Washington: Proposed rate hike is smaller than anticipated

Calling it a "small step toward rebuilding the state's workers' comp reserves," the Washington State Department of Labor & Industries proposed its lowest workers' comp rate increase in five years.

Regulators said the increase likely would have been much higher if not for the recently adopted reforms to the system.

The proposed 2.5 percent average rate hike is aimed at balancing the "impact of painfully slow economic growth" with the "needs of the workers' comp system," according to L&I Director Judy Schurke. "The reforms passed this year had the effect they were designed to -- now and into the future."

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The legislative reforms will save an anticipated $1.1 billion over the next four years. Without them, Schurke said a 10 percent to 14 percent increase would have been required to cover the cost of 2012 claims and begin restoring the system's reserves.

The State Fund's reserves have been cut by $332 million over the last three years to help hold down rates for employers and workers. Washington, which has a monopolistic fund, is the only state that collects premium dollars from employers and employees.

The drawdown on the reserves put the reserves in a position that is "critically low by industry standards," Schurke said. However, she said the workers' comp trust funds remain solvent.

L&I will develop a multiyear plan to rebuild the reserves in conjunction with the Workers' Compensation Advisory Committee, which represents business and labor. Recently, L&I officials had asked the WCAC for input on a rate increase ranging from 4.5 percent to 8 percent.

The proposed 2.5 percent rate hike will help ensure funds are protected in the future. It follows increases of 12 percent last year, 7.6 percent in 2010, 3.1 percent in 2009, and 3.2 percent in 2008.

In addition to using money from the reserves, regulators said the L&I kept more than $200 million in the State Fund by:

Using various methodologies to reduce delays and waste.
Cutting administrative costs.
Holding down medical cost inflation "well below" the national average.
Using technology to replace paper-based transactions.
Reducing fraud in the system.
Using more effective methods to collect money owed.

The proposed rate hike will be the subject of public hearings in October. The final rates will be adopted in December and take effect in January.

Read more at the WorkersComp Forum homepage.

October 13, 2011

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