Workers' Comp Rates Rise 40.5 percent in Washington in 2003

The Washington Department of Labor and Industries (L&I) has an indecent proposal for employers in the state: it wants to increase workers' compensation insurance premiums by 40.5 percent in 2003.

It is the agency's first general rate increase in eight years. If adopted, the proposal will bring in an additional $371 million next year.

L&I Director Gary Moore said the money is needed to bring rates more in line with the benefits, and to keep the contingency reserve at an acceptable level.

The increased premiums will offset rising medical costs, a recent upsurge in claims frequency and court-ordered increases in worker benefits. In addition to those costs, L&I's earnings on investment this past year has fallen $380 million below what had been expected.

In past years, earnings have done so well that L&I intentionally reduced rates and paid out dividends to draw down the contingency reserve. In 1999, and 2000, the agency sent dividend checks totaling $400 million to employers. In all, over an eight-year period, employers and workers received benefits of $1.8 billion in the form of dividends, deferred rates and actual rate reductions.

"Keeping rates low and drawing down the excess contingency reserve was a good strategy as long as we were making money in the financial markets," said Moore. "We can't do that anymore."

Because of recent losses in the financial markets and continued low rates in 2002, the contingency reserve is expected to fall below $300 million by the end of this year.

Historically, Washington's workers' compensation rates have ranked among the lowest in the nation. Over the last three years, only 12 states had rates lower than Washington's, according to surveys done by Oregon's industrial insurance system. Even with this increase, Washington's rates will rank somewhere in the middle third of all states. As a percentage of payroll, industrial insurance premiums in Washington rank far below the national average.

Washington's workers' compensation system provides coverage for about 163,000 employers and more than 1.9 million workers. Another 400,000 workers, representing 30 percent of the state's workforce, are employed by companies that are self-insured.

Four public hearings on the rate proposal have been scheduled. They are set for:

  • Spokane - 10 a.m., Oct. 28; Labor and Industries Office, Conference Room 4, 901 N. Monroe St., Suite 100
  • Everett - 10 a.m., Oct 29; Labor and Industries Office, 729 100th St. SE
  • Tukwila - 10 a.m., Oct. 30; Labor and Industries Office, 12806 Gateway Dr.
  • Tumwater - 10 a.m., Nov. 1; Labor and Industries Auditorium, 7273 Linderson Way SW
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