Washington State's Monopoly Work Comp System To Increase Rates
By Lonce LaMon - September 24, 2009The state of Washington will increase its workers' compensation premiums by an average of 7.6 percent or about 4 cents per hour worked, according to the Washington state Department of Labor and Industries' announcement made just this past Monday.
“I know that any increase adds to the challenges that businesses and workers face in this tough economy,” said Washington's Labor & Industries Director, Judy Schurke, in a news release. “We have pushed this proposed rate increase down to the lowest possible level given the uncertain state of our recovery from this deep recession.”
That is much lower than the earlier predictions made by the Department, which had indicated that a potential increase of 15 percent to 20 percent might be needed.
Washington state runs a monopoly with no allowed private competition for workers' compensation insurance, and the Department of Labor & Industries (L&I) is the sole provider of workers' compensation insurance.
According to Amy Brackenbury, who is the Building Industry Association of Washington’s human resources analyst, and Erin Shannon, who is the association’s public relations director, Washington only needs to look to their southern neighbor, the state of Oregon, for change that would yield lowered work comp rates for Washington.
Drawing from an article from the News Tribune, authored by Amy Brackenbury and Erin Shannon, dated February 20, 2009, for Oregon, which has a private workers’ compensation insurance market, 2009 marks the 19th year Oregon employers won’t face a rate increase. And for the third straight year, most Oregon employers will pay almost 6 percent less for workers’ compensation coverage in 2009.
In Washington, employers’ workers’ comp rates have increased by 40 percent over the last five years. The biggest difference between the two states is that in Oregon, employers can purchase workers’ comp insurance from a private insurer.
In Washington, the Department of Labor & Industries (L&I) is the sole provider of workers’ comp insurance. No competition is allowed. Managing the state’s monopoly is no small task – as L&I collects workers’ compensation premiums totaling $1.6 billion to insure 171,000 employers and more than 2.5 million workers.
It is one of the largest agencies in state government, with more than 2,700 full-time staff and a budget of just under $600 million. This massive bureaucracy, unhindered by competition, has little incentive to become more efficient and keep costs down. The result: Washington collects some of the highest premiums from employers and injured worker rates are well above the national average.
Oregon used to be like Washington. Twenty years ago, Oregon was one of the leading candidates for the dubious honor of having the nation's worst workers' compensation system. But a series of reforms that began in the 1990s turned Oregon’s workers’ comp system around. The state injected competition in order to improve efficiency and reduce the cost of the system. Administrative costs were cut and the process was streamlined to make it simpler and less time-consuming for businesses and insurers. The state even brought representatives from business and labor together to negotiate recommendations on workers’ comp policy.
Since then, Oregon workplace injury rates have declined 50 percent, benefits for permanent disability are among the highest in the nation, and the insurance premium rates paid by Oregon employers have gone from 6th highest in the nation in 1986 to 42nd highest in 2006. The state now shines in ensuring accurate and timely benefits for injured workers and return-to-work programs that help get injured workers back to work faster. Oregon’s workers’ comp system provides the state with a critical competitive advantage over neighboring states like Washington.
Judy Schurke of Washington's L&I further explained that a rate increase for Washington is needed now for several reasons: Workers’ comp funds now have weaker investment returns, there are fewer premiums because people aren’t working as many hours, and there are fewer jobs for injured workers to return to. In addition, health-care costs have increased by 8.5 percent and wages increased by 3.4 percent.
Well, what arguments can be made in response to Judy Schurke? What questions asked?
If work comp funds now have weaker investment returns, why not get the best investors in the private sector to make better investments? If there are fewer premiums because people aren't working as much, then there should be fewer injuries because people aren't working as much. If health care costs have increased, then get busy on medical cost containment programs. That's what the private sector is busiest and hardest at work doing at this moment in history. And it's best left with them. Keep the government to managing the private sector, and allow the private sector to do the work.
Government's excuses are best transformed into the private sector's next best business challenge and opportunity.
Readers, please let me know your thoughts: write to me at lonce@adjustercom.com.
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