Tennessee Businesses Get Relief From Workers Comp Premiums
April 26, 2011
Tennessee businesses are getting some relief from one of the nation's most costly workers' compensation systems. Just two years ago, a staggering 52.4% of all workers' comp premium dollars in Tennessee were paid into what is known as the assigned-risk pool, which provides the insurance of last resort for small and risky businesses that can't get workers' comp insurance on the open market. Today, state officials estimate that only about 28% of state premium dollars go into the pool. While that's still above the national average of 17%, it's a vast improvement for Tennessee. And it's providing a much-needed break for small businesses, who pay significantly higher premiums if they are placed in the pool. The numbers ``mean that we are a more attractive place for people to invest,'' says State Sen. Doyle Herma, a Nashville Democrat. ``And that translates into more jobs.'' Driving the shift is legislation that wasn't expected to have much impact until 2012. The bill, passed in July but not set to take effect until next year, altered both the way rates are set for workers' comp insurance and the way disputed claims are arbitrated. State officials and insurance executives say the new rules already are changing the way firms are selling insurance and handling claims. ``The environment for workers' comp is clearly much better these days because of the changes on the horizon,'' says Maryalice Janee Acker, a vice president of government affairs at Travelers Insurance, Hartford, Conn., which recently initiated a workers' comp product in Tennessee that targets small businesses. Until recently, Tennessee was one of a handful of states that placed tight restrictions on rates charged by workers' comp insurers, which complained that the caps were too low to make it profitable to insure small or risky businesses. As a result, ``virtually everyone charged the same rates, and no one wanted to take on smaller businesses,'' says Sharri Basil, assistant commissioner of the state Insurance Department. Now, as part of the recent legislation, the state is moving to a looser rate system that allows for more competition among firms, and also permits the firms to react more quickly to changes in the market. The new legislation also will change the way disputed claims are handled. Beginning September 12, 2010 such claims must first go through an informal ``benefit review conference'' conducted by the Tennessee Department of Labor. Only if that process is unsuccessful will the claim be handled by the courts. State officials hope that by keeping more claims out of court, they can keep costs down for workers' comp firms. Still, critics question whether the changes can keep workers' compensation in check over the long term. Currently, Tennessee's workers' comp market is benefiting from a strong economy, which tends to reduce the number of claims filed by workers and allows insurance companies to take risks on smaller firms. Should the economy sour, the percentage of small businesses that must turn to the assigned-risk pool will probably rise. Others in the industry worry that the legislation, which mandates a cap of 10% of state premium dollars in the assigned risk pool by 2015, could pose major problems for workers' comp firms. If insurers don't meet the goal, state officials will assign high-risk groups to private carriers or start a state workers' compensation fund that will compete with the private sector. But even skeptics are praising the state's action. ``The fact that there have been improvements certainly is encouraging,'' says Nannette Woodard, director of workers' compensation for the National Association of Independent Insurers, a Des Plaines, Ill., trade group for small insurers. ``There still need to be more improvements, but the state did send a message that it is concerned about workers' comp.''
