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Caldwell: L&I silence on premiums seems to be political ploy

Sun., Sept. 26, 2010

The Washington Department of Labor & Industries has delayed release of 2011 workers’ compensation premium adjustments until November, after an election that includes a proposal that would drastically change the program.

Director Judy Schurke told legislators Thursday the department has not run the numbers, normally released in September, because they would have to be thrown out if Initiative 1082 passes. Releasing any numbers, she said, might “confuse” business owners.

“Conflagrate,” more likely.

Business interests say they are the prisoners of one of the few remaining state workers’ comp monopolies, and one headed for insolvency at that.

They accuse L&I of “hiding the ball” by not disclosing big premium increases that would work to the benefit of I-1082 supporters. And they chastise the department for allowing prolonged, expensive worker absences that grossly exceed the norm in other states.

But the most damaging claim made is based on a December 2009 independent audit of the program’s accident fund, which pays nonmedical costs like lost wages and pensions. The auditors said insolvency was a 74.4 percent possibility within two years, and a 90 percent possibility within five years.

The medical aid fund that covers medical expenses was also headed for trouble.

Just to break even, and assuming a 4.2 percent return on investments, the consultant estimated the department would have had to increase 2010 accident premiums 33 percent. The department estimated the necessary increase would have been 23.3 percent. To quote the summary prepared by the Washington State Auditor’s Office, “The actuarial firm believes the Department’s estimate is outside a range of reasonable estimates.”

No matter, the department raised accident fund premiums 4.5 percent, and medical fund premiums 8.2 percent. The rationale was a desire to shield businesses from the full effects of a $1 billion loss inflicted on workers’ comp insurance funds by the Wall Street meltdown.

But the less-than-half measures only reinforced the conviction in the business community that L&I was as timid about facing up to its financial problems as they allege it is getting injured workers treated and back on the job.

Schurke’s remarks no doubt confirmed their suspicions, and the actuaries’ warning.

The accident fund reserve is $360 million in the hole for 2010. And average time loss for an injured worker increased to 280 days from 266 — an additional two weeks. The down time is twice the national average but, unlike other states, Washington does not close out long-term claims by providing lump-sum settlements to the injured.

Business interests say the alternative to this train wreck is I-1082, which would allow employers to buy coverage from private insurers, not just the state. And the way rates would be calculated would change.

The Washington State Labor Council says business exaggerates the damage from two extraordinarily bad years.

Workers’ comp premiums increased just 8 percent during the 2004-2009 period, and decreased in eight of the last 15 years.

And state calculations of down time do not account for the majority of injury claims that result in no time off. A better measure is the median down time, which in Washington is 40 days, approximately the national average.

And so go the claims and counterclaims. In the middle of this lively, knock-down fight, L&I has elected to play dead.

It smells bad.

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