OLYMPIA— A 7.6 percent rate increase proposed today by the Washington State Department of Labor and Industries (L&I) underscores the need for Gov. Chris Gregoire and the Legislature to make some fundamental changes to our state’s workers’ compensation system when it convenes in Olympia next January.

In response, the Association of Washington Business (AWB) called on the agency, the governor and the Legislature to pursue and enact major reforms to lower costs to all employers, both in the private, non-profit and public sector, while insuring that injured workers and their families are treated fairly and that people are quickly rehabilitated and returned to work as soon as safely possible.

AWB, the state’s largest and oldest business organization representing more than 6,700 employers, says the reviews are necessary and go beyond L&I’s proposal today to raise workers’ compensation taxes 7.6 percent, or $117 million for 2010.

“In this difficult economic climate, any rate increase is a problem for struggling employers,” said AWB President Don Brunell. “The workers compensation tax or rate is one issue but when the cumulative impact of all costs of taxes, fees and government-mandated programs are added together, it makes it increasingly difficult for employers to keep people on the job and their doors open.”

“There are some fundamental problems that drive costs up for the workers compensation program regardless of whether the employer is self-insured or purchases its insurance from the state and today, we do not have the strong investment returns to offset higher workers compensation costs.”

Brunell said when our economy was thriving and workers compensation funds were invested in strong investment portfolios, the rates of return masked some growing problems with amount of time injured workers were off the job and receiving time-loss payments, the higher number of pension awards and the claims that remained open with no resolution.

“All of this costs employers, who pay the bulk of the workers compensation rates and those costs, when added to other higher costs of doing business in Washington, causes our competitiveness and job market to shrink,” added Brunell.

Washington state’s workers’ comp benefits package is the second highest per employee in the country according to the National Academy of Social Insurance. And while employers and employees have worked together to make workplaces safer, resulting in a 55 percent reduction in the annual number of claims filed since 1990, those fewer claims are taking longer to resolve and costing exponentially more to manage as they stay in the system longer.

According to L&I’s data, the average injured worker who misses work is absent an average of 266 days, almost three times the national average. Workers who miss more than two years have a nearly 50 percent chance of never returning to work. Washington also leads the nation in the number of expensive, lifelong pensions awarded each year, at a rate that has ballooned more than 300 percent since 1996.

And, while the overall number of claims has decreased, L&I’s administrative costs have increased by $39 million in the last year alone.

According to Kris Tefft, AWB’s government affairs director for workers’ comp issues, “this indicates an urgent need to reform the system. Getting costs under control should be a top priority,” he said.

Some common-sense reforms L&I and the Legislature should pursue next session include creating a settlement option for complex or long-term claims as an alternative to pensions. Washington is one of six states that doesn’t allow final settlement agreements.

Washington should also bring its coverage of “occupational disease” claims into line with the majority of states by refusing to cover factors that aren’t primarily work related. Presently, Washington has one of the broadest legal standards for occupational disease coverage in the nation.

The state should also join the 42 other states that allow and encourage the use of medical provider networks to treat injured workers according to national best practices and treatment guidelines at costs that can be negotiated and stabilized.

Finally, Washington should, like many states, index its maximum wage benefits to 100% of the state’s average monthly wage, not the current unjustified rate of 120 percent.

“These reforms would help establish a system that gets injured workers the treatment and benefits they need to get them back to work, at costs that are fair and affordable for employers and workers,” said Brunell.

“Workers’ comp costs are a major competitiveness issue, and the long-term viability of Washington jobs depends on it.”

About the Association of Washington Business
Formed in 1904, the Association of Washington Business is Washington’s oldest and largest statewide business association, and includes more than 6,700 members representing 650,000 employees. AWB serves as both the state’s chamber of commerce and the manufacturing and technology association. While its membership includes major employers like Boeing, Microsoft and Weyerhaeuser, 90 percent of AWB members employ fewer than 100 people. More than half of AWB’s members employ fewer than 10. For more about AWB, visit http://www.awb.org/.