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Q&A about 2011 workers' compensation reforms

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This is a summary of the workers' compensation reforms contained in Engrossed House Bill 2123, Substitute Senate Bill 5801, and Engrossed Substitute House Bill 1725 passed by the 2011 Washington Legislature and signed into law by Governor Gregoire.

The legislation creates a statewide medical provider network, expands the Centers of Occupation Health and Education, promotes getting workers back on the job faster and includes changes that should reduce the system's overall costs and prevent double-digit rate increases.

As a whole, the bills represent some of the most dramatic changes in Washington's workers' compensation system since it was created in 1911.

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Creating a Statewide Medical Provider Network

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Expanding the Centers of Occupational Health and Education

Fraud Initiative

  • Expand/collapse How does the new legislation address fraud?

    L&I has taken a number of approaches that have successfully reduced employer fraud and underground economy activity. EHB 2123 requires L&I to apply these approaches to address worker and provider fraud.

    Specifically, L&I will  participate in a national information exchange with other workers’ compensation insurers. By cross-matching our claims information with insurers in other states, L&I will be able to identify duplicate claims more easily. L&I is also developing new criteria for periodic review of pension cases.

    L&I is also working to identify potentially fraudulent billing patterns by medical providers. Additional efforts to increase public awareness of employer, worker, and provider fraud issues and how to report suspected fraud will also begin early next year.

Performance Audit

  • Expand/collapse What is the workers’ compensation performance audit requirement all about?

    The legislation requires the Joint Legislative Audit and Review Committee (JLARC) to contract with an independent workers’ compensation expert to conduct a performance audit of the workers’ compensation claims management system, including self-insured claims. The audit will provide information about how claims are currently managed, and make recommendations for improvements.

  • Expand/collapse What will the audit examine?

    The audit will compare Washington claim management practices to industry best practices. The audit will focus on:

    • How L&I handles disputes and complaints in a timely, fair and effective manner.
    • How employers and workers are kept informed about review and appeal rights in a timely, responsive and accurate manner.
    • Identifying differences between members of the retrospective rating plan and nonparticipants, and how those differences influence retrospective rating plan refunds.
    • Making recommendations to improve efficiency and reduce costs while maintaining quality customer service.

Safety and Health Investment Projects (SHIP) Grants

Occupational Disease Study

  • Expand/collapse What is the Occupational Disease study that was required by the legislation?

    L&I will contract with an independent researcher to study occupational disease claims in Washington. The study will help answer important questions about the trends of these claims, their impact on the workers’ compensation system, and how Washington’s occupational disease claims and laws compare to other states.

Cost-of-Living Adjustments (COLA)

  • Expand/collapse What changes did the legislation make to the cost-of-living adjustment for workers' compensation benefits?

    The Legislature eliminated the July 1, 2011 COLA for those who receive time-loss compensation or pension benefits. This temporary freeze on COLAs was one of many steps to reduce costs for the workers' compensation system.

    There was a 3.6% COLA increase in July 1, 2012, for most workers injured before July 1, 2011.

    What is a cost-of-living-adjustment, or COLA?

    A COLA is an adjustment to time-loss or pension benefits based on the change in the state's average wage for the prior calendar year. With the July 1, 2012 COLA, the adjustments will be effective the second July 1 following a worker's injury and each subsequent July 1.

Permanent Partial Disability (PPD) payments

  • Expand/collapse Did permanent partial disability benefits change in the workers’ compensation reform bill?

    No, but the requirement that the department and self-insurers pay 8% interest on unpaid permanent partial disability (PPD) or impairment awards was eliminated.  (This interest only applies to injured workers who receive their PPD award in monthly installments.) The change applies only to workers who were injured on or after June 15, 2011.

    Also, injured workers who receive an award for permanent partial disability will have the amount of that award deducted from any future permanent total disability pension. This applies to new pensions on or after July 1, 2011.   

    What is a Permanent Partial Disability award  or “PPD?”

    This is a benefit awarded to workers who are partially disabled by their on-the-job injury; for example, a worker who loses a finger in an accident or part of the function of an arm.  The award may be paid in one lump sum if the amount due is less than three times the state’s average monthly wage.  Larger awards are paid with an initial down payment, followed by monthly installments.

Rainy Day Fund

  • Expand/collapse What is the Rainy Day Fund?

    The Rainy Day Fund is a new workers’ compensation fund that will consist of transfers from the Accident and Medical Aid funds when assets for those accounts total more than 110% of liabilities.

  • Expand/collapse When can the Rainy Day funds be used?

    Primarily, they will be used to reduce future rate increases when needed to help businesses during economic recessions.

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