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Editorial: I-1082 makes long-overdue industrial insurance fix

Sun., Oct. 10, 2010

A year ago, as the Washington state Department of Labor and Industries was proposing a 7.6 percent increase in industrial insurance premiums, business leaders were urging that the troubled system be overhauled. Unfortunately, but predictably, the Legislature ignored their plea.

Now it’s up to state voters to decide whether to enact Initiative 1082 and finally bring the merits of competition to bear on a workers’ compensation program distinguished for its costliness.

The pattern of steadily rising premiums isn’t the only thing that sets Washington’s system apart from those in other states. For example, a disproportionate number of Washington’s injured workers wind up with permanent pensions rather than returning to work. Those who do get back on the job take generally longer than their counterparts in other states. Injured or not, all workers pay a portion of the premium out of their own pockets, a cost that employers pick up fully in every other state.

And the distinction that I-1082 addresses – Washington is one of only four states where state government has monopoly control over the industrial insurance program. Fix that, many believe, and you fix the performance problems listed above.

At present, except for large concerns with the substantial means to insure themselves, all businesses must obtain their industrial insurance from the state – at whatever premium the state chooses to impose. In 46 states, private insurance companies can compete for that business. Until five years ago, West Virginia operated a system similar to Washington’s. Since opening the market to private insurers, its costs have dropped 44 percent. Nevada converted to a privatized system a decade ago and is still seeing benefits.

How do those experiences stack up against what happened in states that converted from a private system to a state monopoly? None ever has. That’s a compelling message.

We concede that the sour global economy has hammered the industrial insurance trust fund’s investments. But while that has contributed to rising premiums, it is not the root cause. Oregon’s privatized system hasn’t had a rate hike in more than 20 years, yet premiums in Washington are up 55 percent in the past 10 years. And while laudable safety programs have cut workplace injury claims more than in half, the costs of administering the program have risen 82 percent.

Industrial insurance is a critical program. It protects employers from lawsuits and assures workers continued income while they’re off the job.

But when the program is inefficient and costly, it is both a burden to in-state businesses and a conspicuous red flag to out-of-state concerns thinking of locating here and hiring Washington workers.

Washington state should have made this change years ago, but the Legislature has never mustered the political will to defy the opposition mounted primarily by organized labor. Voters now have a chance to adopt the model that satisfies all but three other states. We encourage a vote for I-1082.