Washington L&I: Reforms Create Opportunity to Restore Workers' Comp Reserves

"It's critical that we restore the workers' comp reserves. Savings from the reforms create an opportunity to do this without large rate increases," said L&I Director Judy Schurke.

The Washington Department of Labor & Industries (L&I) recently asked the Washington Workers' Compensation Advisory Committee (WCAC), made up of business and labor stakeholders, for input on restoring the workers' compensation reserve funds that have been drawn down over the past three years.

"The reforms passed by the Legislature earlier this year allow us to put the reserve funds back on a sustainable path for the future," said L&I Director Judy Schurke.

The reforms will save $1.1 billion over the next four years. As a result of these savings, the indicated or "break-even" rate for 2012 for workers' comp premiums is a negative 0.3 percent. Without the reforms, the break-even rate for 2012 would have been an 8.1 percent increase.

L&I drew down its contingency reserves by $332 million over the last three years to hold down rate increases for employers and workers during the recession. At a Sept. 12 meeting, L&I actuaries told WCAC that Washington state's current reserves are low by industry standards. For every dollar held in reserves by other public industrial insurers, Washington has 20 cents in reserve.

"It's critical that we restore the workers' comp reserves. Savings from the reforms create an opportunity to do this without large rate increases," Schurke noted.

WCAC was asked to comment on a rate increase for 2012 ranging from 4.5 to 8 percent. Taking a higher rate increase in 2012 will restore the reserves faster and lead to lower rate increases in the future.

After hearing from WCAC and other stakeholders, the agency will announce the proposed rates for 2012 on Sept. 20. Public hearings will be held in October and the final rates will be announced in early December.

"We know the economic climate is still precarious. The workers' comp system is also impacted by economic conditions over which we have little control, such as inflation and lower yields on investments," Schurke said. "That's why we are asking for input on how fast to restore the workers' comp reserve funds."

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