The state of Washington yesterday announced higher workers’ compensation insurance premiums for 2010 than earlier forecasted.
In June, the state’s Department of Labor and Industries advised the Workers’ Compensation Advisory Committee on a preliminary basis that an average increase of 15-20 percent might be necessary next year.
Yesterday, the department proposed an average increase of 7.6 percent.
“I know that any increase adds to the challenges that businesses and workers face in this tough economy,” said Judy Schurke, the department’s director, in a press statement. “We have pushed this proposed rate increase down to the lowest possible level given the uncertain state of our recovery from this deep recession.”
With a proposed increase of 7.6 percent, average premiums would go up by about 4 cents per hour worked. In Washington, the state is the sole provider for workers’ compensation insurance. Employers that do not opt into the system must self insure.
While companies pay the majority of the insurance premiums, workers also pay a portion. If the proposed increase is adopted, the worker contribution would increase to just over 28 percent.
Schurke noted that the economy has hurt the state fund. The fund was hurt in the investment market, and the fund is collecting fewer premiums because workers have lost jobs and are working fewer hours.
Recent health-care inflation of 8.5 percent and wage inflation of 3.4 percent are two other factors that have led to the increase, the department said.
The proposed increase shows how much Washington needs to fix its system, said the Association of Washington Business.
The association called on elected officials to enact some kind of major reform. When the economy was good, investment income masked some of the problems with the system. But now the problems are urgent. Those problems include injured workers being off work for longer, a higher number of pension awards, and more claims remaining open without resolution.
“In this difficult economic climate, any rate increase is a problem for struggling employers,” said Don Brunell, president of the association. “The workers compensation tax or rate is one issue but when the cumulative impact of all costs of taxes, fees and government-mandated programs are added together, it makes it increasingly difficult for employers to keep people on the job and their doors open.”
Because Washington premiums are based on hours worked, the state fund must explicitly adjust rates for wage inflation, the department said in its statement. Other states assess premiums as a percentage of payroll, so wage inflation is already accounted for when payrolls rise. The State Fund provides insurance to employers and workers at cost; the money to pay claims comes from premiums and investment revenue. No money comes from taxes that go into the state general fund.
The proposed increase, which would bring in an additional $120 million, is an average for all Washington employers. Individual employers could see their rates go up or down, depending on their recent claims history and any changes in the frequency and cost of claims in their industry. The state will soon be publishing online the proposed 2010 rate tables by industry.
Washington’s workers’ compensation system is made up of three funds that provide benefits when workers are hurt on the job.
Under the proposal, the Accident Fund rate would increase 4.5 percent. Employers pay premiums in this fund. The Medical Aid Fund rate would go up by 8.4 percent, and the Supplemental Pension Fund rate would increase 16 percent. Employers and workers contribute equal premiums for the latter two funds. Self-insured employers, who fund their own medical and time-loss expenses for injured workers, are affected only by the increase in the Supplemental Pension Fund.
Final 2010 rates will be adopted in late November following six public hearings:
* Tukwila: Oct. 27, 1 p.m., L&I Office, 12806 Gateway Dr.
* Tumwater: Oct. 28, 10 a.m., L&I Headquarters, 7273 Linderson Way S.W.
* Vancouver: Oct. 28, 10 a.m., Red Lion Inn at the Quay, 100 Columbia St.
* Bellingham: Oct. 29, 1 p.m., Bellingham Quality Inn, 100 E. Kellogg Road
* Spokane: Oct. 30, 9 a.m., Spokane Airport Ramada, 8909 W. Airport Dr.
* Richland: Oct. 30, 2 p.m., Richland Hampton Inn, 486 Bradley Blvd.
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