Tennessee Workers' Comp laws may be getting a facelift. According to The Tennessean, lawmakers just made a proposal that would allow employers to opt out of the Workers' Comp system and create their own coverage plan, so long as it meets minimum requirements. The bill comes on the heels of Oklahoma's opt-out option, and if it passes, Tennessee, Oklahoma, and Texas will be the only three states in the country that allow employers to sidestep the Workers' Comp program.
Here are the highlights of Tennessee's proposed bill:
- It would limit benefits to 156 weeks or until medical expenses reach $300,000 for the injured employee. The current program requires coverage for as long as treatment is needed.
- An employer would have to prove they have the financial strength to create their own program.
- The employer will decide the benefit rules. Employees can sue employers if issues crop up.
Worth noting: Tennessee already allows financially able employers to self-insure. Though these employers pay occupational injury benefits out of pocket, the current self-insure system requires them to have a contract with an insurance company that can be shown to state officials. This system comes with a heavy price tag, so the logic behind the proposal is to remove that extra step to save employers money.
Let's learn a little more about Tennessee's current and proposed Workers' Comp laws.
Tennessee Workers' Comp: Before and After
Currently, Tennessee's Workers' Comp laws are more similar to the laws around the country. Most states mandate that employers carry Workers' Comp (even if they have only one employee) to pay for their employees' medical expenses, lost wages, and death benefits if they're hurt at work.
Tennessee requires that employers carry Workers' Compensation Insurance…
- If they have five or more employees.
- If they belong to the construction industry, regardless of how few employees they have.
If the proposal passes, Tennessee's financially stable employers can apply to opt out of this program and set up their own alternative coverage. However, the proposal requires that these alternative plans offer…
- Up to 156 weeks and up to $300,000 per employee in covered medical expenses.
- Up to 70 percent of the employee's average weekly wages in temporary disability benefits (starting on the fourth day of disability).
- Up to $300,000 in death and scheduled dismemberment benefits per employee.
- A combined limit of $750,000 per employee and $2 million per occurrence limit.
So How Would the Bill Affect Tennessee Small-Business Owners?
You'll notice that we keep making mention of financial stability. Employers who qualify for the op-out option have to be pretty well-off to meet the alternative coverage requirements (plus the application fee alone is $500). In other words, if you can afford to pay $300,000 per injured employee, you're probably not a small-business owner, and the change won't affect you.
That also means you have to participate in the traditional Workers' Comp program and carry coverage if you have five or more employees. Per Tennessee's current laws, corporate officers are part of that employee headcount.
Not a Tennessee business owner? You can find a succinct summary of your state's Workers' Comp laws in our guide "Workers' Compensation Laws By State." And to learn more about the cost of Workers' Comp, check out this Workers' Comp Insurance Cost Analysis.