L&I adopts 9.8 percent rate increase for 2004

December 2, 2003

Associated Press
King 5 News

OLYMPIA, Wash. - Workers' compensation insurance rates in Washington will increase by 9.8 percent in 2004, a hike roughly half the size of the one proposed in September, the Department of Labor and Industries announced Monday.

The department had proposed a 19.4 percent increase in September, but slashed it after a loud outcry from businesses who argued that such a steep hike would be disastrous in a weak economy.

Workers pay about 23 percent of the cost of insuring against work-related injuries, while employers pick up the rest.

"Much of the testimony we heard was heartfelt and sincere about the effects of a significant rate increase in a tough economy," said Paul Trause, the agency's director. "A 19.4 percent increase is hard to absorb given other rising costs faced by businesses, such as private liability insurance, private health insurance and local utilities rates."

Also on Monday, Gov. Gary Locke said he would appoint a panel of business and labor leaders to examine the workers' comp system and recommend changes. After years of flat or declining rates in the 1990s, the department last year increased rates 29 percent after proposing a 40 percent hike.

Business groups praised this year's smaller increase, but renewed their call for reform of a system they argue is bloated with waste and fraud.

"I still don't like the increase, but I like the fact that the increase has been decreased," said Don Brunell, president of the Association of Washington Business. "We're also encouraged that they're going to form a commission or a committee of workers' comp experts to look at the whole system."

The 9.8 percent figure is an average. Actual increases will vary by industry and individual business according to the risk of worker injury and past claims history. The increase also doesn't apply to about 400 large, self-insured employers that employ about 30 percent of the workforce.

Labor unions also praised the department's move.

"We have every reason to keep L&I rates low, just as employers do," said David Groves, a spokesman for the Washington State Labor Council. "It will hopefully reduce some of the pressure to gut the system."

Even with the increase, average rates next year will be nearly identical to those in Oregon and Idaho and far lower than Montana and California, Trause said. The department estimates that 30 states will have rates higher than Washington's.

Cutting the size of the increase may force the department to use some of its contingency fund to pay claims, which could drive the reserve dangerously low and force rate increases next year. Business groups, meanwhile, argue that the contingency fund is already unnecessarily large.

Locke also directed the agency to look for internal cost savings to help keep rates down and called for changes in how it manages claims.

The agency itself hopes to persuade the Legislature to overhaul the state's vocational rehabilitation system and increase its authority to crack down on fraud in the system.

Trause said the department spends about $140 million annually on the worker retraining program, which often doesn't effectively prepare workers for new careers.

The department's idea is to give workers the option of negotiating a lump-sum settlement to their claims.

The state's workers' compensation system insures 1.9 million workers and about 160,000 employers.


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