The recent announcement by the Department of Labor & Industries that average workers' compensation taxes won't increase in 2013 is good news for businesses in today's tough economy. Unfortunately, that good news is a temporary reprievethe current monopoly system is failing and a 40 percent tax hike spread over 10 years is set to begin in 2014.
To avoid the unwanted attention of the looming tax hike plan, much hullaballoo is being made over the no-tax year, made possible by fewer injured worker claims and the modest reforms passed in 2011 that saved $300 million more than initially expected.
Here's the real storyinjured worker claims are down 6.2 percent because more people are unemployed, not due to suddenly efficient claims management by L&I. As for the reforms, they might be saving money, but not nearly as much as they should be.
One of the reforms is a significantly watered down version of what the business community originally proposed.Businesses urged lawmakers to allow injured workers eligible for a lifetime pension the option of voluntarily settling the nonmedical portion of their claim.
Known as a structured settlement agreement, the injured worker receives medical care for as long as treatment is needed, but agrees up-front to a set amount of compensation for lost income from being unable to work. Structured settlements give injured workers control over how their claim is managed and resolved, rather than being forced to rely on a lifetime monthly pension from the state.
Since the settlements only cover the nonmedical benefits on a claim, a worker choosing this option will never be left with unmet medical needs.
In a recent presentation, L&I gave three examples of how structured settlements have already helped real people. Those examples included empowering a worker to receive dental care he otherwise couldn't afford, assisting a worker to relocate and retire in his family's hometown, and allowing a worker to avoid the cost of litigation and acquire the peace of mind of predictable, adequate income.
Voluntary settlement agreements are a proven solution already working in 44 states. Unlike in those states, though, our legislature severely limited this money-saving option to workers age 55 and over. Washington is the only state that imposes such a restriction.
The original proposed reforms would have allowed all injured workers the settlement option. The state's own budget analysts estimated removing the age restriction would more than double savings for taxpayers.
Given L&I's announcement that the weaker reforms are saving more than predicted, imagine the savings if the full reform was implemented. Giving all workers the settlement option would go a long way toward fixing our broken workers' compensation system.
Make no mistake, the current monopoly system is failing. After years of warnings from the state auditor, L&I managers admit the system is approaching insolvency.
Meanwhile, Oregon employers have enjoyed a cumulative rate decrease of more than 60 percent since the state ended its monopoly 20 years ago and allowed private insurers to sell workers' compensation insurance at competitive prices. Similarly, rates in West Virginia and Nevada have fallen 51 percent and 40 percent, respectively, since those states allowed private competition.
It's increasingly clear the state's monopoly program, one of only four left in the nation, is not working. Opening the market to private insurers is the key to real success. If lawmakers won't let businesses buy worker protection coverage on the open marketletting normal competition set prices and reduce coststhey at least should pass legislation that expands the structured settlement option to all workers.