L&I proposes modest 2.7% workers’ comp rate increase

By DAVID GROVES
The Stand

OLYMPIA (Sept. 17, 2013) — The Washington State Department of Labor and Industries (L&I) on Monday proposed an average 2.7 percent rate increase for 2014 workers’ compensation premiums, the first rate increase in three years.

L&I said its objective is to provide steady and predictable rates; benchmark against wage inflation (this happens automatically in other states where rates are based on wages rather than hours, as in Washington); slowly rebuild reserves to protect against unexpected changes; and lower costs while focusing on better outcomes for injured workers.

“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,” said L&I Director Joel Sacks. “My goal is to reduce costs by an additional $35-70 million in 2014.”

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L&I is attempting to rebuild its contingency reserve funds, which were drawn down during the recession in order to avoid rate increases. Those reserves are slowly rebuilding thanks to the recovering economy and administrative cost savings, but the labor and business stakeholders on the Workers’ Compensation Advisory Committee (WCAC) are seeking to rebuild reserves quicker while also lowering projections for future investment earnings. Hence, the proposed rate increase, which L&I said would not have been necessary except to make progress toward those WCAC targets.

“The proposed rate increase for 2014 comes out to about 1.7 cents per hour and since the increase is in the Medical Aid premium that is split evenly between workers and employers,” said Jeff Johnson, President of the Washington State Labor Council, AFL-CIO. “This is a reasonable rate proposal given the objectives of rebuilding the contingency reserve fund, creating stable and predictable rates, lowering the pension discount rate over time, and tying rate changes to changes in wage inflation.

“The new administration is clearly taking politics out of rate-setting process,” he added. “New L&I Director Joel Sacks also announced a series of administrative changes that should save between $35 and $ 70 million in costs. While this is an ambitious goal, I have a lot of faith in the new director.”

L&I says that work underway to cut costs includes:

• Helping injured workers return to work as soon as they are medically able.
• Improving L&I’s workers’ compensation claims processes.
• Improving workplace safety.
• Improving medical care and reducing long-term disability.
• Making it easy to do business with L&I.

No dramatic rate increase

Earlier this year, suggesting dramatic rate increases were imminent, Senate Republicans threatened a state government shutdown unless House Democrats advanced legislation to lower workers’ compensation benefits, among other things. The GOP bill expanding lump-sum buyouts of injured workers’ claims was part of the “ideological wish list” (as called out by Gov. Jay Inslee) that Republicans demanded throughout the session, and most of two overtime sessions, before finally agreeing to approve a state budget.

Ultimately, any sense of urgency for further cutting benefits was diminished when L&I reported in May that the system’s financial condition was improving as the economy recovered from recession. In addition, Senate Republicans relented amid news that the lump-sum buyout program was not saving as much money as advertised when it was created.

At Monday’s WCAC meeting, L&I reported that its contingency reserve funds had increased $37 million to a total of $617 million in the fiscal year that ended June 30, 2013. Those reserves — modestly bolstered in a year with no rate increases — would have increased even more if not for the $244 million hit reserves took when L&I was forced to revise its expectations for savings from lump-sum buyouts.

“Organized labor argued all along that projected savings were wildly off base,” Johnson said when the shortfall was announced in June. “Those inaccurate projections from 2011 were the biggest reason legislators legalized the lump-sum buyouts in the first place. Now some legislators want to double-down on this failing experiment by expanding the buyouts and they have a new set of ‘projected savings’ that are also grossly inflated.”

Sure enough, Association of Washington Business lobbyist Kris Teft was quoted on Tuesday in the conservative Washington State Wire blog touting estimates that the GOP bill would save about a half-billion dollars in its first three years.

WSLC President Johnson has urged state legislators to “stop chasing phantom savings down this rabbit hole. It’s harming injured workers and their families.”

Public comment

L&I will seek public comment on its 2014 rate proposal at the following public meetings:

• Tukwila, Oct. 22, 10 a.m., Tukwila Community Center
• Bellingham, Oct. 23, 10 a.m., Central Library Lecture Room
• Spokane Valley, Oct. 24, 10 a.m., CenterPlace Event Center
• Richland, Oct. 25, 9 a.m., Community Center Activity Room
• Tumwater, Oct. 28, 10 a.m., L&I Auditorium
• Vancouver, Oct. 29, 10 a.m., Northwest Regional Training Center Rainier Auditorium

Written comments can be sent to Doug Stewart, Employer Services Program Manager, P. O. Box 44140, Olympia, WA 98504-4140, or emailed to doug.stewart@lni.wa.gov.