WEDNESDAY, OCTOBER 21, 2009
Workers' comp: Just the facts, please
Labor Council responds as business groups' false claims take root in media

Does the average injured worker in Washington state really miss 266 days of work? That's what the Association of Washington Business says. That's what Republican legislative leaders say. And subsequently, at least one daily newspaper has reported the statistic, without attribution, in its editorial pages.

The problem: it's not true. 

That statistic is part of a media campaign coordinated by business lobbying groups to undermine Washington's State Fund workers' compensation system. Their goal is to promote business-sought "reforms" that lower employers' costs by cutting injured workers' benefits. And today, the Washington State Labor Council is issuing a new report, called Just the Facts, to begin setting the record straight in order to facilitate an honest discussion on the issue.

One month ago today, the Washington State Department of Labor and Industries proposed an average 7.6% premium increase in 2010 for the system. (This doesn’t affect large self-insured employers like Boeing, Microsoft and about 400 others that cover about one-third of the state's workers.) L&I says the increase is needed because the national recession has taken its toll on the system: an estimated $1 billion hit on the State Fund reserves. Investments have suffered, unemployment is up, and work hours have been cut, so less money is flowing into the system.

Having been warned weeks prior of a significant pending increase -- possibly as high as 15-20% -- business groups were prepared for L&I's announcement. Within hours, a series of press releases, blog postings and newspaper columns were published decrying the system's inefficiency, exorbitant benefits and negative impact on the business climate as we struggle to emerge from the national recession.

But in their campaign to argue for changes in the system, they are making false or misleading claims. And disturbingly, some of those claims are being repeated -- unquestioningly, without attribution or confirmation -- in newspaper editorials supporting business-sought "reforms."

In response, the Washington State Labor Council has prepared Just the Facts, a report debunking some of those erroneous and misleading claims. This report is being distributed to state lawmakers and newspaper editorial boards throughout the state in order to facilitate an honest discussion between business, labor and government leaders about Washington's workers' compensation system and how it can be improved for both businesses and injured workers. 

Starting next week, L&I is conducting a series of public hearings about the proposed rate increase. Although the mid-day hearings will be difficult for working people to attend, the WSLC is urging all union members to try to be there, and to arrive there prepared to respond to misleading and false claims about the system.

Here are some excerpts from Just the Facts:

CLAIM: Nearly half of injured workers never return to their jobs. ¹

This is false. Nearly 3 out of 4 claims (72.5%) by injured workers are medical-only, covering treatment only and NO time off work, and 19.5% involve short-term disability with less than 90 days of work missed. In other words, 92% of injured workers miss NO work or miss less than 90 days. Only about 1.5% of the total number of injured workers’ claims become pensions, where the worker is found to be unable to return to work permanently.

CLAIM: The average injured worker in our state misses 266 days of work, nearly three times the national average. ^{1, 2, 3}

More information about Washington's workers' compensation system: Washington's workers' comp advantage Part of the WSLC's "Outside the Echo Chamber" series on the state business climate, this report addresses one of the most persistent myths about our business climate: that our workers' comp costs are higher than in other states. Not only do we have comparatively low premiums, the system's costs to employers in Washington state are the fifth lowest of any state in the nation. An honest discussion about workers' comp (by Sen. Jeanne Kohl-Welles and Rep. Steve Conway) -- Some argue the proposed workers' compensation rate increase for 2010 is evidence the system is broken and vow to seek changes that will cut injured workers' benefits to drop premiums even lower. Such changes would be unfounded. The problem isn't the system, it's the recession. Cutting benefits wouldn't constitute "reform." That would merely salt the open wounds of families who have lost their source of income at the worst possible time.

This is false. The 266-day figure is an actuarial index used to measure trends among the longest and most serious claims over decades. It’s an average for all injured workers currently receiving time-loss benefits, but it excludes nearly three-quarters of all injured workers who miss NO work. It also excludes injured workers who were kept on salary by their employers, and it excludes workers who lose three days of work or less. It includes claims dating back as many as 50 years, which grossly distorts the average. The number is meaningless for assessing how many work days claimants typically miss, and is deliberately being used to exaggerate the duration of benefits.

A better indication of the duration of work missed by injured workers would be the median, where one-half of all claimants miss more work and one-half miss less. From March 2008 to March 2009, the median duration of time-loss benefits in Washington was less than 40 days. This compares favorably to a national study by the National Council on Compensation Insurance of 37 states that shows a median time-loss duration of 45 days.

CLAIM: Administrative costs have risen 28% in the past year. ^{1, 2, 4}

This is false. Workers’ compensation premiums are based on what is needed to pay the lifetime costs, including administration, of all of that year’s claims. A serious injury occurring in 2009 could require 20 or more years of administration, but it must all be paid in 2009. These expenses don’t reflect year-to-year changes in L&I’s budget. The real budget increase for administrative expenses for the system was 7% between FY 2008 and FY 2009.

In terms of total overhead, based on lifetime expenses for claims, the national workers’ compensation industry’s costs over a 10-year period as a percentage of total benefits paid are 55.4%, according to A.M. Best, a national firm that analyzes insurance industry performance. Labor and Industries’ was 14.8%. In other words, in Washington, total overhead for the system is about one-quarter of the national average. 

That’s one big reason why Washington maintains its status as a high-benefit, low-cost state.

^{Copyright © 2009 --  Washington State Labor Council, AFL-CIO}