will not be maintained solely to comply with the state’s workers’ compensation law, but it would be the sort of welfare benefit plan that is subject to the Employee Retirement Income Security Act of 1974, as amended (ERISA).

The TN bill does not exactly track either Texas or Oklahoma. In Texas there are three (3) options an employer has, (a) do nothing, (b) to provide traditional workers’ comp coverage under the State Act and thereby enjoy the exclusive remedy, or (c) provide benefits under an employee benefit plan where there is no exclusive remedy. In Oklahoma if the employers “opt-out” from the traditional State Act provided benefits, they still maintain the exclusive remedy defense.

Some Of Our Thoughts And Opinions

It is without question that TN S.B. 721 will be reviewed and debated in great depth. Some of our thoughts are along the following issues and questions:

  • It seems to provide for limited medical benefits; different than the traditional State Act coverage;
  • If the above presumption is correct, then does the proposed bill create two (2) separate and distinct classes of employers?

All that remains to be seen, as the legislative session progresses, so stay tuned.

Business information and development is an important segment of the services Compcheck provides to its clients who have opted for our Total Risk Management Solution (TRMS) service plan.

Tony Damoulis leads our Risk Management Program and can be reached via email.

Why are States considering opting-out from workers’ compensation

For many years, Texas was the only state that allowed employers to opt out of the workers compensation system. Opting out from the workers compensation system, strips a state’s employers of the exclusive remedy protection of the workers compensation law, as well as certain common law defenses to worker injury claims.

Recently, other states have looked at the business climate in Texas and considered the merits of an opt-out system. Last year, Oklahoma began allowing employers to opt out of the state’s workers compensation law on the condition that they provide comparable benefits to injured workers under an alternative plan. While challenges to the law were expected, so far none have been successful in striking down the right of the employer to opt out. Last month, the Oklahoma Supreme Court declined to hear a case in which two injured workers were seeking to have the law declared unconstitutional.

Bills have been introduced in Tennessee and South Carolina that would allow employers in these states to opt out of the workers compensation system and create their own occupational injury benefit plan. As in Oklahoma, employers in these states would have to obtain approval from the appropriate state department by showing they are financially capable of supporting the plan and that all required benefits are being provided. With legislatures in recess, both bills — the Tennessee Employee Injury Benefit Alternative (Senate Bill 721) and the South Carolina Employee Injury Benefit Plan Alternative (H. 4197) are on hold until 2016. Even so, the opt-out movement appears to be gaining steam.

Published by IRMI  ISSN: 1949-419X

Compcheck Commentary:   IRMI with this published article has made a very good and very important point. We are not here to “politicize” but we are here to earn a living by servicing our clients the best way we know how. First, there is no question that health care costs have skyrocketed. Second, there is no question that the costs of workers compensation insurance have skyrocketed also. The second is a direct consequence and a product of the first. In a previous news article we posted, published by Reuters on June 11, titled “Many US hospitals mark up prices 1000 percent”, Reuters makes it abundantly clear, that workers compensation medical costs are not as highly regulated as Medicare costs are, and therefore “…employers who pay into workers compensation…pay full freight…that results in higher premiums…”.

State Legislatures are starting to become aware of the disparity between “standard care” and “high costs”, especially as it affects local business. We all agree there is a definite link between domiciling business in a State and the actual operating cost of that business. If an owner has to choose between keeping the business healthy or driving it into the ground simply by operation of law, there will be no choice. Either the business will go bankrupt and local consumers will loose their jobs, or the business will re-domicile in another State, in which case, local consumers will still loose their jobs. Either way, the local economy and people will be affected.

We know we may be painting a simple picture of what is purported to be a complicated problem. Well, that may be true, but the fact is, the business owner has another option. Get involved in an attempt to control insurance premiums, which every one knows, are a big percentage of the overall operating expenses. The insurance industry and its machinations, is not being taught in the business schools or simply learned by reading. If a business owner finds the “right person” in an insurance broker and the “right” relationship is established, that business owner has accomplished one of the most important tasks in keeping their business alive and healthy.

With over 95 years of experience under our belt, Compcheck Corp has been in the forefront of successfully assisting insurance brokers and their clients, in drastically reducing insurance premium costs, especially in the workers compensation arena. These reductions can have a retroactive effect in reducing the applicable mod rates which insurance companies use to calculate workers compensation premiums. There are two (2) options: One is not to have any workers compensation claims, and two, is to mitigate the claims you have or the ones you will have. Obviously, option one is not a natural or a logical option; they call them “accidents”, in simple language and for a reason; they are after all, by definition, unexpected. These claims will always be there with a certain frequency and or severity. The other option, the one involving mitigation or reduction of claims costs, is what Compcheck Corp does. It reduces and or mitigates the frequency and or severity of these claims and thereby reduces the cost of workers compensation insurance.

There is one thing for certain; regardless of what State Legislatures do in the future to assist businesses in reducing their workers compensation insurance premium costs, the need for claims frequency and or severity mitigation, will always be there. That’s why you need Compcheck Corp.

Mike Turano, the founder of Compcheck, was a pioneer in identifying the universal need for workers’ compensation successful claims auditing, management and rate reduction with the associated subsequent overall insurance premium cost reduction.
Tony Damoulis has made the international world of the insurance and re-insurance industry his home since 1972. Tony’s professional experience includes declaratory judgements, medical malpractice, other professional liability claims and the standard primary and surplus secondary insurance markets, along with reinsurance and alternative risk funding.

