Legislative reforms give L&I stability

October 4, 2012 

It is good news when government, business and labor manage to avert another all-out battle in Washington. Despite reforms enacted by the Legislature last year, a renewed fight over workers’ compensation rates was looming until recently when the Department of Labor & Industries announced no increase for 2013.

It will be the second year in a row without an increase, not even for inflation, thanks to changes made by lawmakers during the 2011 session.

It appeared that workers’ compensation rates might rise in 2013 by as much as 19 percent to restore the agency to fiscal soundness.

But when the formal proposal was released late last month, it included a long-term plan to increase rates slowly but consistently over the next 10 years to reach its financial goals.

Agency director Judy Schurke said, “What I heard from the business side of the table was to make it (rate increases) as long and as predictable and gradual as possible, to try not to have a spike in 2014 as we were seeing in many of the scenarios that we went over in June and July. And what I heard from labor was to make sure that we really stick to a plan that keeps building a contingency reserve that is adequate.”

The agency has drawn down its cash reserves during the recession, despite increases in the cost of claims, to put off a big tax increase during a time when businesses are struggling.

The bigger issue is whether L&I is being run efficiently as a state agency. Washington is one of only four states that doesn’t allow private industry competition or hasn’t gotten out of the worker compensation insurance business altogether.

Voters rejected a privitization measure, Initiative 1082, in 2010 by a significant margin. Voters opposed it in all 39 counties, and voting it down statewide by 59.1 percent.

The following year, the state Legislature passed reforms that included freezes on cost-of-living increases and a new Stay at Work program designed to encourage employers to provide light-duty jobs for injured workers.

The reforms also included the more controversial “structured settlements” for workers older than 55. That reform didn’t go far enough for some business interests and has not attracted as many takers as lump-sum payouts have in other states.

But taken together, the reforms are now projected to save $1.5 billion over four years, rather than the original $1.2 billion estimate. That will build the reserve by $82 million.

For now, it looks as though the Legislature achieved its three goals to keep rates down, build stability into rate levels over the long-term and pump up the agency’s reserves.

Prudent lawmakers would look for further reforms during the 2013 session.

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