Washington Governor Wants to Reform Workers’ Comp

Washington Gov. Chris Gregoire has proposed several changes to the state’s workers’ compensation system to help the state out of the recession and support the vitality of businesses. She estimates the proposed changes would save the workers’ compensation system $720 million over four years.

Of that $720 million, the following would save $560 million over four years:

• Reduce lifetime pensions — which represent 85 percent of workers’ compensation costs but only 8 percent of claims — by offering lump-sum benefits to older workers unlikely to reenter the workforce and adjusting pensions of totally disabled workers who earn income through limited work;
• Incentivize employers to keep injured workers on the job by subsidizing wages in exchange for offering employees light-duty work; and
• Expand Centers of Occupational Health and Education, which encourage health care providers to adopt best practices and return workers to their jobs.

Gregoire noted that Washington’s “State Fund” is the seventh largest workers’ compensation system in the nation and covers 2.3 million workers employed by 163,000 employers. The workers’ comp premium rate index is $2.04 per $100 of payroll, according to a nationwide survey conducted by the Oregon Department of Consumer and Business Services.

“The system is fundamentally sound, but systemic trends, many made worse by the recession, drive up costs, and the state must act to protect employees and employers. In a system this size, opportunities exist to lower costs and reform unsustainable expenditures,” Gregoire said in her 2011 Policy Brief. She indicated one of every 19 time-loss claims becomes a lifetime pension — a rate that has doubled in the past 10 years. And lifetime pension claims comprise half of all workers’ compensation costs.

“Common-sense changes to workers’ compensation will free up money that workers and businesses can use to support their families and improve their companies,” she said. “By offering businesses and workers these tools, the state is laying a stronger foundation that businesses and workers can use to grow and succeed in the 21st Century.”

“The state workers’ comp system is in a lot of trouble, and these small proposed changes will not save the program,” said Daniel Holst, executive vice president of the Independent Insurance Agents & Brokers of Washington. His association believes “more meaningful, structural changes need to be made” to the system. IIABW believes a private insurance option needs to be created so private insurance companies can sell workers’ comp coverage in Washington.

In addition to the workers’ comp changes, Gregoire proposed modifying the state’s training benefits program to make it more accessible and flexible. These changes also will qualify the state to receive $98 million in federal incentive funds, she said.

Gregoire said she would introduce legislation to create a network of credentialed health care providers for state and self-insured employers. Workers will still be able to choose their doctor, and state and self-insured employers will be able to encourage providers to follow best practices to help workers remain productive and healthy. This proposal alone will save an estimated $160 million over four years, she said.

Additionally, Gregoire wants to support economic growth by saving businesses $300 million on their 2011 unemployment taxes.

She noted that Washington’s unemployment-insurance trust fund is among the healthiest funds in the nation, but as required by statute unemployment rates are set to rise by an average of 36 percent in 2011. Gregoire wants to introduce legislation to reduce and cap the shared-cost portion of unemployment taxes in 2011, which will reduce businesses’ unemployment taxes by $300 million. To take effect this year, the Legislature must pass the bill by Feb. 8, 2011.

“This is money businesses can use to hire more employees and get people back to work,” Gregoire said. “I ask the Legislature to move quickly and enact this job-supporting legislation.”