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Aug. 31, 2006

L&I proposes 2 percent cut in workers’ compensation rates

TUMWATER — The Department of Labor & Industries (L&I) today proposed lowering workers’ compensation rates next year by an average of 2 percent, the first general rate reduction in six years. It will save employers about $31 million in premiums.

A final decision on rates will be made in late November following four public hearings.

“Lower workers’ compensation rates indicate that the economy in Washington is strong and that we are a business-friendly state,” said Gov. Chris Gregoire.

L&I Director Gary Weeks credited the proposed rate reduction on a strong economy, a good return on investments and L&I’s ability to control its health-care costs. He said the rate proposal is in keeping with his and the governor’s goal of making minor annual adjustments in the rates to avoid the kind of big rate increases that occurred in 2003 and 2004.

Weeks said his rate proposal would have a minimal impact on the State Fund’s large, $1.7 billion contingency reserve — the difference between assets and anticipated liabilities over the next 40 to 60 years. He said L&I is working with the Workers’ Compensation Finance Committee to determine the appropriate size of the contingency reserve. One option being explored for lowering it is a six-month Medical Aid Fund rate holiday in the second half of 2007. A decision on the contingency reserve will be made later this fall.

L&I’s proposal for a 2 percent rate reduction includes:

  • Lowering the average Accident Fund rate by 5 percent. Employers contribute premiums to this fund, which pays partial wage-replacement, disability and pension benefits to workers injured so severely they miss work.
  • Leaving the average Medical Aid Fund rate the same as it is this year. Employers and workers contribute equally to this fund, which provides health care, as well as vocational-rehabilitation counseling, to injured workers.
  • Increasing the Supplemental Pension Fund rate by 7 percent. This fund pays cost-of-living increases for injured workers receiving long-term wage-replacement benefits. Employers and workers contribute equally to it.

The proposed 2007 workers’ compensation rate is estimated to bring in $1.622 billion in premiums -- about $31 million less than this year’s rates are expected to produce.

If adopted as proposed, the share of premiums paid by workers will increase slightly. Next year, on average, they would pay just over 25 percent of total premiums. Washington is the only state where workers pay a substantial portion of the cost of workers’ compensation insurance.   

This rate proposal is an average for all industries and risk classes. What happens to a company’s individual rate is tied directly to that company’s and industry’s safety history. Companies with effective workplace-safety programs will likely see their rates go down. To see how this rate proposal would affect specific industries, go to www.LNI.wa.gov/ClaimsIns/Insurance/RatesRisk/Check/RatesHistory/default.asp.

Based on a nationally recognized rate study, about two-thirds of the states are expected to have higher average rates next year than Washington.

L&I’s workers’ compensation system provides coverage to about 163,000 employers and 2.3 million workers. About 30 percent of the state’s workforce is employed by self-insured companies. Because those companies only contribute to the Supplemental Pension Fund, the rate they pay will rise slightly.

Here is the schedule and location of rate hearings:

  • Oct. 19, Yakima: 1 p.m., L&I office, 15 W. Yakima Ave., Suite 100.
  • Oct. 20, Spokane: 10 a.m., West Coast Ridpath Hotel, 515 Sprague Ave.
  • Oct. 23, Mount Vernon: 10 a.m., Best Western Cottontree Convention Center, 2300 Market St.
  • Nov. 6, Tumwater: 10 a.m., L&I office, 7273 Linderson Way.

Written comments may be e-mailed to Ronald Moore, Employer Services acting program manager, at mooa235@LNI.wa.gov, or mailed to him at the Department of Labor & Industries, P.O. Box 44140, Olympia, WA 98504-4140. Faxed comments should be sent to 360-902-4729. Written comments will be accepted through Nov. 6. A decision on 2007 rates will be announced Nov. 21.

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For media information contact: Robert T. Nelson, 360-902-6043 or nelq235@LNI.wa.gov

To view the State Fund’s financial reports, go to www.StateFundFinancial.LNI.wa.gov

Broadcast version
The Department of Labor & Industries announced today that it intends to lower workers’ compensation rates next year. L&I Director Gary Weeks proposed a 2 percent reduction in the average rate in 2007. It would be the first rate reduction since 2001. A final decision will be made in late November following four public hearings around the state. Weeks credited the proposed rate reduction on a strong economy, a good return on investments and L&I’s ability to control its health-care costs.

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