PRESS RELEASE: In Tennessee, Workers’ Compensation Benefits as a Share of Covered Payroll Decline Sharply

WASHINGTON, D.C. – Tennessee experienced a sharp decline in workers’ compensation benefits as a share of covered payroll in 2016, according to a new report from the National Academy of Social Insurance (the Academy). Workers’ compensation costs to Tennessee employers also declined as a share of payroll, but at a slower rate.

Workers’ compensation benefits paid to injured workers and their health care providers in Tennessee fell from $0.53 per $100 of covered payroll in 2015 to $0.48 per $100 of payroll in 2016, a 9.4 percent decrease compared to an average decrease of 3.6 percent nationally.

The Academy’s report, Workers’ Compensation: Benefits, Costs, and Coverage, also highlights five-year changes in workers’ compensation benefits paid from 2012 to 2016. Over this period, benefits as a share of payroll declined by 32.4 percent in Tennessee, compared to a 15.6 percent decline across the rest of the U.S. (Figure 1). Workers compensation benefits as a share of payroll in Tennessee were 74.0 percent of the U.S. average in 2012. By 2016, benefits as a share of payroll in Tennessee were only 59.3 percent of the U.S. average.

Tennessee reformed its workers’ compensation statues in 2013, effective January 1, 2014. The reforms restricted eligibility for benefits to cases in which work-related injuries were the primary cause of a worker’s current disability, and established a new administrative process for resolving claims. The 2013 legislation also imposed more restrictive guidelines on medical treatment for work-related injuries, guidelines, and reduced benefits rates for permanent partial disability claims, although the maximum duration of benefits was increased.

Workers’ compensation costs as a share of payroll to employers also declined in Tennessee in 2016, but at a slower rate than the decrease in benefits. Employer costs decreased by 3.3 percent in the state, from $0.91 to $0.88 per $100 of covered payroll. In the U.S. as a whole, employer costs decreased by an average of 2.3 percent, from $1.29 to $1.26 per $100 of covered payroll.

Over the five-year period from 2012 to 2016, workers’ compensation costs to Tennessee employers declined by 20.0 percent, from $1.10 per $100 of covered payroll to $0.88. Over the same period, employer costs in the rest of the country declined by only 3.8 percent, from $1.31 per $100 of covered payroll to $1.26 (Figure 2). Between 2012 and 2016, workers’ compensation costs to Tennessee employers fell from 84.0 percent of the U.S. average to 69.8 percent. Only six jurisdictions had lower workers’ compensation costs as a share of payroll in 2016 than Tennessee.

“The reductions in costs in Tennessee are in large part due to the effect of moving the adjudication of disputed claims from state courts to a new administrative law court,” said Abbie Hudgens, Administrator of the Bureau of Workers’ Compensation in Tennessee.  “The Reform Act reduced the jurisdiction over workers’ compensation matters from 120 elected judges hearing civil, probate, and criminal matters as well as workers’ compensation to twelve appointed judges devoted solely to workers’ compensation.  This change resulted in a more efficient system that greatly reduced the time and costs associated with claims and resulted in outcomes that are more predictable. The time-span for most cases is now measured in months, as opposed to years under the previous system.”

Figure 1. Workers’ Compensation Benefits per $100 of Covered Payroll, 2012-2016: Tennessee vs. U.S. Average (non-federal)

Figure 2. Workers’ Compensation Costs per $100 of Covered Payroll, 2012-2016: Tennessee vs. U.S. Average (non-federal)

Workers’ Compensation: Benefits, Costs, and Coverage (2016 data) is the 21^st in an annual series. The report provides the only comprehensive data on workers’ compensation benefits, costs, and coverage, for the nation, the states, the District of Columbia, and federal programs.

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