As premiums are set to increase, Washington’s high workers’ compensation benefits costs prompt calls for legislative action on reforms

Last week we wrote that workers’ compensation premiums will rise an average of 0.7 percent, as originally proposed by the Department of Labor and Industries. Business groups argue that the increase is unnecessary. 

The Association of Washington Business wrote in a press release:

“Once again, the Department of Labor and Industries has elected to impose a tax increase on Washington employers that it does not need to impose,” said AWB President Kris Johnson. “The department’s proposed 0.7 percent average rate increase may seem like a small number, but some industries will see dramatically higher rate increases.

“Furthermore, the cumulative impact of this proposed tax increase, which follows several years of unnecessary workers’ comp rate increases, represents a significant cost to all Washington employers, making it harder for them to compete with other states. In fact, officials could have reduced rates an average 2.3 percent and still broken even, meaning this proposal is 3 percent higher than was necessary.”

The Lens reports on a recent committee hearing on workers’ compensation policies.

At a recent State Senate Commerce and Labor Committee meeting, Chair and State Sen. Michael Baumgartner (R-6) said his concern lay with exactly what type of reforms would help lessen the cost burden of workers’ comp for employers. Reducing unnecessary time off that is forced by system mandates would punch a hole in costs, said State Sen. Curtis King (R-14)…

Natalee Fillinger is a private practice attorney for employers and the former Self-Insured Program Manager for L&I. She told the committee that faulty formulas baked into L&I processes can drive up workers’ comp costs for employers.

The committee also heard testimony on the state’s approach to occupational disease, one of the workers’ compensation policies were wrote about in our foundation report.

Similarly, the state has consistently had the highest workers’ compensation benefit costs in the country. In 2012, the most recent year for which data are available, benefit costs averaged $840 per covered worker, nearly twice the U.S. average of $434.98.

In 2011, the Legislature allowed workers who are at least 55 years old (dropping to 50 in 2016) to voluntarily settle their claims with structured settlements. Opportunities to build on this reform might include expanding the use of voluntary settlements to workers of any age. Voluntary settlements bring closure for workers and reduce long-duration time-loss claims.

Clarifying the definition of what constitutes an occupational disease (a condition warranting workers’ compensation) would also help control costs. Over 1997-2009, “occupational disease claims have been a rising proportion of all compensable claims in Washington while their proportion has fallen in both Oregon and British Columbia.”

In Washington, the definition of occupational disease is very broad. The lack of clarity means diseases may be covered that are not directly caused by workplace exposure, but are instead ordinary diseases of life. Other states (e.g. Virginia) exclude common illnesses and specify when a disease arises out of employment.

The Lens reports,

Occupational injuries “can be claimed two years from the point of realization of exposure, unlike an industrial injury where it’s one year from point of exposure,” Bob Battles told the Senate Committee. He is Government Affairs Director for the Association of Washington Business. Battles added, “…there is no statute of limitations on occupational disease, you can bring it (up) forever because you can always claim that ‘I just found out about it.’”

Unsurprisingly, opponents of reform continue to claim that Washington’s workers’ compensation costs are low. For example,

By some measures, Washington state has among the highest benefit levels provided to injured workers. But in terms of the costs paid by employers and workers, Washington is in the middle of the pack, ranked 15th highest in the latest state-by-state comparison by the Oregon Department of Consumer and Business Services.

The Washington Research Council effectively refutes such claims. 

You really can’t say that with a straight face any more. These days, even the flawed measure that is the Oregon study shows that Washington is a high cost state. A better measure of our workers’ compensation costs relative to those in other states is the National Academy of Social Insurance report on workers’ compensation benefits. This year’s report shows that Washington’s workers’ compensation benefit costs are the highest in the country.

The Lens also reports,

As workers’ compensation premiums continue to rise in Washington, raising alarms for employers, the state is already among the most expensive for claims. Washington from 2010 through 2014 each year ranked third highest out of 50 states in amount of workers’ comp payouts by employers per $100 of payroll. That’s according to a National Academy of Social Insurance (NASI) report (pp. 32-33) released in October. 

In our foundation report, we acknowledged the balancing of interests that must go into labor policy reforms.

Washington employers and residents alike place a high priority on the equitable compensation and protection of those in the workforce. Policymakers must carefully consider wage and benefits mandates and system to ensure that such protection are maintained in a cost-effective manner so that employers can create more job opportunities for Washington citizens.

With that in mind, the current discussion of workers’ compensation policies may provide a framework for positive reform in 2017.