The Washington state Department of Labor & Industries should reconsider its decision to raise workers’ compensation insurance rates for 2023, in light of the surge in a wide range of costs employers are facing in the current inflationary environment.
L&I has proposed a 4.8% average rate increase next year, following a 3.1% bump in rates this year. Of the 325 occupational risk classes designated by the state, 286 are due to pay more next year, as proposed.
And while the 4.8% rise in rates is average, many occupations face much larger hikes. Rate classifications that are to be hit with double-digit surges in rates range from physician and medical clinics to fulfillment centers to vineyards to siding and gutter installation companies. Conversely, only one profession listed with one employee—dam construction—will experience a double-digit decrease.
Keep in mind, such rate increases are occurring at a time when businesses face increases in unemployment insurance and minimum wage, in addition to surges in costs for supplies and services, in many cases.
The state attributes the need to increase workers’ compensation rates, in part, to wage inflation and medical costs. In Washington, rates are tied to hours worked, rather than to wages paid, but wage inflation is a factor in determining cost-of-living increases for people who have been disabled while working and are receiving long-term benefits. In an inflationary era, those workers will receive a much larger cost-of-living increase than usual.
Bob Battles, general counsel and government affairs director in employment law at the Association of Washington Business, points out that people receiving those long-term disability benefits typically are receiving larger increases in pay than those in the conventional workforce are receiving. Considering that dynamic, the state should look at how it factors such cost-of-living increases.
In a good-faith measure, L&I says it will tap its contingency reserves to keep rate increases lower than they would be otherwise. As of June 30, the state’s contingency reserve as a percent of liabilities stood at 27%, down from the low 30% range over the previous year. However, prior to 2017, the state’s contingency reserve as a percent of liabilities routinely fell below 25% every year for 15-plus years. While it’s important for the fund to remain healthy and sustainable, history suggests it can operate with a lower level of contingency—and tap into it more aggressively at this time, if necessary.
In early September, the week before L&I announced its rate increase, the Oregon Department of Consumer and Business Services announced an average decrease in workers’ compensation rates for 2023—the 10th year of average decreases in such premiums in that state. Even when acknowledging that comparing two states’ rate trends might be an apples-to-oranges exercise and recognizing that Washington had a string of four years of not increasing rates before the 2022 bump, it does raise the question as to whether there’s something the state can do to ease the burden on employers.
L&I has public hearings scheduled for Oct. 26 and 27. We hope they listen to employers’ concerns and act accordingly. Our state’s employers could use the respite.
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