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Nov. 30, 2009

Workers' compensation insurance premiums increasing by 7.6 percent

TUMWATER – The Department of Labor & Industries (L&I) today announced a 7.6 percent average increase in workers’ compensation insurance premiums for 2010.

"I do understand how difficult the economic environment is right now and wanted to keep the increase as low as possible," said L&I Director Judy Schurke. "This rate ensures that the State Fund can meet its obligations to pay benefits to workers."

At Gov. Gregoire's direction, Schurke convened a group of business and labor leaders to examine ways to control long-term costs to the workers’ compensation system, including pensions.

Robert Malooly, assistant director for L&I's Insurance Services Division, said the agency has intensified its efforts to reduce operational costs of managing the system while protecting benefits that injured workers receive.

 "We're examining all of our costs and all of our processes to identify any potential additional savings that we can squeeze out of the system," Malooly said. "We have to be just as aggressive as businesses in this regard."

Despite this year's increase, over the last five years, rates have ranged from a 2 percent decrease in 2007 to last year's 3.2 percent increase. Over the past 15 years, rates have increased an average of 2.1 percent annually, while more than $2 billion was returned to ratepayers in dividends and in rate holidays.

Two of the biggest factors that influenced this rate increase are health-care inflation and wage inflation, up 8.5 percent and 3.4 percent last year, respectively. Because Washington premiums are based on hours worked, L&I must explicitly adjust rates for wage inflation. Other states assess premiums as a percentage of payroll hours and, as a result, revenue automatically goes up as wages increase, without the need for a formal rate increase.

The 7.6 percent rate increase, which will bring in an additional $117 million, is an average for all Washington employers. Average premiums will go up by about 4 cents per hour worked. Individual employers could see their rates go up or down, depending on their recent claims history and any changes in the frequency and cost of claims in their industry.

Workers will pay more too. Washington is the only state where workers pay a significant portion of premiums. Next year, their share will increase slightly to about 28 percent.

The State Fund provides insurance to employers and workers at no profit; the money to pay claims comes from premiums and investment income. No money comes from state taxes that go into the state General Fund.

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For media information: Elaine Fischer, L&I, 360-902-5413.

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