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Labor & Industries proposes 2.5% rate increase for workers comp

Post by Jordan Schrader / The News Tribune on Sep. 20, 2011 at 4:34 pm with No Comments »
September 20, 2011 4:34 pm

The agency would have sought double-digit increases if not for last winter’s business-backed law to rein in costs. Here’s the Associated Press story by Mike Baker:

OLYMPIA, Wash. (AP) — A major overhaul of Washington’s workers’ compensation system is already helping keep costs down for businesses.

The Department of Labor & Industries said Tuesday it is proposing an average rate increase of 2.5 percent for 2012. The agency says without this year’s changes in the Legislature, the agency would have been pushing for a double-digit increase.

Officials had been considering an increase of up to 8 percent as recently as this week as a way to restore depleted reserves. L&I Director Judy Schurke says the low number takes into account the painfully slow economic growth hindering businesses.

Businesses worked with lawmakers this year to change the system so that the state could offer settlements to workers that would lower payout costs over the long term.

Here’s L&I’s news release:

L&I NEWS RELEASE: L&I proposes lowest workers’ comp rate increase in 5 years

L&I proposes lowest workers’ comp rate increase in 5 years

Governor’s workers’ comp reforms bring rates down, avoid double-digit increase

TUMWATER – The Department of Labor & Industries (L&I) today proposed its lowest workers’ compensation rate increase in five years.

To help save jobs in the state’s struggling economy, L&I is proposing a 2.5 percent average increase. While many were expecting a higher increase, reforms passed in the most recent legislative session prevented a double-digit rate increase.

“We recognize the impact of painfully slow economic growth, and this proposal balances that with the needs of the workers’ comp system,” L&I Director Judy Schurke said. “The reforms passed this year had the effect they were designed to — now and into the future.”

The landmark reforms to the system passed by the Legislature this year will save $1.1 billion over the next four years, and continue saving money into the future. Without the reforms, Schurke said a 10-14 percent increase would have been needed to cover the cost of 2012 claims and begin restoring the fund’s reserves.

Over the past three years, L&I used $332 million from the State Fund reserves to partially fund the premiums for employers and workers, holding down rates during the recession. This has significantly reduced the reserves, which are critically low by industry standards.

“This proposed increase is a small step toward rebuilding the state’s workers’ comp reserves. Although the workers’ comp trust funds remain solvent, we recognize the need to ensure the funds are protected in the event of a further economic downturn,” Schurke said. “This is consistent with past reports from the State Auditor.”

L&I will work with the Workers’ Compensation Advisory Committee, representing business and labor, on a multi-year plan to rebuild the reserves.

L&I adopted a 3.2 percent increase in 2008, a 3.1 percent increase in 2009, a 7.6 percent increase in 2010 and a 12 percent increase last year. Each of these rate increases was less than needed to cover the projected cost of claims that year.

In addition to using reserves to absorb some of the claims costs, L&I kept more than $200 million in the State Fund by the end of the last biennium by using Lean methodologies to reduce delays and waste, cutting administrative costs, and by:

  • Holding down medical cost inflation well below the national average.
  • Using technology to replace paper-based transactions.
  • Reducing employer, provider and workers fraud.
  • Using more effective methods to collect the money owed to the funds.

The proposed rate increase is an average for all Washington employers. Individual employers will 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.

Washington is the only state where workers pay a substantial portion of premiums, about 24 percent of the 2012 proposed rate.

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.

Public hearings on the proposed rates will be held in:

  • Vancouver, Oct. 25, 9 a.m., Red Lion Hotel Vancouver at the Quay
  • Tukwila, Oct. 26, 1 p.m., L&I Office
  • Bellingham, Oct. 26, 1 p.m., Bellingham Public Library
  • Richland, Oct. 27, 2001, 1 p.m., Red Lion Hotel Richland Hanford House
  • Spokane, Oct. 28, 10 a.m., Spokane CenterPlace Event Center
  • Tumwater, Oct. 28, 2011, 10 a.m., L&I Headquarters

More information regarding the rate proposal is available at Rates & Risk Classes. The final rates will be adopted in early December and go into effect Jan. 1, 2012.

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