L&I proposes 12 percent workers’ comp rate increase

The Bellingham Business Journal

Beginning next year, workers’ compensation insurance premiums will increase an average of 12 percent, which equals about 6.5 cents per hour worked. The rate hike is the result of increased workers’ compensation claims costs, according to the Department of Labor & Industries (L&I).

The new rates will take effect Jan. 1, 2011, under an emergency rule that is effective for 120 days. L&I will hold public hearings in January to gather comments about the proposed increase before adopting permanent rates.

Earlier this year, Gov. Chris Gregoire asked L&I Director Judy Schurke to convene a business and labor workgroup to recommend improvements to the state’s workers’ compensation system.

“In the meantime, we can’t ignore the fact that the severe, persistent recession has increased workers’ comp claims costs. We’re able to hold down the rate increase to 12 percent largely because L&I has aggressively cut costs, including our own budget, by over $200 million,” Schurke said in a press release.

The premium increase has led the Associated General Contractors (AGC) of Washington to reassert its call to reform the state’s workers’ compensation insurance system. While the average premium increase is 12 percent, it will be 16 percent for the construction industry.

“Economists are saying that 2011 could be the year that the state’s construction economy turns around,” David D’Hondt, AGC executive vice president, said in a press release. “The fledgling recovery, however, could be squelched by increased costs such as these. The 16 percent increase for workers’ comp is on top of a 42 percent increase in unemployment insurance premiums.”

The L&I rate increase is an average for all Washington employers. 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. L&I has published a rate table on its website and will soon send all employers a rate notice.

While acknowledging L&I’s efforts to cut its budget, the AGC said systemic reforms are needed, and called on Washington State Legislature to enact changes that allow employers, employees and L&I to use final settlement agreements to close claims; clarify the definition of occupational disease; expand managed care networks for injured workers; and simplify the process for calculating worker benefits by using a flat rate and four-quarter income averaging.

“No doubt the Legislature will be on the spot next year to balance the budget without raising taxes,” D’Hondt said. “The construction industry has been pursuing good ideas that don’t merely cut programs but reform the system in ways that promote the growth of businesses and the tax revenues they provide.  Hopefully the 2011 Legislature, with its dozens of new legislators, will be willing to take a fresh look.”

Every year in Washington, more than 100,000 claims are filed for medical costs and lost wages due to work-related injuries, illnesses and deaths. Each year, L&I must review premium rates and make adjustments to cover the anticipated costs of claims that will be filed in the next year.

“We’ve taken many steps to reduce costs in our claims-management process, such as keeping prescription drug costs to less than half of the national average. But it isn’t enough to overcome the negative impact of the economy,” Schurke said.

The same economic factors that affect workers’ compensation insurers nationwide are impacting Washington’s State Fund: Injured workers are staying on benefits longer because there are fewer jobs; less money is feeding the system because fewer hours are worked; medical costs and wages are up; and investment earnings are down.

Washington is the only state where workers pay a substantial portion of premiums, about 24 percent of the 2011 proposed rate.
Public hearings on the proposed rates will be held in Spokane and Tacoma on Jan. 4, 2011.

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