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BUSINESS JOURNAL

Workers' compensation law working for employers and employees?

Tom Humphrey
USA TODAY NETWORK - Tennessee

Workers’ compensation insurance rates will drop again next year for most Tennessee businesses and Gov. Bill Haslam’s administration contends – with considerable justification – that’s primarily because of an overhaul of the system three years ago in accord with the governor’s recommendations.

In a recent filing with the Department of Commerce and Insurance, the National Council on Compensation Insurance calculated that the “loss cost” to insurance companies in paying Tennessee workers comp claims declined last year by 12.6 percent. Generally, that means premiums paid by business will be reduced by a like amount when Commerce and Insurance Commissioner Julie Mix McPeak formally sets new rates that will take effect March 1, 2018.

Last year, NCCI calculated a loss cost reduction of 12.8 percent and McPeak subsequently signed off on a premium reduction of the same size.  If she does the same this year after a review by the Advisory Council on Workers’ Compensation that will be completed in late October, it will make for the seventh consecutive annual reduction – four of them, totaling 36 percent, since the 2014 law overhaul.

That means, of course, that premiums were on the way down before the last major change. It’s worth noting that former Gov. Phil Bredesen pushed through a workers comp reform package back in 2004 that mandated mediation before a disputed case went to court, lowered some benefits and eliminated a provision of the old law that said courts should “liberally construe” the statutes to see that workers got paid.

Bredesen’s proposal was highly contentious, opposed by many of his fellow Democrats who then had a majority in the legislature. It might well have flopped but for solid Republican support and the efforts of Jim Neely, longtime head of the Tennessee AFL-CIO Labor Council before Bredesen named him commissioner of the Department of Labor and Workforce Development. Neely died this summer at age 76.

Haslam’s overhaul was far more extensive but far easier to enact with Republicans in control of the General Assembly. Approved in 2013 with an effective starting date of July 1, 2014, the new law has workers comp claims bypassing the court system and sent to what critics called at the time “an entire new bureaucracy” – a Court of Workers’ Compensation Claims and a Workers’ Compensation Appeals Board, all housed under a Bureau of Workers Compensation.

While indeed creating a new bureaucracy, the law also substantially simplified and streamlined the process, arguably benefiting injured workers as well as employers. It included language that somewhat narrowed the definition of a workplace injury – excluding things like a basketball game on company property, for example – but had provisions speeding up payments.

The Bureau of Workers Compensation 2017 annual report issued in July – which, naturally, includes a fair amount of boasting -- says that the average time from an injury occurring to conclusion of a filed claim was more than five years (263 weeks) before the overhaul, reduced to less than a year (49 weeks) in 2016. And speed in providing payments to the injured worker is, of course, a plus for the individual who needs the money rather than the insurance companies and employers.

Some other “pre-reform” versus “post-reform” comparison figures from the report:

-Before, 65 percent of workers returned to work after settlement. Now it’s 85 percent.

-Before, 63 percent of the mandatory mediation resulted in a settlement. Now it’s 75 percent.

-The average duration of a “temporary total disability” claim was 240 days before the new law. Now it is 66 days. (The law also revised the legal definition of various disability statuses and the procedure for establishing the extent of injuries/disabilities from a medical standpoint.)

The 2014 law created an ombudsman’s office as an initial contact point to work with injured workers and their employer. The report says that office fielded more than 21,000 contacts in the 2016 fiscal year and declared “problems resolved” in more than 13,000 of those.

And, to its credit, the workers comp bureaucracy has quite the outreach program beyond the ombudsman. There’s a handbook recently made available to injured workers who don’t have a lawyer, along with a  Facebook page, tweeting judges and other social media communication – including a blog.

Workers Compensation Judge Pamela B. Johnson of Knoxville, for example, declared in a recent post that she and the bureau are big fans of numbers – “Did you know prime numbers are unlucky?” – in an informal look at the 2017 report that was coupled with a warning that comp judges can penalize those who don’t file a statistical data form, known as an SD2, anywhere from $100 to $1,000.

“By the way, we will be more strict about the SD-2 being completely filled out. Like a prime number, incomplete SD-2s will be bad luck:  Your settlement won’t be approved,” she writes.

Even lawyers are pretty happy with the new system, says the report. When the bill passed, lawyers representing injured workers were unhappy with some aspects in the legislative lobbying arena, in contrast with those representing business.

“The Court (of Workers Compensation Claims) remains highly regarded by the practicing bar for its work. An annual survey of the Bar gives the Court ratings of above 4.0 on a scale of 1.0 to 5.0 on criteria including the judge’s patience, preparedness, promptness and impartiality,” the report says.

Insofar as benefits paid to a worker, Tennessee currently has a maximum weekly payment of $992.20 per month (up from $976.80 in 2016) for total temporary disability – higher than 31 other states. The rate is calculated based on average wages paid in Tennessee and thus fluctuates – always easing upward in recent years.

In comparison with neighboring states, only Virginia has a higher maximum weekly benefit level, $1,043, according to August figures compiled by the Social Security Administration.  Mississippi has the lowest, $477. North Carolina is at $978; Kentucky $835; Arkansas $661.

There’s been some annual tinkering with the workers comp law since 2014, by the way. The least-complicated provision a bill approved by the legislature this spring (HB666) boosted the maximum payment for death from $7,500 to $10,000. Otherwise, it could be characterized as a technical housekeeping measure.

In a ceremonial signing of the 2013 overhaul bill, Haslam declared:

“As I traveled the state during my first two years in office, I heard consistently from Tennesseans that reforming workers’ compensation would be a significant step toward improving our business climate and growing jobs. Our legislation brings clarity and fairness to the system and builds on our ongoing efforts to make Tennessee the No. 1 location in the Southeast for high quality jobs.”

In August, Tennessee’s unemployment rate dipped to 3.3 percent, which was lowest rate in the Southeast. Runner-up was Arkansas at 3.5 percent.

The high quality of those jobs, of course, is subject to debate if you want to consider whether Haslam has achieved his oft-repeated goal. But the suspicion is that Tennessee might stack up pretty well against Arkansas on the job quality front. Just maybe the state’s willingness to provide higher workers comp benefits overall could be considered a factor in calculating job quality.

“The 2014 workers’ compensation reforms fueled these lower costs,” said McPeak in announcing this year’s NCCI filing, though she acknowledged that statistics indicate the number of on-the-job injuries has also been declining, indicating safer workplaces overall. “These benefits extend to Tennessee’s workforce as well (as business) because the loss cost reductions are a result of decreases in lost-time claim frequency and stabilizing claim costs.”

In other words, she’s saying that being “business friendly” – a repeated mantra of Haslam in his stump speech presentations of administration goals – doesn’t have to be worker hostile.

And in the arcane world of workers compensation – often subject to a cold, number-crunching analysis by businesses looking to bottom-line profit versus wounded workers facing a facing a lifetime of financial anguish – the 2014 revision seems to have struck a pretty good balance.

It also makes for a striking contrast with rising health insurance rates and the utterly inept efforts to deal with that situation on a national level.