When a worker is injured on the job in our state, the worker is entitled to receive workers’ compensation coverage. It’s known as industrial insurance, and in our state the insurance premium is paid by both the employer and employee.

For the past eight years, the Washington State Department of Labor and Industries, which sets the premium rates for most employers, has been able to keep premiums from increasing. Can you name any other insurance you pay that hasn’t increased in the last eight years? I can’t!

But the falling stock market cost the state’s industrial insurance fund a whopping $1 BILLION in lost revenue. Another twist is the skyrocketing cost of medical care. So like other parts of our economy, the Industrial Insurance Fund went from a healthy surplus to a threatened deficit. The fund’s contingency reserve will fall to a mere three percent this year and will drop into the negative next year without an increase in rates.

That’s why the Department of L&I is proposing a hefty increase in premiums this year. It’s tough medicine for employers and employees in a tough economy. Historically, Washington’s workers compensation rates have ranked among the lowest in the nation. In fact, over the past three years, only 12 states have had lower rates, and even with the proposed increase, our premiums will remain well below the national average.

The proposed increase averages a jump of 40.5 percent next year, but the increase varies based on occupation. For example, the proposed increase for clerical office work is only 15 percent compared to the proposed increase for loggers of 37.8 percent. The difference reflects the risk of on-the-job injury in the occupation, and obviously loggers have a much higher incidence of worker compensation claims.

While the increase seems high, it needs to be put in context: 

• Most other states have seen increasing premiums since 1999. In California, premiums have increased 59.3% in the last five years while in our state premiums were reduced during the period. 
• Efficiencies and investments allowed the state to actually REFUND $1.8 billion to employers since 1995 in dividends and reduced rates. The most recent was a November 2000 general rate reduction that saved employers and employees $20 million.
• Employers have also shared in a “retro refund” program that provided millions of dollars in outright refunds for low accident rates.
  

We share the concern of employers that a steep increase in premiums this year, when companies are struggling just to keep workers on the job, is terrible timing. So perhaps a modest suggestion would be welcome as we try to keep our Industrial Insurance Fund safe while protecting employers from premium increases they can’t afford.

As in all major insurance funds, our state’s Industrial Insurance Fund uses complicated formulas to assess the premium schedules. One of those formulas involves the refund program known as “retro refund.” This refund program is actually GROWING from $90 million last year to $134 million in 2003 under the current formula. It doesn’t make sense to us to be handing out refunds at a time when the premium is going up.

And since not all employers are part of this “retro refund” program, it sets up an unequal distribution of the increased premium costs. Some employers would be able to offset their premium because they get a healthy “retro refund” check. Other employers wouldn’t get a dime. That doesn’t seem fair either. 

It makes more sense to simply re-define what counts for the “standard premium.” If you take out the part that covers medical aid, which is paid 50-50 by both employees and employers, you will be able to save almost $45 million! That adjustment would at least keep the “retro refund” program at the current level, rather than allowing it to increase next year.

These are tough economic times for thousands of workers and hundreds of employers. It’s important that we keep all options open so that we can continue to provide a secure and certain system of workers’ compensation for injured workers. The pain and suffering that workers endure cannot be erased by decent benefits, but without a good system, the harm can become unendurable to workers and their families.


Rick Bender is President of the Washington State Labor Council, the largest labor organization in the state.