News for Small Business - December 2006

News

2 percent overall workers' compensation rate cut approved

Gov. Chris Gregoire announced Monday that Washington workers’ compensation rates will decrease by an overall average of 2 percent next year, and also announced a proposal to temporarily reduce rates even further during the second half of 2007.

The Governor said statewide savings will be $38 million for employers — $7.6 million of that saved by employers with 10 or fewer workers. Rate changes for individual employers will be higher or lower than the 2 percent decrease, depending on their individual claims history and that of their specific industry.

The 2 percent rate cut is taken from the workers’ compensation accident fund, which by law is paid only by employers and covers the cost of wage replacement and disability payments for injured workers. Rates will be raised for another portion of workers’ compensation costs known as the supplemental pension fund. Premiums for this fund are paid equally by employers and workers and, as a result, workers will see their overall contributions increase by 2 percent (or $7 million). Employers generally will see a net decrease in rates because the cut in the accident fund is larger than the increase in the supplemental pension fund.

L&I’s workers’ compensation funds are solid thanks to a strong economy, a good return on investments, and L&I’s ability to control its health-care costs.


Half-year 'rate holiday' proposed

Gov. Gregoire said the strong economy and good investment earnings have also grown L&I’s workers’ compensation reserve funds to an amount greater than needed to cover its obligations in the future, so those extra dollars can be returned to workers and employers.

If a proposed plan is approved, L&I will suspend part of the worker’s compensation premium for the 3rd and 4th quarters of 2007, saving an estimated $315 million in workers’ compensation premiums that normally would be paid. The savings will be shared equally by workers and employers. Under the current plan, workers and employers would pay normal premiums again starting in January 2008 after paying smaller bills for the second half of 2007.

Why propose a “rate holiday” rather than reduce overall rates even more than the 2 percent already approved?

L&I wants to avoid large swings in rates such as those seen a few years ago when rates were substantially reduced to give money back to ratepayers. At that time, like today, the system had more reserves than it needed. When the economy went into recession, premiums were substantially increased to bring reserves back to a normal level. A rate holiday gives ratepayers a temporary break, brings assets back down to normal levels and meets the Governor’s directive to L&I that rates be more predictable from year to year.

Four public hearings on the proposal will be held in December:

  • December 13, 1 p.m. at L&I’s Tukwila office, 12806 Gateway Dr.
  • December 14, 10 a.m. at the Ridpath Hotel, 515 W. Sprague Ave., Spokane
  • December 15, 10 a.m. at L&I’s Tumwater headquarters, 7273 Linderson Way S.W.
  • December 18, 1 p.m. at L&I’s Yakima office, 15 W. Yakima Ave.

Written testimony may be sent to Assistant Director Robert Malooly, Insurance Services Division, P.O. Box 44100, Olympia, WA 98504-44100, or maly235@LNI.wa.gov.


New rate formula benefits most small businesses — some could pay more in ‘08

About 6,000 small businesses will see their workers’ compensation rates drop noticeably next year due to changes L&I is making to its rate calculation formula starting in 2007.

Approximately 93 percent of small employers (152,000) will see very small changes up or down due to the new rate formula, while approximately 6,000 small firms will see a rate decrease of 5 to 25 percent. The new formula will take effect January 1, 2007, for all of these employers.

Another 6,000 small employers will see their rates increase by 5 to 25 percent due to the new formula, but that increase will be delayed until at least 2008. L&I will work with labor and business representatives, the Workers’ Compensation Advisory Committee, and interested employers in 2007 to ensure that potential impacts to these businesses are considered, that the plan prices workers’ compensation insurance appropriately for all customers, and that employers still have incentives for maintaining safe workplaces.

The new formula changes how the burden of paying for the workers’ compensation is distributed among all employers, big and small. It does not, by itself, change the dollar amount of premiums collected by L&I, although delaying rate increases caused by the new formula will cost the workers' compensation system about $25 million.

“When we reviewed the workers’ compensation system, we found that most employers were paying an accurate rate for their insurance, but some were paying too little and some were paying too much,” said L&I Acting Director Judy Schurke. “This change brings the system into better balance.”

