Every fall, the Washington State Department of Labor & Industries (L&I) sets workers’ compensation rates for the following year. As wages and healthcare costs rise, the cost of providing workers’ compensation insurance goes up. This year, the department is proposing an average 2 percent rate increase for 2016.
Employers and workers around Washington pay into the workers’ compensation system so they’re covered if someone gets hurt on the job or becomes ill from something they’re exposed to at work. L&I is the state’s primary workers’ compensation insurance provider, covering about 2.6 million workers and nearly 170,000 employers. Last year, L&I covered almost 90,000 work-related injury and illness claims in our state.
More than 80,000 claims are accepted each year through the Washington State Workers’ Compensation State Fund.
L&I takes a close look at expected workers’ compensation payouts, the size of the reserve fund, wage inflation and other financial indicators to determine the proposed base premium rate. The agency is also working to cut costs to help keep rates as low as possible.
“When workers’ compensation rates are like a roller coaster ride, it frustrates everyone. We’re not going to do that. I’m committed to keeping rates steady and predictable,” said L&I Director Joel Sacks. “We’ve worked hard to decrease the costs of running the program, which is one of the reasons we can propose a rate increase that’s well under the wage inflation rate. Still, this small increase will help build the reserve funds needed to keep our program financially healthy.”
The proposed rate is an average. An individual employer’s actual rate change may be more or less depending on that employer’s industry and history of claims that result in wage replacement and/or disability benefits. The proposed increase comes out to a little more than 1 cent per hour worked. Workers’ compensation premiums help cover the cost of providing wage and disability benefits, as well as medical costs for treatment of injuries and illnesses. The reserve fund protects the system against the unexpected.
Cutting workers’ compensation costs
L&I has several initiatives underway that focus on helping injured workers heal and get back to work, improving service and reducing costs.
- Promoting injury prevention.
- Ensuring injured workers receive quality healthcare.
- Supporting employers who want to keep injured workers on a job.
- Improving the workers’ compensation claims process.
These and other improvements and efficiencies have resulted in hundreds of millions of dollars in savings in the past year.
Keeping the system healthy and rates steady
L&I uses wage inflation as a benchmark to help determine rates for the coming year because as wages climb, the cost of providing workers’ compensation coverage rises. Washington’s most recent wage inflation number is 4.2 percent. Significant cost savings by the agency are allowing for a proposed increase well under the wage inflation rate.
“Eliminating major swings in rates makes it much easier for business owners to budget for their workers’ comp costs. And by using wage inflation as a benchmark, we can keep up with rising costs of providing insurance while making sure we have a reserve fund ready for tough times,” said Sacks.
The agency will hold a series of public hearings where people can learn about and comment on the proposed rates.
More information regarding the proposal is available at www.Lni.wa.gov/Rates. Final rates will be adopted by early December and go into effect Jan. 1, 2016.
Source: Washington State Department of Labor & Industries
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