Washington is one of four states that doesn’t allow private companies to sell workers’ comp coverage. Some employers self-insure under state supervision, but the rest must buy policies through the state Department of Labor & Industries.
That would change under Initiative 1082, a business-backed attempt to open up the market. The state still could offer coverage if I-1082 passes, but it would have to compete with private firms.
Initiative supporters say competition could reduce costs for employers in a time of great economic uncertainty. They also point to lower costs for workers, achieved by ending the share of workers’ comp premiums that employees pay.
Supporters also say loosening the state government’s hold on workers’ comp insurance will allow further reforms of the system to blossom. Business leaders believe the system is too tied up with politics to get any reasonable reforms enacted, said Kris Tefft of the Association of Washington Business.
“We need to break this up, to have the discussion of system reform,” Tefft said. “Everything substantive that the business community has brought forward for the last 10 years regarding system reform has been basically shot down.”
Opponents say it would be a mistake to let profit-driven insurance companies into the workers’ comp market, which has been run under a public system in Washington since 1911.
“The insurance industry would only do it if they can make money,” said Alex Fryer, spokesman for the No on 1082 campaign. “They’re not a charity. They don’t have the public’s best interests in mind.”
Critics also say the estimated $315 million per year in reduced payments by workers would shift higher costs to employers.
Supporters of I-1082 have raised more than $3 million, mostly from the Building Industry Association of Washington and insurance companies. Opponents have raised about $6 million, mostly from organized labor and trial lawyers.
If approved by voters, I-1082 would start the transition to a hybrid workers’ comp market by establishing a large task force representing businesses, workers, insurers and state lawmakers. Members would work on proposals to make the new system fit with current state law. Private insurance could be sold beginning in July 2012.
Insurance rates would be calculated based on an employer’s payroll amount, rather than the current formula based on hours worked.
The initiative also would allow groups of employers to band together and secure their own workers’ comp coverage. That could apply to trade groups such as the Building Industry Association of Washington, a politically active construction industry group.
Elected state Insurance Commissioner Mike Kreidler would be responsible for regulating workers’ comp carriers. Benefit levels would remain the same as they are under the current state-run system.
That raises a criticism from opponents, who say benefits for injured workers are the main driver of costs. Without changes there, Fryer asked, where would private insurers find savings while also delivering profits?
“It’s almost impossible to see how they’re going to wring any savings unless they plan to delay and deny claims,” Fryer said. “We think 1082 gives them that ability.”
Supporters say maintaining benefit levels doesn’t mean insurers can’t find ways to deliver savings.
“It’ll have to be through better, smarter, faster, more efficient claims management and customer service, and trying to cut down on disputes and litigation,” Tefft said.
Kreidler, a Democrat, opposes I-1082, saying the measure doesn’t hold workers’ comp insurers to the same standards that other insurance carriers must follow.
Tefft said he’s puzzled by Kreidler’s argument, since the initiative makes clear that Kreidler’s own certification of workers’ comp insurers requires firms to meet the legal requirements for selling insurance in Washington. Tefft also notes that the initiative directs the Legislature to weave I-1082 into existing law before the sale of private plans kicks in.