What’s behind L&I increases

Business owners don’t want to see their rates increase; the question is whether they can plan well for their companies when rates swing widely up and down from one year to the next.

The news Tuesday that the state Department of Labor and Industries had announced a 2 percent average base rate increase in workers’ compensation rates for Washington businesses was met with disappointment from the Association of Washington Business, which represents more than 7,900 companies, large and small, who employ 700,000 workers across the state.

AWB’s President Kris Johnson, in a press release Wednesday, called the increase a blow to employers and employees. The increase, Johnson said, represents a $29 million impact for employers, “nearly double what is needed to keep the fund strong.”

While the agency could have kept the increase near 1 percent, Labor and Industries Director Joel Sacks, says his agency is trying to meet a number of goals.

L&I’s workers compensation program acts as an insurer for companies, who pay premiums to the state that are used to cover the costs of providing replacement wages and disability benefits to workers who are injured on the job. Rates are based on the state’s most recent wage inflation rate, which this year is 4.2 percent and are adjusted depending on the safety risks associated with particular industries and a company’s past history of claims. This also is of interest to employees, who pay a quarter of their own premium.

The agency, Sacks said, is working to strike a balance between keeping premiums affordable while maintaining a system that is financially sound and can provide assistance to workers and employers when needed. Prior to 2014, however, the agency allowed for wide swings in what it charged for premiums, cutting rates far below the wage inflation rate some years, only to see them swing the other direction in following years. L&I cut rates 10 percent in 1996, but then increased them 29 percent in 2003. Following two years of no rate increases in 2012 and 2013, the agency has used wage inflation to guide rate increases: 2.7 percent in 2014, .8 percent in 2015 and 2 percent for next year.

The intent, Sacks said, is to provide some stability and predictability for employers, who previously didn’t know whether to expect a windfall one year or a crushing cost increase the next.

L&I also is having to rebuild its reserves. As a result of the most recent recession, the agency’s reserves were depleted by about $2 billion. During the next few years and before another recession hits, Sacks said he wants to recoup some of that cushion.

The agency also has developed programs that reduce costs and improve service to employers and injured workers.

Beyond its injury prevention programs, the agency is working with employers to keep injured employees on the job at less physically demanding tasks while they heal, even offering financial incentives to employers.

L&I is teaming with health care providers, including the Everett Clinic, which in 2007 established a Center of Occupation Health and Education, which coordinates care and therapy to get workers back on the job more quickly.

Assisting L&I, agencies such as WorkSource in Everett, are finding new employment for injured workers. Over the last two years, 102 L&I clients working with WorkSource are now employed, 37 back on the job after a year and 65 in the second year.

Rate increases can be tough for a business to absorb, but some predictability in rates and confidence in good outcomes for workers should be seen as a plus for employers.

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