L&I Proposes Keeping Workers' Comp Rates Steady for 2021

L&I is proposing no increase in the average price employers pay for workers' compensation insurance next year. With the proposed overall rate change of 0%, the average premium per employee is not expected to change overall.

While financial projections point to the need for a significant increase to cover all of the costs for injuries and illnesses that occur in 2021, the agency is proposing using funds from the workers' compensations contingency reserve to keep the rate from climbing.

If the proposal is adopted, this will be the fourth year in a row with no increase in the average rate. However, there will be changes by job class and employer.

Employers and workers pay into the workers' compensation system to help cover the cost of providing wage and disability benefits for injured workers, as well as medical treatment of injuries and illnesses.

Public hearings

To support social distancing, public hearings on the rates proposal will be held virtually this year on Oct. 27 and 29.

October 27 at 10 a.m.

Join by computer

Zoom meeting: https://zoom.us/j/99395316830
Meeting ID: 993 9531 6830
Passcode: Oct2720!

Join by phone

253-215-8782 U.S. (Tacoma)
Meeting ID: 993 9531 6830
Passcode: 35862365

October 29 at 10 a.m.

Join by computer

Zoom meeting: https://zoom.us/j/97637403577
Meeting ID: 976 3740 3577
Passcode: 4n*z2LvM

Join by phone

253-215-8782 U.S. (Tacoma)
Meeting ID: 976 3740 3577
Passcode: 44645997

Comment on the proposed rates

You are encouraged to submit comments via email at JoAnne.Attwood@Lni.wa.gov or in writing to the following address:

Jo Anne Attwood, administrative regulations analyst
PO Box 41448
Olympia WA 98504-4148

All comments must be received by 5 p.m. Oct. 30, 2020.

Questions About the Proposed 2021 Premium Rates

    How is L&I accounting for the novel coronavirus in the rate-making process?

    Coronavirus-related workers' comp claims don't have a direct impact on the proposed 2021 rates. L&I has implemented measures to assist businesses adversely impacted by the pandemic, including allowing employers to defer premium payments. Go to our frequently asked questions (FAQs) on coronavirus for more information.

    How is L&I able to keep the 2021 average rate the same as the 2020 rate?

    Financial projections point to the need for a rate increase, but the agency is using funds from the workers' compensations contingency reserve to keep the average rate from going up in 2021. The reserve funds were built through L&I reforms and measures to keep costs and expenses down, including employers and workers focusing on safety, and L&I initiatives that are helping injured workers recover sooner and reducing workers' compensation costs. Additionally, small rate increases in previous years and strong investments have helped build reserves, allowing for rate decreases over the last 3 years, and holding it steady in 2021.

    Why is my rate changing when the proposed 2021 rate is staying the same?

    The proposed steady rate is an average. 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 risk classes. Those changes also can increase or lower premiums paid by workers because workers in Washington pay a portion of the total premium. See the proposed changes for all risk classes.

    How much will the proposed rate impact employers?

    The proposed 2021 rate change is 0%; therefore, the average premium per hour worked is not expected to change overall. However, there will be changes by class and employer. See the proposed changes for all risk classes.

    What percent of the premiums do workers pay?

    In 2021, workers will pay on average 26% of the premium. That's similar to what workers are paying in 2020. The actual percentage depends on the classification of the worker's company and its recent claims history. Washington is the only state where workers pay a significant portion of the premium.

    The total rate is made up of four rates that provide benefits when workers are hurt on the job: The accident rate; the medical aid rate, which pays for medical care and vocational services; the supplemental pension rate, which pays for cost-of-living adjustments for long-term time-loss and pension recipients; and finally the Stay at Work rate, which pays for employer financial incentives to keep workers on light-duty jobs while they heal.

    Workers contribute one-half of the premiums for the medical aid, Stay at Work program, and supplemental pension rates. Employers pay for all the accident rates, which pays for wage replacement and partial and permanent disability benefits.

    How many risk classes will have lower workers' comp rates next year?

    Out of the state's 323 risk classes, 181 will have lower 2021 composite rates, if the proposed changes are adopted.

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

    Risk is pooled across all of the risk classifications, which helps keep premiums stable for all while helping those who have had a tough year. So even if a business has an excellent safety and return-to-work program with no injury claims counting against their experience factor, their rate could go up if the rate for the risk class increases.