Many US hospitals mark up prices 1,000 percent, study says

Published June 09, 2015 by Reuters

Even the astronomical price markups that consumers regularly pay for, say, wine in restaurants pale beside those in some U.S. hospitals: The price for procedures is often 10 times the cost, according to a study published on Monday in the journal Health Affairs.

Of the 50 hospitals with the highest markups, 49 are for-profit, including 25 owned by Community Health Systems.

Community Health and other for-profits did not respond to requests for explain their markups, but in the past hospitals have said list prices, shown on a “chargemaster,” are irrelevant because “no one” pays those.

In fact, out-of-network patients and the uninsured are often charged list prices, said Dr. Renee Hsia of the University of California, San Francisco, who has studied hospital charges but was not involved in this research. “People do get bills based on the chargemaster, and for out-of-network care insured patients pay a percentage” of chargemaster prices, she said.

Auto insurers, covering care after accidents, and workers’ compensation also pay full freight. (emphasis ours). “That results in higher premiums for auto insurance and for employers who pay into workers’ comp,” said study co-author Ge Bai of Washington & Lee University. “That means we are all victims of these markups.”

Hsia and Gerard Anderson of Johns Hopkins Bloomberg School of Public Health blamed lack of regulation and transparency for 1,000 percent markups. Non-transparency means patients cannot learn what a procedure will cost before they get a bill, preventing comparison shopping.

Those bills can be eye-opening. Hsia, for instance, found that charges for a lipid panel blood test varied from $10 in one California hospital to $10,169 in another; opening blocked arteries cost $22,047 in one, $165,386 in another.

For their study, Anderson and Bai analyzed 2012 data, the latest available, from the Centers for Medicare and Medicaid Services to identify the 50 hospitals with the highest markup over Medicare’s allowed charges, which Medicare considers a hospital’s cost.

The 50 had an average markup of 1,010 percent, vs. 340 percent for the other 4,433.

Data for 2013, released last week, support the findings. The hospital with the highest markup in 2012, North Okaloosa Medical Center in Florida, charged $113,000 to treat respiratory infections in 2013, vs. Medicare’s $10,000. In second place, Carepoint Health-Bayonne in New Jersey charged $193,000 for pneumonia vs. Medicare’s $9,600.

To treat hemorrhage, common in auto accidents, Okaloosa charged $79,350 vs. Medicare’s reimbursement of $5,177.

Tony Damoulis, in addition to being our Director of Operations, also directs our liability division that deals exclusively with our clients’ risk and claims management needs.


Tuna company & 2 managers charged in death of worker

Published April 28, 2015 Associated Press

LOS ANGELES – Bumble Bee Foods and two managers were charged by Los Angeles prosecutors Monday with violating safety regulations in the death of a worker who was cooked in an industrial oven with tons of tuna.

Jose Melena was performing maintenance in a 35-foot-long oven at the company’s Santa Fe Springs plant before dawn Oct. 11, 2012, when a co-worker, who mistakenly believed Melena was in the bathroom, filled the pressure cooker with 12,000 pounds of canned tuna and it was turned on.

When a supervisor noticed Melena, 62, was missing, an announcement was made on the intercom and employees searched for him in the facility and parking lot, according to a report by the California Division of Occupational Safety and Health. His body was found two hours later after the pressure cooker, which reached a temperature of 270 degrees, was turned off and opened.

The company, its plant Operations Director Angel Rodriguez and former safety manager Saul Florez were each charged with three counts of violating Occupational Safety & Health Administration rules that caused a death. The charges specify that the company and the two men willfully violated rules that require implementing a safety plan [emphasis ours], rules for workers entering confined spaces, and a procedure to keep machinery or equipment turned off if someone’s working on it. Rodriguez, 63, of Riverside, and Florez, 42, of Whittier, could face up to three years in prison and fines up to $250,000 if convicted of all charges, prosecutors said. Bumble Bee Foods faces a maximum fine of $1.5 million.

The state’s occupational safety agency previously cited the San Diego-based company for failing to properly assess the danger to employees working in large ovens and fined it $74,000. Bumble Bee, which has appealed the penalties, said the company improved its safety program after the tragedy. “We remain devastated by the loss of our colleague Jose Melena in the tragic accident,” the company said in a statement. “We disagree with and are disappointed by the charges filed by the Los Angeles district attorney’s office.” Florez refused to comment, and messages seeking comment from Rodriguez were not immediately returned.

District Attorney Jackie Lacey said prosecutors and investigators from her office have been going to major industrial accidents to ensure illegal and deadly work practices are prosecuted. Prosecutions of workplace violations are uncommon — even in fatalities. The state cited nearly 15,000 workplace violations in 2013, according to the state agency. Of 189 fatality investigations opened that year, the state only referred 29 to prosecutors.

District attorneys only filed charges in 14 cases that year, though some of those charges could have been for cases referred in earlier years. They could have brought charges subsequently for cases filed in 2013.

Compcheck Commentary: Regardless of any regulatory, administrative or political discussions that may become food for thought, the fact remains that all businesses, regardless of size, type, exposure or risk, once they become subject to any type of insurance or other risk transfer vehicle, intended to protect others, especially workers compensation, should have a safety plan in place. This safety plan should be reviewed/audited at least every three years to make sure it is responsive to and in compliance with, ever-changing regulations.

Tony Damoulis
Compcheck Operations

You may contact Mr. Damoulis at his Compcheck email address or via his office phone at 866-626-4426 x301