(The Center Square) – Three out of four people on Thursday morning testified against the Washington State Department of Labor & Industries’ proposal for an overall average rate increase of 4.9% in workers’ compensation, which it says will ensure adequate premiums to cover expected costs in 2024 claims.
If the proposed rate hike is adopted, that means employees would pay about $11 more on average next year.
“While this may seem like a small increase, Washington is already an expensive state to do business and unfortunately this proposed 4.9% average rate increase in workers’ compensation insurance will only make it more expensive for employers who are dealing with extraordinary inflationary pressures,” said Bob Battles, general counsel and government affairs director for the Association of Washington Business, during a public hearing on the proposed rate hike.
September’s annual U.S. inflation rate is 3.7%, according to U.S. Labor Department data published earlier this month, which is a substantial decrease from the 8.2% rate at this time last year. Nevertheless, the high cost of food, gas and energy remains on the minds of many Washingtonians.
“Keep in mind, this is an average rate increase across the industry sectors,” Battles said. “For some businesses, this increase could be as high as 20%; for others, there will be no increase.”
Lobbyist Tom Kwieciak, representing the Building Industry Association of Washington, was critical of L&I’s dipping into its contingency reserve fund to keep rate increases lower than they would be otherwise, instead of coming up with a long-term plan to deal with rising costs.
Kwieciak noted that “without the ability to raid the contingency reserve fund that has largely been built upon exceptional investment results, we would be staring at shockingly high rates each year.”
According to an L&I news release in September regarding the proposed rate increase, “This will be the fourth year that L&I has reduced the impact on employers and workers struggling from the pandemic by tapping the contingency reserve to avoid larger increases in premiums. If the agency did not tap into the reserve, it would need to raise average rates nearly 10 percent to collect enough premiums to cover new claims in 2024.”
Continual raids of L&I’s contingency fund are only masking true costs, Kwieciak explained, adding that “Something must be done now to control systems costs…”
He did recommend a course of action.
“One great example would be to change the formula for cost of living increases on L&I claims,” Kwieciak said. “By L&I’s own admission in its press release announcing the 2024 rates, the department states, I quote, ‘In part, the rate increase is needed because Washington has had higher-than-normal increases in the state’s average wage in recent years.'”
Kwieciak said he understands the current formula is statutory and must be followed by L&I, but added he favors a legislative proposal that protects injured workers’ buying power and more accurately reflects cost of living increases.
Lauren Gubbe with the Association of General Contractors agreed with Kwieciak’s proposed solution.
“Change the RCW that calculates cost of living adjustments based on the state’s average wage to a more predictable, equitable, fair and accurate measure of inflation, such as a Consumer Price Index, or CPI,” she said.
Gubbe went on to note, “This methodology is standard insurance practice in other states.”
There was one person who testified in favor of L&I’s proposed workers’ compensation rate increase.
“This has allowed workers’ competition in Washington state to provide a high level of benefits through workers, ranking seventh in the nation, while ranking 24th in the nation for workers’ compensation premiums, and 38th in the nation for premiums paid by employers,” said Joe Kendo, chief of staff of the Washington State Labor Council.
L&I workers’ compensation insurance covers about 2.66 million workers and nearly 198,000 employers in Washington.
A Friday public hearing will be held at 9 a.m. in person only in Spokane, and an Oct. 31 public hearing will be held at 10 a.m. in person only in Yakima.
Written comments can be submitted to Jo Anne Attwood, administrative regulations analyst, P.O. Box 41448, Olympia, WA 98504-4148; or via email to JoAnne.Attwood@Lni.wa.gov. All comments must be received by 5 p.m. on Oct. 31.
Final rates will be adopted on Nov. 30 and go into effect Jan. 1, 2024.