While the Washington state Department of Labor & Industries' proposed workers' compensation premiums for 2012 reflect an average 2.5 percent increase across the board, a handful of industries are bracing for higher rate increases.
Building and construction trades, as well as those in forest products and mining, face a proposed average 6 percent hike. That's the same percentage increase announced for transportation and warehousing.
At the same time, the L&I schedule could mean lower or unchanged premiums next year for some employers in retail, clerical office support, and restaurants.
Even within industries, however, changes vary dramatically depending upon job type. A 1 percent decrease is proposed for the general category of retail stores, while supermarkets would see a 3 percent hike. Additional retail categories show a proposed 7 percent reduction for workers in convenience stores with self-service gas, a 2 percent decline for clothing-and-shoe store employees, and a 3 percent hike for furniture and appliance stores. Restaurants could see an average 1 percent decrease in premium rates.
Other job classifications' proposed rates would increase as much as 18 percent, for a category of wallboard installation, or would fall as much 14 percent, such as for "life and rescue emergency personnel" miscellaneous services.
L&I insurance pays for medical care when a covered employee is injured on the job and also pays so-called "wage replacement" benefits ranging from 60 percent to 75 percent of a worker's income in cases when a worker is off the job due to injury.
L&I department officials have said the average 2.5 percent increase overall is needed to shore up shrinking reserves, and the rate variation is common to insurance programs based on risk and claims history. Following a series of hearings held this fall, L&I will announce formally at the end of this month its final premium rates for next year.
The proposals, however, have some industry leaders questioning any hike in premiums next year in light of recent L&I reforms that are expected to save $1.1 billion during the next four years. Those workers' compensation system reforms passed during the 2011 legislative session include freezing cost-of-living wage replacement for a year and allowing settlements for older workers who want to opt out of retraining, among other steps.
"The state had stated in its actuaries that there wasn't going to be any rate increases," based on the cost-saving legislative L&I reforms, says Bill Taylor, member services director of the Spokane Home Builders Association, The 6 percent average increase proposed next year for building and construction trades would come on the heels of an average 16 percent premium rate hike in 2011 for that industry, he says.
"We have contractors that are closing up business because of the cost of doing business, and we have contractors leaving the state and setting up business in other states," Taylor says. "In this time that we're in a recession, our industry has had a terrible hit. There's very little building."
He adds, "The fact that they're increasing the cost to do business at a time when no one is doing business is unconscionable to me."
Jan Teague, president and CEO of the Washington Retail Association, says she's glad that several categories of retail employment would mostly see a decline or same rate next year, but she adds that she doesn't think any industry should have to pay more next year.
"In general, there shouldn't be any increase for anyone," she says.
Elaine Fischer, an Olympia-based L&I spokeswoman, says the overall 2012 rate proposals are much lower than 2011 hikes, when numerous industries absorbed double-digit rate increases compared with 2010 premiums.
She adds that the lower rates this time are due in large measure to the legislative reforms. Without them, L&I says it would have needed an average 8 percent rate hike to cover the costs of 2012 claims alone.
Fischer also says the department used more than $332 million in reserve funds during the past three years to offset rising costs and hold down rates. L&I needs the average of 2.5 percent increase next year to rebuild reserves, she adds.
"Investment returns are also a factor," Fischer says. "When the economy tanked, there was less money to offset the premium costs, so we started using our reserve money to keep the rate increases lower."
She adds, "We've drawn reserve funds down to a critically low point. We can no longer draw from them."
Teague disputes that, saying, "We think they have an adequate reserve. There's an ample reserve to cover any emergency that might occur. They have a couple of funds they could dip into if you look at the big picture."
As far as the variation for premium rates of certain industries in 2012, Fischer says it's common for individual business classification to go up or down, based on the risk category of the employer, recent claims history, and any changes in the frequency and cost of claims in a specific job category.
Adam Molenda, president of the Spokane-based Timber Products Manufacturers Association, says he's mostly heard concern that next year's proposed moderate L&I increases will only get followed up by another double-digit shot the following year.
"From people I've talked to, the biggest concern they have is that 6 percent is better, but are double digits going to come back the following year because they say it's an insolvent program," he says. "They had to pull out money from reserves before."
He adds that absorption of a 6 percent rate increase for the forest products industry would be tough following an average 15 percent hike this year for the sector.
"It's going to be very difficult," he says. "Like every other manufacturing industry, it's very tight right now."
Some of the L&I reforms include an incentive program that will pay employers if they bring workers back quickly under a light duty or transitional job with doctor's approval, Fischer says. Over time, that's expected to save money because workers won't need long-term benefits. The reforms also will create a workers' compensation medical provider network to go into effect in January 2013.
For employers in the restaurant industry, even a slight dip in workers' compensation costs will help, says Dave Hooke, owner of Senor Froggy on Spokane's South Hill and a Washington Restaurant Association board member.
"It's not going to mean much because it's a very minor drop," Hooke says. "I pay L&I rates of about $9,000 a year, so if it goes down 1 percent, that's 90 bucks. In this economy, everything helps."
Washington restaurant leaders also have done more to improve job site safety, which is reflected in the rate structure, says Bruce Beckett, who is the Washington Restaurant Association's vice president of government affairs. The association has about 5,000 members.
"Restaurants have improved safety and kept claims down significantly," Beckett says. However, he adds that within the industry's broader hospitality category, some sectors would see an increase, including 11 percent for caterers, 1 percent for golf courses, and 4 percent for motels and hotels.
"So it's variable as well even within our own sector," Beckett says.
However, Hooke says, a real issue to address is how rich Washington state's L&I benefits are compared with other states, such as for Idaho. Cooke used to own a Coeur d'Alene restaurant, where he says his L&I rates were less than half what he was paying in Washington state.
"Washington has a very rich schedule rate for any injuries and how much gets paid out," he says. "We pay out a lot more, and that's why our state rates are so high."
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