Washington state: Department proposes 7.6 percent average increase in comp premiums
The Department of Labor and Industries recently proposed a 7.6 percent average increase in premiums for 2010. Officials said that figure is significantly less than originally forecasted when the agency advised the Workers' Compensation Advisory Committee in June that a 15 to 20 percent average increase might be necessary.
"I know that any increase adds to the challenges that businesses and workers face in this tough economy," said Judy Schurke, director of the DL&I. "We have pushed this proposed rate increase down to the lowest possible level given the uncertain state of our recovery from this deep recession."
Schurke said three big factors related to the economy are impacting rates -- reduced investment returns, fewer premiums because of reduced hours worked, and fewer jobs for injured workers to return to. Recent health care inflation of 8.5 percent and wage inflation of 3.4 percent are two other factors that will affect next year's rates, she said.
The proposed increase, which Schurke estimated would bring in an additional $120 million, is an average for all employers in the state.
Under the DL&I proposal, the Accident Fund rate would increase 4.5 percent. Employers pay premiums in this fund. The Medical Aid Fund rate would go up by 8.4 percent, and the Supplemental Pension Fund rate would increase 16 percent. Employers and workers contribute equal premiums for the latter two funds. Self-insured employers, who fund their own medical and time-loss expenses for injured workers, are affected only by the increase in the Supplemental Pension Fund.
Washington is the only state where workers pay a substantial portion of premiums. Next year, their share would increase to slightly more than 28 percent if the proposed rates are adopted. Final rates for 2010 will be adopted in late November after the department hosts a series of public hearings in October.
Businesses push reform. On the heels of the premium increase announcement, the Association of Washington Business called on the agency, the governor and the Legislature to pursue major reforms to lower costs to all employers.
"In this difficult economic climate, any rate increase is a problem for struggling employers," said Don Brunell, president of the AWB. "The workers' compensation tax or rate is one issue, but when the cumulative impact of all costs of taxes, fees and government-mandated programs are added together, it makes it increasingly difficult for employers to keep people on the job and their doors open."
Brunell said that when the economy was thriving and workers' comp funds were invested in strong portfolios, the rates of return masked some growing problems. While the annual number of claims filed since 1990 has dropped 55 percent, Brunell said those fewer claims are taking longer to resolve and costing exponentially more to manage. The state also leads the nation in the number of expensive, lifelong pensions awarded each year, he said, at a rate that has ballooned more than 300 percent since 1996.
Kris Tefft, AWB's government affairs director for workers' comp issues, said this indicates an urgent need to reform the system.
"Getting costs under control should be a top priority," he said.
Tefft said some reforms that the agency and lawmakers should pursue include creating a settlement option for complex or long-term claims as an alternative to pensions. Washington is one of six states that doesn't allow final settlement agreements, he noted.
The group also recommended Washington bring its coverage of "occupational disease" claims into line with the majority of states by refusing to cover factors that aren't primarily work-related. In addition, Tefft said the state should also join the 42 other states that allow and encourage the use of medical provider networks to treat injured workers according to national best practices and treatment guidelines at costs that can be negotiated and stabilized.
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October 12, 2009
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