Lawmakers must reform workplace insurance

When the Washington Department of Labor and Industries proposed a 7.6 percent increase in industrial insurance premiums this week, several business organizations told the agency something its officials already knew. This is a rotten time to heap another $117 million burden on the state’s struggling employers.

The program protects injured employees from financial catastrophe and shelters businesses from lawsuits, but the economy has battered it. Its investment earnings are down, and rising unemployment means fewer premiums to collect.

Only a couple of years ago, the fund was flush. The state suspended premium collection while it spent down a $1 billion surplus. Now, it’s asking businesses for $117 million more even as it dips into its reserve fund for $150 million.

At present, labor and business are debating whether Washington has a model industrial insurance program or one filled with flaws that escaped detection during robust economic times.

Charts and graphs won’t supply the answer. Programs vary from state to state, as does the mix of workplace hazards that drive industrial insurance costs. And Washington’s program is particularly unsuited to comparisons.

It is one of only four states that don’t let private providers compete for the industrial insurance market. It is the only state where employees themselves have to pay part of the premium. And it is the only state that bases the rates on hours worked rather than wages paid.

No wonder the Washington Labor Council can claim Washington employers pay the fifth lowest rates in the nation, while the Association of Washington Business notes that Washington’s liberal benefits are the second costliest.

Both sides can claim a version of the truth, but the reality is that unemployment in Washington is high, and any added burden makes it harder for businesses to hire – or more likely for them to lay people off.

At this point, the rate proposal can’t reasonably be avoided, but critics have issued a reasonable call for structural reform in the program. Consider:

Washington employees who miss work because of on-the-job injuries miss an average of 266 days of work, three times the national average. It’s 70 in Oregon.

While premiums have been gently declining in other states, Washington’s have bounced around erratically since 2001, including increases of 29.2 percent in 2003 and 9.8 percent in 2004.

Thanks to improved workplace safety programs, claims are down by more than 50 percent since 1990, but administrative costs keep climbing.

In many cases, improvements could be made with little or no reduction in the level of benefits. For example, a settlement option would allow the disabled worker to receive a one-time payment and the state to avoid years of claim-management expenses. The Legislature rejected that change this year.

It is in the interest of both business and workers to have a fair, competitive and well-managed industrial insurance program. Significant changes can’t be made in time to head off the 2010 rate hike, but the Legislature owes the state a commitment to refining the system when they return in January.