The Oregon Department of Commerce and Business services has released its annual workers’ compensation premium study. The department finds Washington now has the nation’s 15th highest workers’ compensation premiums.
In commenting on the new data, the Washington Research Council points out that the Oregon study, while no doubt useful to that state’s policymakers, should not be relied upon for interstate comparisons.
We do not consider the Oregon study to be a good reflection of the costs of Washington’s workers’ compensation system, as we explain in this report (see pages 1–3). The short version is that the study is tailored to Oregon’s industry mix, it doesn’t include the costs of self-insured employers, and Washington’s rates have to be converted from an hourly to a payroll measure.
So why pay any attention to it? To answer that, we follow the WRC lead in citing comments by the Washington Self-Insurers Association:
Oregon’s rate study is closely followed by the national workers’ comp industry, since for most states it is an accurate picture of where pure premium rates rank. Washington, a special snowflake in the workers’ comp world, is alone in charging premium by the hour rather than by payroll, and uses unique, rather than standard, industry classifications. A lot of assumptions and conversions have to be made to translate Washington’s system into something that can be compared countrywide. Further, as one of the four monopoly states, Washington has a very substantial self-insured community, covering about a third of the workforce, whose claim costs are not accounted for in the study.
Back — way back — in the day, in the late 90s and early years of this millennium, Washington used to rank alongside Oregon in the high thirties out of fifty states for highest premiums, prompting the improbable rallying cry at the Department of Labor & Industries of that era, that the secret sauce of Washington’s monopoly made us a “high benefits, low cost” state for workers’ comp.
Even today you hear vestiges of that mantra echo in labor union leaflets and legislative committee debates, although no employer who has ever paid premiums or underwritten claims costs in Washington has ever thought it was a low cost state.
One reason employers doubt that Washington is a low cost state is, simply, that it is not. We prefer to compare states on a cleaner metric: benefit costs. And by that measure, as we reported earlier this month, Washington has the highest benefit costs in the nation.
In our foundation report, we discussed the high costs and recommended reforms.
…the state has consistently had the highest workers’ compensation benefit costs in the country…
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.