By Lee Fehrenbacher

The campaign for Initiative 1082 – a push by the Building Industry Association of Washington (BIAW) to introduce private insurance companies into the state-run Labor & Industries (L&I) worker’s compensation program – began with a uniquely funny, but arguably kitsch commercial.

It’s a YouTube video called “L&I: the Only Grocer in Town,” in which L&I is depicted as a lazy, uncaring, grocery store clerk who ignores the needs of shoppers and instead offers them mayonnaise-flavored ice cream. Yes, mayonnaise-flavored ice cream.

“I think that’s a shoplifter right there, but that’s okay, we’ll just charge our regular paying customers more,” says the clerk in the commercial as he scans items into a torn, brown paper bag. “So, why does everyone come to L&I Grocer?”

A frustrated woman in the checkout stand replies, “We don’t have a choice. They’re the only one in town.”

Through the pro-1082 website, www.saveourjobswa.com, the BIAW and other endorsers of the initiative –  mostly small-business associations like the Association of Washington Business and the Associated Builders and Contractors Inc. – go on to say that the L&I’s worker’s compensation has become too inefficient, costly, and financially unstable for Washington businesses, and that increased competition will lower costs.

So far, the pro-1082 campaign has raised $1,057,328, of which $500,000 came from the BIAW.

Supporters claim that in the past 10 years, L&I administrative costs are up 82 percent, tax rates are up more than 50 percent; and that even though claims have dropped 52 percent since 1990, costs keep rising.

“L&I does not care about other people’s money,” said Tom Kwieciak, administrator of insurance programs for the BIAW. “They pay benefits that people are not entitled to and that raises the cost of the system. That raises the question of ‘Why in Washington state do we have an average time loss of 270-something days for each person that goes on a time-loss claim?’”

This has been a popular argument for initiative sponsors, but according to L&I, the number of 274 days does not represent the average time-loss for all injured workers (72 percent of injured workers receive no wage replacement for missed work) but is an actuarial estimate of time-loss claims between three days and long-term claims of up to many years. That number represents only 8 percent of claims but as much as 88 percent of the system’s total costs.

“The state-run system, it’s a good system that protects the workers and it protects the companies,” said Connie Kelliher, communications and media director for the Machinists Union District 751. So far, the union has donated approximately $100,000 to the “No On I-1082” campaign, which itself has raised $801,201.

Adopted in 1911, Washington’s worker’s compensation program is a nonprofit, no-fault system that protects employers from lawsuits that arise from job-related injuries, and provides medical insurance and partial wage replacement for injured workers. It currently covers approximately 171,000 employers and approximately 2.5 million workers.

Reports on how efficient that system is changes depending on whom you talk to, and how the data is presented.

The pro-1082 campaign likes to point out that L&I consistently raises rates each year, but that states like Oregon, which allows private competition in its workers compensation system, hasn’t raised rates in 20 years. However, in fact, Washington L&I’s rates are based on the number of hours worked (which need to be hiked for inflation), Oregon’s rates are based on a percentage of payroll – the percentage doesn’t change but that’s not to say the amount Oregonians pay doesn’t.

According to L&I, paid administrative expenses from 1999 to 2008 were 17.5 percent of the total benefits paid on claims. That compares to a national average of 68.2 percent. Furthermore, a 2008 Oregon ranking of nationwide workers compensation rates paid by employers found that Washington ranked in the lowest one-third of the nation, right next to Oregon’s ranking.

“To me that’s a working system, why would you switch to something that is for profit,” Kelliher said. “That’s certainly not going to look out for the best interest of the workers, or the corporations, it’s going to look out for the insurance companies like AIG.”

Washington State Insurance Commissioner Mike Kreidler said he had serious concerns with the language of the current initiative, but agreed that there needed to be some kind of reform to the current workers comp system.

A recent report from the state auditor’s office reported that the system’s Accident Fund had a 74.4 percent chance of going insolvent within the next two years and that a 33 percent rate increase would be necessary to break even. That said, Kreidler said one major concern he had with Initiative 1082 is that it would give him little power to regulate private insurance companies’ rates, or ensure they paid up on claims due to workers.

“I wouldn’t have any authority to offer to be able to make sure that the business was getting an appropriate rate from the insurance company,” Kreidler said. “There’s no oversight. That’s an erosion that I see and an unfairness that’s built into the system.”

If the initiative passes, it would also do away with the worker contribution to worker’s compensation. Kreidler said that will result in an immediate 18 percent increase for small employers on top of whatever is required to keep the fund solvent. It would also cost the state $200 million, and local governments nearly $50 million over the next five years as a result.

Kwieciak said that is a worthwhile expense.

“The same small businesses that are going to be on the hook to pay this extra are happy to do it if they can get rid of the L&I strangle-hold on their businesses. They’ve made the calculations and they’ve decided that it’s worth it in the short term, so in the long term they would have a much more competitive, less expensive system,” he said.