Washington state: Comp program is sound, not teetering on insolvency

The Washington state workers' compensation system is not at risk of going insolvent, officials said, despite a recent report that indicated trouble may be on the horizon.

Judy Schurke, director of the Department of Labor and Industries, said she is concerned that characterizations of a report by the Washington State Auditor's Office on the State Fund could lead businesses and employees to incorrectly believe that the system will soon become insolvent.

"I want to assure every Washington worker that the benefits they need if injured on the job will continue to be available today and in the future," she said. "Businesses also need to know that L&I will continue to provide the insurance coverage that they expect and count on."

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Schurke said confusion appears to come from a misinterpretation of the audit's mention of the probability of "insolvency" in the State Fund, which covers nearly 2.5 million people and 168,000 employers. The insolvency refers to the contingency reserve, which is only a very small portion of the system's current total assets of $11 billion, she said.

"The fact is, we made a deliberate decision to draw down the contingency reserve in order to keep premiums low and help businesses keep their doors open in this tough economic time," Schurke said. "This has been done before, and this year it's more important than ever that we keep insurance costs as low as possible. This was the right thing to do and doesn't threaten the long-term financial integrity of our system. I understand we're cutting it closer to the edge this year, given the economy. That's why we are looking intensively at every way to cut costs while still providing protection for injured workers and employers."

Schurke said it's important to recognize that some interest groups and lobbyists have seized on the audit as a way to advance their agendas to significantly change workers' comp. In recent months, the Association of Washington Business and other employer groups have urged lawmakers to enact worker' comp reforms to curtail rising costs. Gov. Chris Gregoire has indicated that workers' comp reform is on her agenda in 2010 although no specific details of a plan have been announced.

Antifraud success. State officials also announced the results of a targeted campaign against workers' comp fraud in 2009. According to the L&I, the antifraud efforts netted $128 million for the state. The total included recoveries of payments made as a result of fraud, as well as inadvertent overpayments, to injured workers and health care providers. The collection amount also includes payments from employers for delinquent or falsely reported premiums.

Overall, the fraud program's collections in FY 2009 increased by 3 percent over the previous year. In addition, officials said the L&I avoided an estimated $5.9 million in future costs by uncovering and stopping fraudulent payments.

The department compared internal and external data while reviewing up to 2,000 claims each month that had been flagged as potentially fraudulent. In 2009, the agency identified 56 percent more overpayments and questionable billings to health care and vocational providers compared to the previous year.

Read more at the WORKERSCOMP Forum^TM homepage.

January 28, 2010

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