STATE GOVERNMENT
L&I proposes 2% rate increase to promote long-term stability
The small increase is in line with the 10-year plan of small annual rate increases that was endorsed in 2012 by the Workers’ Compensation Advisory Committee (WCAC), a panel of representatives from business, labor, self-insured employers and the Board of Industrial Insurance Appeals that advises L&I on the state-run system.
“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,” said Joe Kendo, Government Affairs Director for the Washington State Labor Council, AFL-CIO. “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.”
Washington’s workers’ compensation system is unique not only because it is state-run, but also because premiums are based on hours worked not on wages paid. That means workers’ compensation premiums don’t automatically increase as wages rise, as they do in all other states. Given the state’s wage inflation rate near 4 percent, L&I’s proposed 2 percent average rate increase is actually a small decrease in the effective rate.
Every fall, the Washington State Department of Labor & Industries (L&I) sets workers’ compensation rates for the following year. As wages and health care costs rise, the cost of providing workers’ compensation insurance goes up. This year, the department is proposing an average 2 percent rate increase for 2016.
Employers and workers around Washington pay into the workers’ compensation system so they’re covered if someone gets hurt on the job or becomes ill from something they’re exposed to at work. Last year, L&I covered almost 90,000 work-related injury and illness claims in our state.
L&I takes a close look at expected workers’ compensation payouts, the size of the reserve fund, wage inflation and other financial indicators to determine the proposed base premium rate. The agency is also working to cut costs to help keep rates as low as possible.
“When workers’ compensation rates are like a roller coaster ride, it frustrates everyone. We’re not going to do that. I’m committed to keeping rates steady and predictable,” said L&I Director Joel Sacks. “We’ve worked hard to decrease the costs of running the program, which is one of the reasons we can propose a rate increase that’s well under the wage inflation rate. Still, this small increase will help build the reserve funds needed to keep our program financially healthy.”
The proposed increase comes out to a little more than 1 cent per hour worked. Workers’ compensation premiums help cover the cost of providing wage and disability benefits, as well as medical costs for treatment of injuries and illnesses. The reserve fund protects the system against the unexpected.
Cutting workers’ compensation costs
Tens of thousands of workers in our state are injured on the job every year, and Washington’s workers’ compensation system is always ready to help them, their families and their employers.
L&I has several initiatives underway that focus on helping injured workers heal and get back to work, improving service and reducing costs. That includes:
• Promoting injury prevention.
• Ensuring injured workers receive quality health care.
• Supporting employers who want to keep injured workers on a job.
• Improving the workers’ compensation claims process.
These and other improvements and efficiencies have resulted in hundreds of millions of dollars in savings in the past year.
Keeping the system healthy and rates steady
L&I uses wage inflation as a benchmark to help determine rates for the coming year because as wages climb, the cost of providing workers’ compensation coverage rises. Washington’s most recent wage inflation number is 4.2 percent. Significant cost savings by the agency are allowing for a proposed increase well under the wage inflation rate.
“Eliminating major swings in rates makes it much easier for business owners to budget for their workers’ comp costs. And by using wage inflation as a benchmark, we can keep up with rising costs of providing insurance while making sure we have a reserve fund ready for tough times,” said Sacks.
The agency will hold a series of public hearings where people can learn about and comment on the proposed rates. The hearings are scheduled for:
• Tumwater, Oct. 26, 10 a.m., Dept. of Labor & Industries Auditorium.
• Vancouver, WA, Oct. 26, 10 a.m., NW Regional Training Center.
• Tukwila, Oct. 27, 10 a.m., Tukwila Community Center.
• Everett, Oct. 28, 10 a.m., Everett Community College.
• Spokane, Oct. 29, 9 a.m., Spokane CenterPlace.
• Richland, Oct. 30, 9 a.m., Richland Community Center.
People can also comment in writing 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.
More information regarding the proposal is available at www.Lni.wa.gov/Rates. Final rates will be adopted by early December and go into effect Jan. 1, 2016.