Frustrated by rising workers’ compensation premiums and a political stalemate in Olympia, the people who provide the jobs in our state want change.
Those employers, whether they run hospitals, schools, small businesses, nonprofits like Goodwill, local governments or large corporations pay the lion’s share of the premiums for workers’ compensation insurance. Those premiums cover medical costs and lost wages due to workplace injuries and pensions for those who are permanently injured and cannot return to work.
Washington has one of the most expensive workers’ compensation programs in the nation and employers fear it will become even more costly in the years ahead.
Our per worker costs are the second highest in the nation, according to the National Academy of Social Insurance. And while improvements in workplace safety have reduced injuries 55 percent since 1990, claims are taking longer and costs skyrocket as workers are off the job until their claims are resolved.
According to the Washington Department of Labor and Industries, injured workers who miss work are off an average 274 days, more than twice the national average. Washington also leads the nation in the number of expensive, lifelong pensions awarded each year, a rate that has ballooned more than 300 percent since 1996.
During good times, the program’s weaknesses and true costs were masked by strong financial markets where workers’ comp income was invested. But in bad times, that investment income has vanished. This year, rates rose an average 7.6 percent – L and I’s actuaries had argued for a 19.4 percent rate hike to keep up with mounting costs and an independent state audit required by law called for a 33 percent rate hike to break even, so next year employers are bracing themselves for double-digit increases.
Unfortunately, in the last legislative session, Gov. Chris Gregoire, Senate and House Democrats would not even consider some proven workers’ comp reforms that are working in other states.
One of those reforms would change Washington’s definition of “occupational disease.” A majority of states refuse to cover factors that aren’t primarily work-related.
Another would bring our state in line with 44 other states that allow and encourage the use of medical provider networks to treat injured workers at costs that can be negotiated and stabilized.
A third reform would create a settlement option for complex or long-term claims as an alternative to pensions. Washington is one of only seven states that doesn’t allow final settlement agreements.
Aggravated public and private-sector employers see no end to the rising workers’ compensation taxes and are fed up with the political stalemate. In fact, in a recent poll of 7,000 member companies of the Association of Washington Business, respondents overwhelmingly agreed that things will change only by passing Initiative 1082.
Initiative 1082 would end the state’s monopoly on workers’ compensation insurance. Washington is one of only four states with a monopoly. With the exception of 375 large self-insured businesses, all employers are required to purchase their insurance from the government. The initiative would allow private insurers to compete with the state under the very same rules and restrictions governing L and I and self-insured companies like Boeing.
Employers recognize that the initiative is only the beginning. The real challenge is how to make our workers’ comp system less costly and more responsive to injured workers by treating them and getting them back to work as quickly and safely as possible. The longer a worker receives time-loss benefits, the less likelihood that person will return to work.
Experience has shown that bringing competition to workers’ compensation insurance reduces costs and improves quality.
During the last 10 years, Nevada and West Virginia privatized their failing state monopolies. According to the Council of State Governments, privatizing Nevada’s workers’ comp system erased a $2 billion liability. In just three years, West Virginia’s privatized system cut the state’s $3.2 billion unfunded liability by 40 percent. Last March, the state’s insurance commissioner reported that “…treatment of injured workers has improved and rates have been reduced over 30 percent.”
Why not Washington?
Don Brunell is the president of the Association of Washington Business.