    Maintaining a safe work environment and helping injured workers heal and return to work quickly and safely does have a return on investment. When costs are lower across a risk class, all employers in the class benefit.

    Does L&I offer a discount on rates?

    Yes. L&I offers employers a Claim-Free Discount that can lower their average base rate by 10% or more.

    What can I do as an employer to reduce my rates?

    Rates are based on the risk classifications assigned and your experience factor. You can help control your insurance claim costs, which in turn may affect the experience factor. Visit Control Your Costs for a list of resources that L&I offers to help employers control premium costs.

    What if I need help paying my workers' comp premium?

    In times of need, L&I's Employer Assistance Program allows an employer with a good payment history to ask for a 90-day "same as cash" payment plan, with no interest or penalties.

    How have L&I's rates changed over time?

    The orange line in the chart below shows how rates have changed over the past 2 decades. L&I's goal is to use wage inflation as a benchmark for steady and predictable rates. Wage inflation is a good benchmark because workers' comp costs increase as wages increase.

    The following chart shows a comparison of wage inflation and L&I rate changes over time.

    2021 proposed rates

    Why are Washington's rates based on "hours worked" rather than a "percentage of payroll," which is how all other states charge for workers' compensation premiums?

    Washington's current system, which charges premiums based on the worker's exposure to the risk of injury (hours worked), was established many years ago. This system doesn't negatively impact employers who pay higher wages.

    How financially stable are Washington's workers' comp trust funds?

    The accident, medical aid, and pension funds have enough financial assets to cover the expected benefits that will be paid over the long term to workers who have already been injured.

    Consistent with insurance principles, L&I also tries to keep additional assets (contingency reserve) above the amount of these liabilities in order to cover unexpected future events that will likely occur. Unexpected events include downturns in the economy that may affect fund investments and opportunities for workers to return to work, court decisions that may increase future benefits, or natural disasters that affect workplaces.

    L&I keeps a lower contingency reserve than other workers' compensation insurers, including other state workers' compensation funds. The private workers' compensation specialist insurers have an average surplus that is 48% of their liabilities, and other state funds have, on average, a surplus that is 62% of their liabilities. As of June 30, 2020, the Washington State Fund had a contingency reserve about 26.9% of liabilities, below the averages for these insurers.

    What is L&I doing to control costs?

    In recent years, L&I has been providing vocational support and assistance much earlier in claims. It's helping reduce long-term disability and improving return-to-work results for those hurt on the job. The agency's Stay at Work Program has made a great difference. Since the program started, we've provided employers more than $96.6 million to help keep more than 38,175 workers in 7,072 businesses on light duty while they heal.

    L&I has several initiatives that are lowering costs by focusing on better outcomes for injured workers. Some examples include promoting workplace safety, ensuring injured workers receive quality health care, providing vocational services to workers, and supporting employers who want to keep injured workers on a job.

    How has the increased focus on safety in the workplace affected workers' comp costs?

    Expenses associated with long-term disabilities and fatalities make up the majority of costs covered by premiums in the workers' comp system. The best way to control costs is by creating safe workplaces to avoid injuries, illness, or death.

    Inspection and consultation activities by L&I's Division of Occupational Safety and Health (DOSH) make a significant contribution to reducing claim rates and costs. Studies show that employers receiving a safety inspection or safety consultation have 10 – 30% fewer claims filed by their workers.

    What is L&I doing to deter fraud and ensure employers pay their fair share of premiums?

    L&I makes employers, workers and health care providers think twice about committing fraud. The Fraud Prevention and Labor Standards program uses systematic and innovative approaches to detect and deter fraud and abuse.

    Last fiscal year (2019), L&I:

    • Assessed over $26 million in unpaid employer premiums plus penalties.
    • Collected a total of $218.9 million in delinquent money, of which $197.5 million came from unpaid employer premiums.
    • Audited over 2,200 employers, of which over 700 were unregistered.
    • Received nearly 4,200 employer fraud leads.

    You can help L&I combat fraud in Washington State.

    More information is available on 2021 rates. If adopted, rates become effective Jan. 1, 2021.

Learn more

Other resources