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The Department of Labor and Industries’ Judy Schurke said Monday that reforms approved by state lawmakers in May are making it possible for the agency to break even with existing premium rates and pay all lifetime costs for claims it anticipates getting in 2012.
But with no rate hikes, the agency would have too little in reserves. Schurke believes an increase of between 4.5 percent and 8 percent is needed to get depleted reserves back over the preferred $1 billion level.
Schurke’s announcement to a meeting of stakeholders drew cautious criticism from the Association of Washington Business and initial support from the Washington State Labor Council. The two parties battled during the 2011 session over reforms to the system – particularly over elements of House Bill 2123, which allows permanently injured workers to receive a series of lump-sum payments to settle their claims.
“It’s critical that we restore the workers’ comp reserves. Savings from the reforms create an opportunity to do this without large rate increases,” Schurke said in a statement issued later. She indicated that Washington has 20 cents in reserve for every $1 that other public-run systems have.
L&I drew down its contingency reserves by $332 million over the last three years to hold down rate increases for employers and workers during the recession and its aftermath, agency spokeswoman Renee Guillierie said.
Reserves were about $786 million as of the end of the last investment quarter, June 30, and are projected to fall to $563 million by year’s end “due to our projected declines in the stock market,’’ Guillierie said.
“On the one hand I understand what they are saying. On the other hand, I can’t believe now is a good time to raise rates when the department’s own data shows they don’t have to because of these … reforms,’’ said Kris Tefft, general counsel for the Association of Washington Business, who attended the Workers Compensation Advisory Committee briefing in which Schurke spoke. “My sense is most folks on the business side are going to say this is not the time.”
Tefft said AWB has no position yet on the proposed rate hike but that he understands L&I’s interest in building a larger reserve. At the same time, he thinks the ink is barely dry on the reforms and the economy is still in recovery.
“We think that restoring reserves is the responsible choice,” Kathy Cummings, spokeswoman for the Washington State Labor Council, countered in a statement. “This is especially true given that much of the projected ‘savings’ from 2011 legislation are based on unproven assumptions about workers getting lower lump-sum benefits.”
Cummings also wrote that the state was “heading into uncharted waters with our state’s workers’ compensation system. Employers have a strong financial incentive to aggressively market these lump-sum buyouts, but it’s anybody’s guess how often workers will sign on the dotted line. Given this uncertainty, it will be especially important that reserves are restored to responsible levels.”
Rates went up by 12 percent this year and might have gone up by more if the state had not dipped more deeply into reserves. L&I said it would be seeking rate hikes of 8.1 percent to break even if lawmakers hadn’t enacted reforms.
Schurke said her agency is releasing its rates proposal Sept. 20 and plans public hearings on the rates in October. Final rates would be set in December.
Brad Shannon: 360-753-1688
bshannon@theolympian.com
www.theolympian.com/politicsblog
