|
 |
|
|
|
AWB Working on Ways to Reduce Workers' Comp Rates |
|
|
|
Written On: January/February 2004 |
|
|
|
Written By: By Paul Schlienz |
|
|
|
On Dec.1, Washington’s Dept. of Labor and Industries (L&I) announced that workers’ comp rates would increase an average of 9.8 percent. Originally, L&I proposed a 19.4 percent hike scheduled to begin New Years Day.
In announcing the revised rate increase, Gov. Locke called for a Blue Ribbon Commission of employers and labor to meet and find ways to workout their differences. The Governor looked to AWB to form the employer group participating on the Commission. At press time AWB had no details about how the commission would work.
This is the second year in a row that L&I increased its rates. In 2003, it raised rates an average of 29 percent. Washington firms that participate in the state fund have seen their rates rise an average nearly 40 percent since 2002.
“It is important to note some employers face much higher rate increases while others will receive lower adjustments,” AWB President Don Brunell said. “However, what is essential to remember is that while workers’ comp rates are increasing, so are unemployment, health and liability insurance premiums. It is the cumulative effect of all of these added costs in a struggling economy which has us very concerned.”
AWB is looking at a number of options to contain comp costs.
“First, we believe L&I should implement the Priorities of Government (POG) process, which was used so successfully in general fund agencies to prevent the need for general tax increases in our budget last year,” Amber Balch Carter said.
Second, L&I needs to look at its administrative costs and tighten its belt.
Third, L&I must resolve the dispute over how it reserves for claims. A PriceWaterhouseCoopers (PWC) reports that between $2.3 and $3.2 billion may be available if L&I changed the way it calculates its contingency reserve. L&I disputes this report and AWB encouraged actuaries from PWC and the L&I to meet to resolve differences. “If the reserves have been overstated,” Carter said, “then L&I should reduce rates accordingly.
Court Decisions Are Driving Comp Costs Up
“We need to deal with policy issues like the Cockle and Avundes decisions, which have changed the basis for awarding claims and made workers’ comp more expensive,” Washington Research Council President Richard Davis said. Davis is doing a workers’ comp analysis for the Washington Alliance for a Competitive Economy (WashACE).
The Washington State Supreme Court’s 2001 Cockle decision jettisoned 30 years of workers’ compensation practice. According to Cockle, employer contributions to workers’ health care benefits must be included in the wage calculation for workers’ compensation benefits.
In the 2000 Avundes decision, the Court weakened the statute that adjusted time loss benefits for seasonal workers. Avundes requires employers to pay many of these workers substantially more in benefits then they ever earned in wages.
Carter stresses SB 5378 addresses both the Cockle and Avundes decisions. The bill changes the structure of our workers’ comp system to a flat rate saving $124 million. Right now we have a sliding scale for workers’ comp based on a claimant’s number of dependents. Washington is one of the few states in the nation with that kind of formula for determining payments for workers.
“If you go to a flat rate, you not only become more competitive on a nationwide comparison, but you also reduce the administrative hassle in calculating time loss. You no longer have to figure out how many dependents a claimant has and get custodial documents to show the person has a family.”
Impact on Small Business is Driving Need for Change
AWB Vice President of Governmental Affairs Gary Chandler, who owns a UPS Store in Moses Lake, has been particularly hard hit by workers’ comp increases.
“This will be the second year of increases,” Chandler said. “I can’t handle those huge increases in my small business. I can’t pass those costs on or raise my prices in this economy. These increases can’t go on. L&I has to start tightening its belt.”
“Washington is in a very fragile recovery,” observed Davis. “Anything that increases labor costs will discourage hiring. For that reason, the workers’ comp increases will be a drag on the economy. At the minimum, the state should direct L&I not to increase its rates.”
AWB is collecting workers’ comp rate information.
“We want to know how these rates are impacting you,” Brunell said. “It is important for our members to talk to their legislators and give them the cold, hard facts about what workers’ comp rates are doing to them. Please fax to (360) 943-5811 or e-mail your information to Amber Balch Carter at AmberC@awb.org.”
Editor’s Note: AWB is asking its members to supply us with information about how their workers’ comp costs have increased in the last couple of years. We plan to combine that data into a workers comp impact story for the March-April issue of Washington Business Magazine.
|
|
|
|
