AGC Pushes Reform of Washington State's Illogical Workers' Comp System

AGC of Washington will work to reform the workers’ compensation system in the 2010 Legislature. The 7.6 percent tax hike proposed by Labor and Industries – actual rates will vary widely among individual construction class rates – was one more source of motivation for seeking a major overhaul of the system.

See AGC’s press statement below. Since L&I announced the proposed new rate last week there have been several editorial pieces that have echoed the call for reform (see a representative one here).

The proposed increase is an average for all Washington employers. Individual employers could see their rates go up or down depending on their recent claims history and any changes in the frequency and cost of claims in their industry.

The 2010 rate won’t be made final until November following public hearings. AGC members are strongly encouraged to testify at these hearings. AGC’s Legislative Affairs Office will work with interested members on providing testimony; contact Christine Swanson at 360-352-5000. The dates of the hearings are:

• Tukwila: Oct. 27 1 p.m. L&I Office 12806 Gateway Dr.

• Tumwater: Oct. 28 10 a.m. L&I Headquarters 7273 Linderson Way S.W.

• Vancouver: Oct. 28 10 a.m. Red Lion Inn at the Quay 100 Columbia St.

• Bellingham: Oct. 29 1 p.m. Bellingham Quality Inn 100 E. Kellogg Road

• Spokane: Oct. 30 9 a.m. Spokane Airport Ramada 8909 W. Airport Dr.

• Richland: Oct. 30 2 p.m. Richland Hampton Inn 486 Bradley Blvd.

Below is AGC’s press release:

AGC Pushes Reform of State’s Illogical Workers’ Comp System

AGC of Washington urged specific reforms of the workers’ compensation system in light of a 7.6 percent tax increase announced by L&I for 2010.

“This increase is one more burden on construction the industry that has been the hardest hit by the recession with a decrease in employment in Washington State of nearly 20 percent” said AGC Executive Vice President David D’Hondt. “We appreciate the fact that L&I is using reserves to set the rate lower than it otherwise would have been. But the fact that reserves need to be tapped to prevent an enormous increase is evidence that the system needs to be overhauled. If it is not reformed we will be seeing huge increases in the future as the system is not sustainable.”

The breakdown of the L&I-run industrial insurance system is apparent when considered in light of dramatic and positive strides that employers workers and government have worked together to make with regard to jobsite safety. This era of improved jobsite safety precedes and continues through the current economic slump. In Washington State claim rates have plummeted by more than 55 percent in the last 20 years.

“Despite this laudable improvement our state’s employers continue to bear ever-increasing and job-suppressing workers’ compensation taxes” D’Hondt said. “These taxes are going up because the total cost of claims – even with significantly lower numbers of claims – has been skyrocketing.”

According to AGC the illogic of dramatically higher costs and taxes despite dramatically lower accidents and claims is a symptom of a broken system and is not explained away by health care inflation. Two other alarming but telling statistics are:

  •  Pension rates have increased more than 300 percent since 1996. More than 50% of time loss claimants receive a pension from L&I if they’ve been off work more than 2 years.
  • In Washington the average injured worker misses 266 days of work – nearly three times the national average. By contrast Oregon’s average time loss rate is about 70 days.

“Certainly there are situations in which full pension or long convalescence is required” D’Hondt said. “But it is apparent that our system is not geared toward solving health issues and restoring gainful employment.”

AGC notes that Washington State’s system does not have the tools that other states have. For example this state does not have a mechanism that allows complicated claims to be released for a settlement as is common in other areas of insurance and in nearly all states.

“With such flexibility the system could fairly compensate injured workers for lost work time and address their treatment needs yet expedite the return of injured workers to productive employment” D’Hondt said. “This and other constructive ideas would bring logic to our workers’ comp system. A reformed system would improve the ability of our businesses to expand hire new workers – and stay in state.”

The four workers’ compensation system reforms sought by AGC and a coalition of business groups are:

• Final Settlement Agreements. Allow workers employers and L&I the option to settle and release claims for a lump sum. Washington is in a tiny minority of states that forbids this proven mechanism for claim resolution.

• Better define Occupational Disease. Rule out non-work related conditions like growing older. Washington has one of the broadest occupational disease definitions in the country.

• Establish Medical Provider Networks. Injured workers deserve access to medical providers trained and experienced in treating their particular condition – who will adhere to evidence based guidelines for medical treatment - as is the practice in 42 other states. Build on the successful Centers of Occupational Health and Education (COHE) program to make these networks available to Washington’s injured workers statewide.

• Reevaluate Wage Inflation Rates. Base wage levels at the national standard of 52 weeks prior to date of injury and adjust for 100% of inflation rather than the current 120%.