Few issues generate more angst and confrontation than the workers’ compensation system in our state. It’s like none other in the country. The state Department of Labor and Industries and its supporters contend that it’s one of the best in the nation. In reality, it’s riddled with problems and skyrocketing costs and it needs fixing in order to protect workers, their families and promote job growth in Washington.
First, let’s gain some perspective on the benefits and costs of workers’ compensation. With conflicting and apples-to-oranges data being promoted, it’s easy to be misled.
Washington has one of the most generous workers’ compensation systems in the nation. The benefits paid per claim make that clear. The most recent annual data show that benefits paid per claim in Washington are 19 percent greater than the national average. In a state-by-state comparison, Washington is fourth highest in the nation.
The state argues that ranking is the beauty of the workers’ compensation system here — it’s high-benefit and low-cost. That’s a distortion of reality. The benefits of the system are the costs of the system. If benefits are high compared to other states, then costs must also be high.
System costs are supported by premiums paid by employers and, to a lesser extent, workers. Premiums were kept low in the 1990s when the over-inflated "new economy" seemed like it was here to stay. It wasn’t. Investment returns on workers’ compensation reserves were supplying extraordinary income that masked rising system costs. When the economy burst, those returns evaporated and employer premiums began a double-digit climb to catch up with system cost increases.
Now, employer costs are not only high, they are skyrocketing — up an average of 40 percent in just the last two years.
The experiences of employers across Washington underscore this story. A fertilizer dealer reports having to pay twice as much in workers’ compensation costs for an employee in Washington as he does in Oregon. The same for a chemical plant operator or a hops farm worker. Even more astounding, a farm supply business pays five times as much for a clerical worker in Washington as it does in Oregon. So the question becomes: How can employers justify operating in Washington when it’s much cheaper to jump the state line? Nobody here likes the end result — fewer jobs for Washingtonians at a time when we’ve already lost 100,000 jobs in just three years.
Opponents to workers’ compensation reform argue there is little reason to be alarmed about a 40 percent increase in system costs over two years. In these tough economic times — when the state has lost 30 percent of its manufacturing base in the last decade and many of those jobs are not coming back — that argument reflects a disconnect from the state’s current economic reality. The costs of employing workers in Washington are rising dramatically compared with other states and, if Washington is going to rebuild its economy and actually pursue job growth again, workers’ compensation reform must be a top priority.
Most importantly, the workers’ compensation system must be about ensuring an adequate safety net for injured workers, improving rehabilitation and retraining, and promoting a faster return to work. When workers are injured, the system must support them, be easily understood and manageable. Today, it isn’t. The Department of Labor &Industries must address critical claims management problems and control costs.
And the system needs to be fair and dependable with policies that allow employers to accurately predict and plan for associated costs. If we’re going to keep and create jobs, the system must also be competitively priced relative to other states. That means ending regulatory inequities and replacing the cost of living adjustment with an index that reflects rather than drives inflation.
Washington needs to focus on putting people back to work. Implementing workers’ compensation reform is a vital step. Without these changes, we will continue to risk the real possibility of sending jobs elsewhere. Nobody wants that.
Don Brunell is the president of the Association of Washington Business. Steve Mullin is the interim executive director of the Washington Roundtable.
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