Reform L&I before increasing rates
Olympia, WA - The Department of Labor and Industries (L&I) announced last week that worker compensation premiums will increase by 29% starting next January. This means businesses will be forced to throw another $265 million each year into a broken and inefficient system-assuming those businesses can afford to stick around.
Governor Locke should postpone the rate increase until meaningful reforms are implemented.
"We are being asked to pay significantly more money in order to support a system that is fundamentally broken," said Judi Williams, founder of Telect Communications in Spokane. "We're tired of treating symptoms when there are clearly root causes that badly need attention."
Williams is one of many concerned business owners and operators who have identified some serious problems with L&I's management and policy.
First, the claims management system is in disrepair. A legislative performance audit identified management problems several years ago. So L&I promised to improve claims management by 7.5% if it received an increase in the agency's staff and salaries. L&I got what it asked for-and performance dropped 15%, costing taxpayers more than $100 million this year.
Second, court decisions and agency policies are increasing costs. The definition of wages and worker benefits have been changed by the state Supreme Court and the benefits now exceed the original legislative intent. As a result, the calculation of worker compensation has been altered, which has increased costs to businesses by over $100 million a year.
Third, premiums for worker compensation insurance are diverted to pay for other programs. L&I diverted $2.5 million last year to help balance the state budget. Funds were transferred to the Department of Health and were used to pay rent for the State Labor Council, among other things.
Decreasing the increase from 40.5% to 29% only delays solving the problems inherent in the L&I system. Governor Locke needs to tackle these problems head-on. He needs to appoint a tough, no-nonsense manager to clean up the mess at L&I. The system should be overhauled and opened up to private sector competition.
Lawmakers this next session should clarify how worker compensation benefits are calculated. Washington has the nation's most excessive benefits, but still faces a high number of disputes and lawsuits. Worker compensation claims should be resolved quickly to avoid litigation.
Until these reforms are implemented, pouring money into this broken system will only exacerbate the current problems, and make the burden heavier for hard-working employees and employers.
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