Posted by Christine Foster on October 14, 2015
On September 23rd, the Washington State Department of Labor & Industries (L&I) officially announced its proposed rate increase for the state's workers' compensation system for 2016.
Overall, the proposed rate increase is 2 percent, which comprises a structural-wide average and is meant to contribute to the recovery of the State Funds' reserves, including disability benefits and pensions. The increased rate pitch is up from the 1.1 percent in additional premium income L&I has forecasted it will need to pay administration and benefits in 2016, due to rising wages and health insurance costs.
The announcement quickly elicited a heated response from the Association of Washington Business (AWB) as an unnecessary increase. Not far on AWB's heels, former Attorney General Rob McKenna wrote about the rate increase to build up reserves,
“At L&I, it's always a great time to build reserves – to take more money than is necessary out of Washington businesses and park it in Olympia."
“A 2% increase may not sound like much, but it's just another in a string of rate hikes by what is already one of the most expensive workers compensation systems in the country. Periodic rate increases might be easier to swallow if L&I ever showed that it takes the burdens imposed by these increases seriously, or if it ever acknowledged that its leaders could learn something from other states that have managed to actually lower costs.”
Both assertions made note of the fact that Oregon, by contrast, is proposing to drop rates by more than 5 percent next year. Joe Kendo, Government Affairs Director for the Washington State Labor Council, meanwhile, endorsed the announcement stating that,
“This modest rate adjustment is part of a long-term plan – supported by business and labor stakeholders after the last recession — to rebuild the system's reserves and to avoid dramatic rate spikes in the future. That plan appears to be working so far. We need to resist suggestions that we abandon this plan by freezing rates. That would jeopardize those important goals and destabilize our state's safety net for injured workers.”
As Washington State continues to rank in the top five states for workers' compensation rates, and is the costliest for benefits, employers' are becoming increasingly frustrated. They see other states taking positive action to both steadily maintain rates, and yet still ensure their ability to care for injured workers.
Washington State Labor and Industries 2013 Director Joel Sacks said it perfectly when referring to the 2014 proposed 2.7 percent rate increase,
"This proposal is part of a long-term plan to ensure steady and predictable rates, help injured workers heal and return to work, and reduce costs by improving operations. My goal is to reduce costs by an additional $35-70 million in 2014."
The Department of Labor & Industries has been steady concerning their rates alright - steadily proposing rate increases above and beyond what the projected costs to the system would be, only to then start backstroking to reduce the initial amount they were hoping for.
AWB President Kris Johnson issued this statement in response to L&I's proposed rate increase,
"Today's proposal to once again raise employers' workers' compensation insurance rates by 2 percent, or nearly double what the department needs to break even, is yet another illustration of the need for efficiencies and reforms within the single-option system. In Oregon, officials are proposing to reduce the cost of workers' compensation by more than 5 percent, all while taking care of injured workers."
"Employers are concerned, not only about the years of unnecessary workers' compensation rate increases, but also the message that it sends — a message that government fails to appreciate that our economy is still fragile and that while economic recovery has come to parts of the Puget Sound region, it has not arrived in all parts of the state."
While Oregon State's system is different from Washington State's, it is a constructive and encouraging example of how reforming a government program to be more cost-effective and employer/employee-friendly can benefit everyone.
The Washington State Department of Labor and Industries will hold a series of public hearings where people can learn about and comment on the proposed rates. The following hearings are scheduled for:
Employers may also submit written comments to Jo Anne Attwood, administrative regulations analyst, P. O. Box 41448, Olympia, WA 98504-4148; or email joanne.attwood@Lni.wa.gov. All comments must be received by 5 p.m. Nov. 3, 2015.