Essentially, the revised formula gives small employers more credit for working safely and softens the sharp rate increase that a small employer now suffers when it loses claim-free status because of one or more small “compensable” claims (those that include wage replacement or disability payments). The changes bring L&I in line with insurance-industry practices already adopted in most states.

You will see the effect of the change on your business or organization when you receive your Annual Rate Notice from L&I in late December. Your rate notice will show your “experience factor” calculated under both the new and old formulas, and indicate that your 2007 rates will be driven by whichever is lowest.

An employer’s experience factor goes up or down according to the number and type of workers’ compensation claims for that business or organization. If an employer’s experience factor is higher than average for their business type, they pay higher rates. If their experience factor is lower than average, they pay lower rates.


Tools to save time and money

New 2007 calendar features dangerous construction bloopers

A hard hat protected this worker from a screwdriver that fell from above.L&I safety calendar uses real-life photos to drive home important safety tips.

L&I’s 2007 Job Site Safety Calendar features amazing — but true — examples of hazards, dangerous conditions and just plain bad judgment found on construction sites. With 52 eye-catching photos, it clearly tells the story of how construction workers can get hurt or killed — and why safety is so important.

Each page of the weekly calendar features a photo, a few words highlighting the hazard, and a related safety question that can be used in weekly crew safety meetings.

Many construction-industry groups already have copies of the calendar. For a single complimentary/promotional copy you can contact L&I’s DOSH Outreach Services at 360-902-6307, or by e-mail at SHARE@LNI.wa.gov.

Additional copies can be purchased. For cost and ordering information, contact the Washington State Department of Printing’s General Store online at https://fortress.wa.gov/prt/printwa/wsprt/, or call 360-586-6360.


2007 Washington Minimum Wage will be $7.93 an hour

Beginning Jan. 1, 2007, Washington State’s minimum wage will be $7.93 an hour, although 14 and 15-year-olds may be paid 85 percent — $6.74 per hour. The new minimum wage applies to workers in both agricultural and non-agricultural jobs.

L&I recalculates the state’s minimum wage each September as required by Initiative 688, approved by Washington voters in 1998.

Get a FREE 2007 Washington Minimum Wage poster

The 2007 Washington Minimum Wage poster (form F700-102-909) and other workplace posters are available at no charge from local L&I offices or toll-free from L&I’s Employment Standards division, 1-866-219-7321.

L&I recommends that employers post the minimum wage poster in addition to the following required posters:

  • F242-191-909 Notice to Employees.
  • F416-081-909 Job Safety and Health Protection poster.
  • F700-074-909 Your Rights as an Agricultural Worker (agricultural employers should order F700-083-000).
Be on-guard for poster marketing schemes

Business owners and managers regularly ask L&I about tough-sounding mailers that warn you to buy workplace posters or face stiff fines. These mailers come from private marketing firms, not a state or federal government agency. You can get all of these posters (state and federal) at no charge. Visit http://www.LNI.wa.gov/IPUB/101-054-000.pdf for a description of all required posters.


FOCUS ON: Experiment with workers' compensation claims reported to employers

L&I has selected more than 300 employers to participate in a test project that allows workers’ compensation claims to be reported to employers as well as health care providers.

Currently, all workers’ compensation claims in Washington are filed by the worker’s health care provider. This two-year project is aimed at finding whether claims filed through an employer result in less disability and better outcomes for workers and employers. The first year of the project begins Jan. 1, when workers at participating companies will have the option of filing workplace injury and illness claims through their employer.

L&I is preparing training material and workplace posters, and will be contacting participating employers to notify them of scheduled training dates in their area. Employers who were chosen, and those not selected, are being notified primarily by e-mail. Please watch for this e-mail notice if your company volunteered for the project.

L&I wants to recruit additional employers for the second year of the project, which begins Jan. 1, 2008. Recruitment for the second year will begin next summer. For updates on the project, please go to http://www.EmployerReporting.LNI.wa.gov.


L&I Small Business Contact:

Ron Langley
Small Business Liaison
Phone: 360-902-4205
Fax: 360-902-5420
E-mail: SmallBusiness@LNI.wa.gov

Want to subscribe to L&I News for Small Business? Contact Ron via the contact information listed above.

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