(The Center Square) – The Association of Washington Business has expressed disappointment over a proposal by the state Department of Labor & Industries to raise rates for workers compensation insurance in 2024.
On Tuesday, L&I announced a proposed 4.9% hike in the average hourly rate that employers and workers in Washington jointly pay for individuals who become ill, injured, or disabled on the job. If adopted for next year, the agency said the increase would average an extra $65 annually for each fulltime employee within a business.
That may seem like a small increase when viewed alone, but it “follows multiple years of rate hikes,” said Kris Johnson, president of the Association of Washington Business, in a press statement Wednesday.
“Over the last two years, workers’ comp rates have increased nearly 10 percent in Washington while other states continue to lower their rates,” said Johnson.
“Washington is already an expensive state to do business, and unfortunately, this proposed 4.9 percent average rate increase … will only make it more expensive for employers who are also dealing with extraordinary inflation pressures,” said Johnson.
He noted the proposal is an average rate increase across industry sectors. An individual employer’s actual rate change may vary depending on that employer’s industry and history of claims for wage replacement or disability benefits.
“For some businesses, the increase will be as high as 20% while others may get no increase,” said Johnson.
Labor & Industries will hold a series of public hearings on the proposal in late October.
Employers and workers both pay into Washington’s compensation system to fund wage and disability benefits and medical coverage for work-related injuries and illnesses. The program covers about 2.66 million workers and nearly 198,000 employers in Washington.
In Tuesday’s announcement, L&I director Joel Sacks said the proposed increase is below what the department expects to pay for claims in 2024, so it is tapping a contingency reserve fund in addition to the proposed increase in premium rates.
“With help from our reserves, we’re finding a balance between charging enough to cover costs and keeping rates steady and predictable, as Washington employers deal with economic uncertainty and lingering impacts of the pandemic,” said Sacks.
According to L&I, a typical worker will continue to pay about a quarter of the premium, similar to this year. The proposed increase means employees will pay about $11 more on average in 2024. In part, the rate increase is needed because Washington has had higher-than-normal increases in the state’s average wage in recent years, according to the agency.
“It’s good for workers that wages are rising, but that means the cost of replacing wages when a worker gets hurt goes up too,” Sacks said. “Our workers’ compensation State Fund investments are performing well, so we’re able to use the returns to help cover costs again this year instead of passing it on to employers.”
The agency said this will be the fourth year it has tapped the contingency reserve in order to avoid larger premium increases to employers and workers who may still be struggling with economic impacts from the COVID-19 pandemic. Without the reserve funds, said L&I, it would need to raise average rates nearly 10% to collect enough revenue in premiums to cover new claims anticipated next year.
According to L&I, most states charge rates as a percentage of payroll, so when employee wages go up, those states automatically collect more premiums. But Washington charges compensation rates as an amount per hours worked. When wages go up, the rate paid stays the same. The average wage of Washington state workers is expected to increase in 2024, resulting in increased costs in the system. The rate increase helps to cover those costs, the agency said.
From the business association’s perspective, Johnson said L&I’s proposed rate hike comes on top of other cost pressures to businesses in Washington, including unemployment insurance, paid family and medical leave, and “the nation’s highest workers’ compensation benefits paid,” according to the 2023 Competitiveness Redbook.
“This all adds up,” said Johnson. “We’re disappointed that Washington once again missed an opportunity to lower costs for employers and to help them navigate this challenging economy.”
He said the association will continue to work with legislators and others “to make Washington a great place to do business.”
L&I has scheduled public hearings for Oct. 26, 27 and 31 to take input on the rate proposal before a final decision is made. The Oct. 26 hearing will be held at 10 a.m. virtually and in person at L&I headquarters in Tumwater. The Oct. 27 hearing will be held at 9 a.m. in person only in Spokane. The Oct. 31 hearing will be held at 10 a.m. in person only in Yakima. Final rates will be adopted on Nov. 30 and go into effect Jan. 1, 2024.
Written comments should be addressed to: Jo Anne Attwood, administrative regulations analyst, P.O. Box 41448, Olympia, WA 98504-4148; or email JoAnne.Attwood@Lni.wa.gov. All comments must be received by 5 p.m. on Oct. 31.
More information about the proposal is available at www.Lni.wa.gov/2024Rates.