Understanding the proposed hike in workers’ compensation rates: will it come to pass?

Kudos to the Washington Research Council for calling our attention to a thoughtful analysis of the proposed 2 percent average increase in workers’ compensation premiums. The analysis, by Kris Tefft, head of the Washington Self-Insurers Association, carefully dissects the state’s process for calculating rates. As the WRC notes, Tefft’s review should be read in its entirety. A couple of takeaways.

The rate proposal is up from the 1.1 percent in additional premium income the Department forecasts it will need to pay benefits and administration in 2016. The difference is meant to assist with recovery of the State Funds’ reserves covering disability benefits and pensions.

The announcement drew fire from the Association of Washington Business as an unnecessary increase. Echoing that theme, former Attorney General and public policy commentator Rob McKenna wrote that the rate increase amounts to “tak[ing] more money than is necessary out of Washington businesses [to] park it in Olympia,” showing the need for further workers’ comp reforms. Both statements noted that Oregon, by contrast, intends to drop rates by more than 5 percent next year. The state AFL-CIO, meanwhile, generally praised the announcement as modest and reasonable.

The details are important and Tefft goes into it with more precision than we would attempt here. So, again, we commend the whole post to your attention.

Note this:

Nevertheless, in the big picture, it is interesting to see that most of the country’s competitive workers’ compensation systems are in a rate decrease cycle presently, whereas Washington is set in a cycle of moderate but steady increases to account for operations and to build reserves.

A good question for the Department as it heads into public hearings on its rate filing next month would be, why is our system so seemingly counter-cyclical?

In our research report we pointed out employers’ concerns:

UI and workers’ compensation policies have been the subject of significant legislative attention in recent years. A number of reforms have been proposed and promoted by the employer community and lawmakers have responded with modest improvements. Despite this progress, Washington’s costs remain high compared to other states…. 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.  

Hearings are scheduled throughout the month. It’s an issue to watch.