September 17, 2012: The Washington State Department of Labor & Industries (L&I) today announced it is proposing no increase in the average rate for workers’ compensation insurance. If adopted, this would be the second straight year with no increase in workers’ comp rates.
“Had the Governor and the Legislature not adopted the 2011 reforms, I wouldn’t be making this proposal today,” said L&I Director Judy Schurke. “In fact, without those reforms, we would be facing a rate increase. Instead, we’re able to keep rates down for Washington’s businesses and workers.” Savings due to reforms are beating expectations. L&I is now projecting the reforms passed in 2011 will save $1.5 billion over four years, $300 million higher than originally estimated.
While the reforms play an important part in lowering costs, Schurke pointed to additional factors responsible for lower costs in 2013, including:
- Fewer claims in high hazard industries like construction are resulting in fewer long-term disabilities;
- Overall claim frequency, or the number of claims per 100 workers, has gone down by 6.2 percent;
- L&I has held medical cost growth below 4 percent over the past five quarters and expects continuing to do so in 2013 with the new provider network and health technology assessments;
- L&I is resolving claims more quickly as a result of Lean and other improvements.
Today’s proposal would mean an additional $82 million is placed in the State Fund reserves by the end of 2013. In the past, the State Auditor issued strong warnings about the consequences of maintaining inadequate reserves. Schurke also acknowledged the reserves are critically low by industry standards due to increased liabilities, investment losses and drawing down the reserves to hold down rates during the recession.
The Workers Compensation Advisory Committee (WCAC), which has been working with L&I on a plan to rebuild the reserves, endorsed L&I’s proposal to hold rates steady in 2013 and begin rebuilding the reserves. Washington is the only state where workers pay a substantial portion of premiums. Workers will pay about 24 percent of the premiums in 2013. The proposal to keep rates flat in 2013 is an average for all Washington employers. Individual employers may see their rates go up or down, depending on their recent claims history and changes in the frequency and cost of claims in their industry.
Every year in Washington, about 100,000 claims are filed for medical costs and lost wages due to work-related injuries, illnesses and deaths. Each year, L&I must review premium rates and make adjustments to cover the anticipated costs of claims that occur in the next year.
Public hearings on the proposed rates will be held in:
- Tukwila, Oct. 23, 10 a.m., L&I office.
- Bellingham, Oct. 23, 1 p.m., Public Library Lecture Room.
- Spokane, Oct. 24, 10 a.m., CenterPlace Event Center.
- Richland, Oct. 25, 10 a.m., Community Center Activity Room.
- Tumwater, Oct. 26, 10 a.m., L&I Auditorium.
- Vancouver, Oct. 29, 10 a.m., Red Lion at the Quay, Quayside Portside Room.
More information regarding the rate proposal is available at www.Rates.Lni.wa.gov. The final rates will be adopted in early December and go into effect Jan. 1, 2013.
“Evidence-based coverage decisions have reduced unnecessary care and avoided $27 million in annual costs.” (Emphasis added.)
Translation: Denying requested treatment costs the State less than authorizing it. – Ed.
- On average, workers’ comp rates have increased less than 3 percent per year since 2006. This is lower than L&I’s anticipated rate of medical and wage inflation.
- When calculated as a percentage of payroll, which is how rates are calculated in other states, the proposed 2013 overall rates would be equal to a 2.2 percent reduction.
- Without savings from the reforms, the 2013 break-even rate would have been about 4 percent instead of minus 4.2 percent. The break-even rate is the amount needed to cover projected costs for the next year. L&I will use the difference between the break-even rate and zero – $82 million – to begin restoring the workers’ comp reserves.
- The elements of the 2011 workers’ compensation reforms have various effective dates, beginning in 2011 and continuing through 2013. Savings estimates are now at $1.5 billion over four years, with continued savings in future years.
- As a result of Lean and other initiatives, we are seeing a downward trend in the duration of younger claims.
- L&I has held medical cost growth below 4 percent over the past five quarters and estimates doing so in 2013 with the new provider network and health technology assessments. Our medical costs are 26 percent less than the average workers’ comp program in the U.S.
- Evidence-based coverage decisions have reduced unnecessary care and avoided $27 million in annual costs.
- In 2011, the number of long-term disability claims per 100 workers fell by 6.2 percent, the largest decline since 1995. Long-term disabilities account for 85 percent of workers’ comp claim costs.
- When hiring picks up in construction and other high-risk industries, we can expect an increase in long-term disability injuries. That’s why it’s important to examine safety practices now and be ready to bring more people back to work safely.
- Workers’ comp insurance rates are based on the likelihood of an injury. Rates for almost half of the job classifications will change 1 percent or less next year.