Workers Comp proposal draws ire - L&I plans 40.5 percent increase next year

Thursday, November 7, 2002

By GRETCHEN FEHRENBACHER, Columbian staff writer

Olympia, WA - An overflow Vancouver crowd assailed officials from the Washington Department of Labor and Industries on Wednesday over the state's proposed 40.5 percent increase in Workers' Compensation premiums next year.

Those testifying, many from local building trades and wood products businesses, said the new higher rates would flatten scores of businesses and devastate the economy at a time when Washington has the nation's second-highest unemployment.

Twenty-four people testified, at L&I's Vancouver offices at the last of seven hearings statewide, that business can ill afford to absorb the increase, and many would be wiped out or forced to leave the state. Many lambasted the department for gross inefficiencies and said it should reform its own operation and crack down on fraudulent workers' comp claims before imposing the burden on those providing jobs.

Doug Connell, director of the state's Insurance Services Division, had told the gathering of 85 that the increase, which would bring in an estimated $371 million, was imperative in merely maintaining the status quo. Losses in investment income and other factors have been cited as reasons for the hike. He said the increase was the department's first in eight years.

A decision on the hike will be rendered Nov. 20 by Gary Moore, director of L&I.

Under the proposal, the average rate in Washington would rise to 51.9 cents an hour. Employers would pay 38.8 cents of that, with employees contributing 13.1 cents. All told, employers would pay about $247 million more a year, while workers would pay some $124 million more.

Direct impact

Corine Higgins of Image Construction Remodeling typified the sentiments of many who spoke in asking L&I to make the same hard choices with its internal operations that businesses such as hers have made in a down economy.

"Thirty percent of our work is in Washington and 70 percent is in Oregon," she said. "If this kind of increase continues, we are going to skip out of Washington."

Noting the hardship the added Workers Compensation levy would impose on all, Higgins said, "I can't look at my children and my employees and say this is justified."

Joe Mattilla of Victory Enterprises, a residential framing company, said, "This rate is going to raise home costs. Builders are going to pass it onto the customer."

Dave Generaux of a residential construction company bearing his name said he would be forced to pay an extra $13,000 a year.

"Out of what?" he asked rhetorically.

"When you are a bigger company, you may be able to absorb it. When you are a smaller company, there is no room."

Expensive state

But two representatives of Jack in the Box Inc., which has 112 fast-food restaurants and nearly 4,000 employees in Washington, said that business would be crippled as well.

"It is a low-margin business with intense competition," said Lyn Jeffers.

"The hard reality is that every increase results in fewer hours, fewer restaurants and fewer new jobs."

She added that "Washington is one of the most expensive states in which we operate."

One man testified that his company has paid more than $1 million to L&I in the past decade, while only accruing claims totaling $2,000 in payments.

"I just don't understand why someone who has a record so good should be grouped with a higher rate," he said, adding that SAIF in Oregon, which provides equivalent insurance in Oregon, is much more competitive.

Dave Asivido of TOC Management Services said as things stand, "Washington is facing a huge crisis," with depressed markets in core industries. Among them, he said wood products, up against foreign competition, would erode further.

"We believe a better solution is to defer the increase scheduled for Jan 1," he said.

"Continue to use a contingency funds and form a blue-ribbon committee, and we can come up with solutions we can live with long-term."

Stifling growth

John Lieber of Swanson Bark & Wood Products said his company has put on hold the purchase of a new piece of packaging equipment because the hike would result in job losses.

Lieber, who is incoming president of the Cowlitz Economic Development Council, said, "Washington is tough to get business to come into, and L&I is part of it. We run off the folks we are serving."

Michael Kersey of DKI Insurance said in the department's defense, "Your loss ratio is high there is no hiding it."

But, he added, "The difference is, in the insurance industry, people have the option of going to somewhere else. You are asking for a huge rate increase, but they don't have the right to choose.

"You might say it is an anti-business practice that is going on here it is not pro-business at all."

A number of those who spoke told of abuses, in which L&I allowed claims to be reopened years after being closed, and, in at least one instance, the department grant-ing a payment for someone injured in an alcohol-related fight: the rationale was that the injury was exacerbated by a work-related injury years earlier.

Denise Woodhouse, owner of EIR Electric commercial-industrial contracting in Battle Ground, said she had spoken with former L&I employees who said there was a practice of taking the path of least resistence and placing the burden on the employer.

Connell did not respond to that or any of the other criticisms leveled during the public hearing.

More training needed

Daryl Dennis, executive director of the Southwest Washington Contractors Association, said L&I staff need to "train employees, not just pay bills."

R.E. Kinghorn, president of Stellar J Corp., said he decided to attend Wednesday's hearing after being told by L&I that an employee who was on light-duty status would be able to take a vacation he wanted and be paid Workers' Compensation.

Kinghorn said he also was dismayed to learn that L&I had given $1 million back to the state one year.

Citing rates for employees in other states that were far less, Kinghorn said that L&I should be held accountable to a mandate for reform.

"You can't demand payment for mismanaged programs," he said.


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