No general rate increase for workers' comp rates in 2012

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Governor's workers' comp reforms hold rates down. Good news for Washington businesses and workers

The Department of Labor & Industries (L&I) has announced there will be no general rate increase on average in workers’ compensation rates next year. While there will be no general rate increase, individual employers may see their rates go up or down, depending on their recent claims history and changes in the frequency and cost of claims in their industry.

In total, 171 risk classes will increase and 146 risk classes will decrease or stay the same. For example:

  • Construction and forest products – both increase by 3%
  • Agriculture – no increase
  • Retail and restaurants – decrease by 3%

The decision to hold overall rates flat in 2012 is due to public testimony about the impact of the recession and recent positive trends in claims duration.

L&I has published a rate table online and sent all employers individual rate notices.

Questions & Answers – Labor & Industries and the 2012 workers' compensation rates

Why did my rates go up if I haven't had a claim?

In Washington State, employers with similar operations and exposures are grouped together in the same workers' compensation risk classification. Premium rates are based on the expected average costs per hour worked for most risk classes. Medical-treatment costs and/or wage replacement for lost work days may have driving up premium rates for an industry risk class at higher than average trends, thereby increasing the rates above average for the risk class.

How can I learn my experience modification factor?

Your account manager can provide you with the calculation of your experience modification factor. Your account manager's name is on your quarterly report or you can call 360-902-4817.

How big is Washington's workers' comp system?

Washington's workers' compensation system is the 7th largest workers' compensation insurer in the country. It provides insurance coverage to 162,000 employers and 2.3 million workers at no profit; the money to pay claims comes from premiums and investment income. The State Fund does not get any money from state taxes that go into the state General Fund or from the federal government. Every year, about 100,000 claims are filed for work-related injuries and illnesses.

How do Washington’s rates compare with other states?

It is difficult to compare workers' compensation rates state by state. Workers' comp systems have many other differences, such as different hazards workers are exposed to, benefits they are entitled to by law, and whether or not workers pay part of the premium.

Nevertheless, most insurance professionals rely on the respected Oregon Workers' Compensation Premium Rate Ranking Summary. The latest study shows that Washington's workers' comp rates are at the median nationally.

What is L&I doing to help employers meet their obligations?

L&I's Employer Assistance Program is here to help employers who are having trouble paying their premiums. We can set up a payment plan and in many cases we can waive late penalties and interest. L&I has already helped nearly 13,000 businesses since we started this program in 2009.

Rate history timeline

  • 2007 – Due to higher than expected investment returns and good success at controlling health-care costs, L&I was able to decrease rates by 2% and give employers and workers a partial “rate holiday” that saved them about $350 million in workers’ compensation premiums that year.
  • 2008 – L&I increased rates by 3.2% to cover wage and health care inflation.
  • 2009 – Although the actuarial calculations indicated a 6.3% increase was needed, L&I adopted a 3% rate increase and used reserve funds to help businesses and workers weather the economic recession. Due to volatile markets, the system’s contingency reserve dropped from $1.6 billion to approximately $990 million.
  • 2010 – L&I adopted a 7.6% average rate increase, an amount necessary to ensure funds were available to meet future obligations to pay benefits to workers. As the recession continued, workers’ comp insurers across the nation saw the same impacts – fewer people working meant fewer premiums paid, investment earnings down, and claims lasting longer. These factors combined to increase costs at a time when employers could least afford it.
  • 2011 – The severe persistent recession continued to increase workers’ comp claim costs forcing a 12% rate increase. L&I kept the increase as low as it did by aggressive cost-cutting measures, budget reductions and drawing down the reserves by another $117 million.
  • 2011 – Workers’ Comp Reforms enacted – The 2011 Legislature passed a comprehensive set of reforms that will save $1.1 billion over the next four years.
  • 2012 – No rate increase. Overall rates will remain the same as 2011.

Questions? Call us at 360-902-4817, or email to PublicAffairs@Lni.wa.gov.

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