Wash. L&I: Small Increase in Workers’ Comp Rates Proposed for Next Year

September 9, 2004

Workers’ compensation premiums would increase an average of only 3.7 percent next year under a proposal issued this week by the Washington Department of Labor and Industries (L&I). The increase is the lowest in three years reportedly because of higher investment earnings and positive program trends.

“We’ve had a good year financially, and we also are making substantial progress in controlling medical costs and getting injured workers back to work as soon as it is medically appropriate,” said L&I Director Paul Trause. “The increase in the average length of time-loss claims appears to be leveling off and investment earnings have improved. Given these favorable trends and the continuing economic challenges facing employers and workers, we settled on an increase that would simply keep pace with increased costs.”

If adopted, the higher premium rate would cover anticipated increases in the cost of workers’ comp benefits for workers injured on the job next year.

Beginning Nov. 3, the agency will hold seven hearings to give the public a chance to comment on the proposed rate increase. Trause will make a final decision on rates in late November. The new rates take effect Jan. 1, 2005.

The proposal would bring in an additional $52 million next year. Some of that increase is a result of a state law requiring annual cost-of-living increases based on average wages statewide. As in past years, the agency will draw down the contingency reserve to cover part of the cost of benefits, reducing the reserve by between 1 and 2 percent. That will leave the contingency reserve between 6 and 7 percent — well within the range the agency strives for.

Washington’s workers’ comp system collects premiums in three funds. The Accident Fund is the largest and pays partial wage (time-loss) benefits when a worker is injured on the job and can’t work. On average, that rate will go up 3 percent. The Medical Aid Fund pays for the medical treatment of job-related injuries and illnesses, and for vocational rehabilitation. That rate will go up 4.9 percent. The Supplemental Pension Fund, which is the source of cost-of-living increases for workers receiving long-term disability payments and pensions, would increase 3 percent. That all adds up to a 3.7 percent general premium rate increase.

The 3.7 percent increase is an average for all industries and employers. Individual rates will be higher or lower based on the cost of an employer’s recent claims and the frequency of claims in the risk classes in which they are reporting. The proposed average base rate for each risk class can be found at: www.LNI.wa.gov/ClaimsInsurance/RatePremium/UnderstandRates/Rates/.

Based on a national rate study Oregon conducts every other year, Washington’s rates have typically been lower than most other states. Just where they will rank next year won’t be known until other states set their rates. Washington also is the only state where workers contribute premiums to the workers’ comp system. If this rate increase is adopted, workers next year will pay 27.6 percent of total premiums.

Washington’s workers’ comp system provides coverage for about 160,000 employers and 1.9 million workers. About 800,000 workers, representing 30 percent of the state’s workforce, are employed by companies that are self-insured.

In addition to providing benefits to injured workers, the workers’ comp system protects employers from the cost of extended claims and from tort lawsuits that would otherwise result from workplace injuries.

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