Washington state: Premiums to increase 7.6 percent despite businesses' concerns

Officials in Washington state recently announced that workers' compensation premiums will increase an average of 7.6 percent in 2010 despite calls from business leaders to lower costs amid challenging economic times.

Judy Schurke, director of the Department of Labor and Industries, pointed to three major factors related to the economy that have impacted rates -- reduced investment returns, fewer premiums because of reduced hours worked, and fewer jobs. Health care inflation and wage inflation -- up 8.5 percent and 3.4 percent last year, respectively -- also played a significant role, she said. Because Washington premiums are based on hours worked, Schurke said the department must explicitly adjust rates for wage inflation. Other states assess premiums as a percentage of payroll hours, and as a result, revenue automatically goes up as wages increase without the need for a formal rate increase.

"I do understand how difficult the economic environment is right now and wanted to keep the increase as low as possible," Schurke said. "This rate ensures that the State Fund can meet its obligations to pay benefits to workers."

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The 7.6 percent rate increase, which officials estimate will bring in an additional $117 million, is an average for all employers in the state. Average premiums will go up by about 4 cents per hour worked. Individual employers could see their rates go up or down, depending on their recent claims history and any changes in the frequency and cost of claims in their industry.

Workers will also pay more under the rate change. Washington is the only state where workers pay a significant portion of premiums. In 2010, employees' share will increase slightly to about 28 percent.

Employers seek reform. When the department proposed a rate increase, the Association of Washington Business and other employer groups urged lawmakers to enact worker' comp reforms to curtail rising costs. At the request of Gov. Chris Gregoire, Schurke convened a group of business and labor leaders to examine ways to control long-term costs, including pensions. Robert Malooly, assistant director for the department's Insurance Services Division, said the agency has also intensified its efforts to reduce operational costs of managing the system while protecting benefits that injured workers receive.

"We're examining all of our costs and all of our processes to identify any potential additional savings that we can squeeze out of the system," he said. "We have to be just as aggressive as businesses in this regard."

The governor has indicated that workers' comp reform is on her agenda for the coming year, but she has not detailed her plans.

Read more at the WORKERSCOMP Forum^TM homepage.

January 4, 2010

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