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The Washington state Senate approved a measure Saturday that would drastically change the state’s workers compensation system by establishing an option for lump sum settlements.
The 34-15 vote was a significant win for the business lobby, which has been trying to move the state away from prolonged payment benefits and pensions for injured workers.
Organized labor steadfastly opposed this measure and will take their fight to the House, where support for business may not be as robust as in the Senate. Labor argues that adding the option of a settlement moved the state closer to reducing a safety net for injured workers.
This year, though, workers compensation has taken a central role in the legislative session because the system is bleeding money.
Gov. Chris Gregoire, the head of the state Department of Labor and Industries and the state auditor have all said the system is heading toward bankruptcy. In a December report, the auditor’s office said the state’s fund for workers compensation has a 95 percent chance of becoming insolvent in the next five years.
The system had about $499 million in reserves as of Dec. 31.
That figure represents the medical fund of the system, which stands at nearly $709 million; the liability fund that is in the red for $275 million; and the pension fund that currently stands at $65 million.
Workers compensation is a state-provided insurance system in which businesses pay premiums. Businesses, usually bigger companies, can opt to self-insure. If a worker is injured on the job, they can file claims for workers compensation and receive money while they heal. The state funds the system from the payroll taxes that businesses pay and investments handled by the state.
The system tanked, the auditor’s report said, because of less money coming from businesses due to the recession and the drop in returns from investments, also because of the economic downturn.
The major expenses of the system come from only 8 percent of all claims, which involve workers who are receiving benefits for a prolonged period of time or have lifetime pensions. That section of workers represents 85 percent of the compensation costs, according to the state labor department that manages workers compensation.
The measure approved Saturday was a deal worked out between Senate Republicans and Democrats, amending the governor’s bill to include the option of a voluntary settlement in case of an injury at the work place. Supporters said it’s something most states in the country have.
Gregoire’s proposal initially had a settlement option that would only apply for workers over 55 years of age.
Under the proposal, an injured worker who chooses a settlement can do so with a lawyer, or be consulted by a state settlement officer. There’s a 30-day period after settlement negotiation when a worker can change their decision.
“This is a balanced bill that is good for workers and employers alike,” said Association of Washington Business President Don Brunell. “Costs continue to go up, yet injured worker claims are actually down, and our workers’ compensation system is on the verge of collapse.”
Opponents of the measure raised concerns about the cost of the proposed add to the system and medical privacy and said the workers compensation system’s reserves are bouncing back as the stock market rebounds.
“We have no projections. No predictions of savings,” said Sen. Karen Keiser, D-Kent. “We need to slow down. There’s no solvency crisis. We need to consider what we’re turning on its head.”
Opponents of the measure attempted to push an amendment that would have created a study panel to examine the proposed changes.
Rebecca Johnson of the Washington Labor Council said labor is against a settlement option “because it turns a reliable safety net into a lottery” where access to lawyers plays a key role.