State Workers

State delays setting workers' comp rates

The state Department of Labor and Industries will delay its traditional September calculation and announcement of workers' compensation rates for 2011 until after the Nov. 2 election to avoid confusion for businesses.

However, business interests backing Initiative 1082 – which would let private insurers sell workers’ comp policies in Washington – see a sinister motive. They are skeptical of the agency’s claim that the delay is the result of changes in rates that passage of I-1082 would require, including a change in rate calculations from an hours-worked basis to one based on every $100 of payroll.

Patrick Connor of the National Federation of Independent Business said in an I-1082 campaign news release that a politically unpopular increase of more than 33 percent could be expected, based on a state auditor’s report on the system.

“A double-digit tax increase wouldn’t help labor unions’ campaign against I-1082, so L&I is hiding the ball for them until after the election,” Connor said in a statement released by the Save Our Jobs campaign. “They know it will be a significant rate increase and they are hiding it from voters. This is a government agency actively engaged in election-year campaigning, using taxpayer dollars to help defeat I-1082.”

L&I representatives say that’s far from the truth. Vickie Kennedy, policy adviser to the agency’s director, said actuaries that set rates have not concluded what is appropriate under the existing system. There also are effects from the slowdown in construction that are reducing the number of disability claims in some high-risk jobs, which complicates the rate outlook.

L&I issued a news release that quoted director Judy Schurke as saying, “To be most fair to businesses, our rates proposal needs to be based on the decision that voters make on November 2.”

The spat comes at a time one consumer coalition – Americans for Insurance Reform, whose leaders have worked with Ralph Nader – says Washington’s workers’ comp system is one of the best deals for business of any in the nation. In a report released Tuesday, the group calls L&I’s state-run system “a model for efficiency” and says Washington pays out twice as much per $1 of employer premium as what private systems do. Washington’s system also is set apart by its requirement that workers split premiums with employers.

Other report findings: “Over the 5-year period ending in 2008, the cost to private insurers to run their workers’ compensation systems was more than 90 percent higher than Washington state’s costs to run its state system.”

“I’m shocked by it. I didn’t expect in to be that clear,” said Joanne Doroshow, executive director of the Center for Justice & Democracy who co-founded Americans for Insurance Reform with Robert Hunter, insurance director for the Consumer Federation of America. “You are so lucky in Washington to have a state-run system. Most other states have gotten rid of it. … It’s a shame it’s at risk right now.”

Connor called the report propaganda, and Kris Tefft of the Association of Washington Business said it “would be a mistake to view this ‘study’ as anything other than political hyperbole from an advocacy group aligned with the unions and trial lawyers who are desperately trying to defend the status quo.”

Tefft added in an e-mail that “I-1082 is about choice. It opens up Washington’s monopoly to competition, and allows our employers the same choice of insurer, including L&I, that employers in 46 other states enjoy. If L&I’s operation is the unalloyed success that the unions and trial lawyers claim it is – then employers will choose it hands down. That’s the beauty of a free market.”

The debate over workers’ compensation rates has raged off and on for several years in the Legislature without resolution, wedging L&I into the controversy. Agency spokeswoman Kim Contris called it “a very politicized area” and said L&I would be accused of trying “to dupe the voters” if it came out with a proposal to lower rates this year.

Kennedy, the policy adviser, said that under the agency rulemaking laws, L&I would typically post its proposed rate at this time of year, then hold hearings late in October with an eye toward setting rates in early November – just when election results come in.

“When employers see our proposed rate and start planning for it, then we shift it midstream; that is a lot of confusion created for the individual business owner,” Kennedy said, adding there is no statutory requirement to set rates at any particular time of the year.

Brad Shannon: 360-753-1688