The Washington Department of Labor and Industries (L&I) has adopted a 29 percent rate increase for 2003. It is the agency’s first general rate increase in eight years.
On Jan. 1, the average rate will rise from 36.9 cents for each hour worked to 47.6 cents. Even with a 29 percent rate increase, Washington’s rate will still be among the lowest in the nation. It is also well below the 40.5 percent increase proposed by the department in September. Gov. Gary Locke called for the lower rate hike to help businesses suffering in the current economic downturn. L&I director Gary Moore said the lower rate is also in response to public testimony urging the department to phase in the increase over a longer time period.
“I am pleased to see Labor and Industries is adopting a much lower rate to help soften the impact on Washington businesses,” Locke said. “While the agency has stated the need to raise the rate after eight years of reductions and reimbursements, we also need to do what we can to lessen the burden on our state’s businesses in these tight economic times.”
The new rate will add $265 million of additional premiums to the workers’ compensation system, bringing revenues more in line with the cost of the benefits paid to workers injured on the job. In recent years, rates were reduced because of strong investment earnings. In 1999 and 2000, L&I returned dividend checks to employers totaling $400 million. In addition, over the past eight years, employers and workers benefited from $1.4 billion in rate reductions and deferred rates. All told, employers and workers benefited by $1.8 billion.
Along with the rate increase, L&I has begun a series of initiatives to improve the performance of the workers’ comp system.
The initiatives fall into two categories — those that will need legislative approval to be adopted, and those that can be accomplished by the department under existing law.
The department’s legislative initiatives will be in the areas of hearing loss, vocational rehabilitation and calculation of wages. “None of these proposals will deprive Washington’s workers of the medical care and income they deserve when they are injured or become ill as a result of their jobs,” said Moore. “We have a very complicated workers’ comp system, more complex than any other state, and it needs to be improved.”
Last summer, Moore formed a work group of experienced claims staff to look critically at the workers’ comp system and propose changes to it. The group came up with several proposals to improve claims management and began implementing them earlier this month.
One area where the agency already has made improvements is in reducing fraud through increased investigations. As a result, millions of dollars have been collected from overpayments to injured workers and medical providers, and from employers who haven’t been paying into the insurance system.
Washington’s industrial insurance rates historically have ranked among the lowest in the nation. According to studies conducted by Oregon, only 13 states had rates lower than Washington’s in 2000 and 2002. Even with a 29 percent rate increase, Washington’s rates will still rank in the bottom third of the nation.
Washington’s workers’ comp system will collect about $1.2 billion in premiums in 2003, up from $940 million this year. That money will go toward covering the $1.7 billion in benefits the insurance program will incur in 2003. Investment earnings and money from the insurance fund’s contingency reserve will make up the gap between premiums and benefits. Next year, the contingency reserve is expected to decline by over $100 million, ending 2003 at $145 million — less than 2 percent of liabilities.
Employers and workers will share the cost of the rate increase. Employers’ share of the $265 million increase will be $166 million. Workers will contribute an additional $99 million.
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