Washington state struggles to contain workers’ compensation costs, ranking third in payouts nationally per $100 of payroll from 2010 through 2014. It is also one of only four monopoly markets remaining nationwide, where workers’ comp insurance can be purchased only from state government. Another monopoly state, Ohio, ranks eighth highest. One key reform that has been identified would be to end the Washington government monopoly, run by the state Department of Labor and Industries (L&I).
Workers comp policies are required for most employers in Washington, except the largest and most financially secure companies, which can opt to self-insure through their own set-aside programs. These claims are still administered by L&I, and problematically, say some self-insurers. About 30 percent of workers in the state are covered through self-insurance.
A Series Of Needed Reforms
Stakeholders say more rigorous standards are needed to protect self-insurers from footing a disproportionate share of the bill when injury causation is due mainly to non-work variables.
Other workers’ comp reform priorities include greater emphasis on return-to-work and injury prevention programs. Also key, but still on the launch pad, is offering expedited claims settlements to more than just older workers.
Elephant In The Room
The elephant in the room for Washington is the state monopoly, according to Erin Shannon, Director of The Center For Small Business at the Washington Policy Institute. Shannon writes: “Under this government-run system that allows no competition, employers have paid increasingly higher workers’ compensation taxes and injured workers have, for years, received the most generous benefits in the nation.”
Shannon adds, “Supporters of the government run monopoly (primarily organized labor) paradoxically insist Washington’s state-run workers’ compensation system is “low-cost, high-benefit.” The employers who have shouldered the 69 percent increase in workers’ compensation rates between 2000-2016 would likely disagree with that characterization.”
Better Protections For Self-Insurers
Injury causation standards can be a sore point for the estimated 360 self-insured employers in Washington, according to Natalee Fillinger, a former Self-Insured Program Manager for L&I, now an attorney for Holmes Weddle and Barcott.
Self-insurers often struggle with disproving workplace injuries, according to Fillinger. Under state law, “the conditions of employment need only be one of the causes” of workplace injury. Said Fillinger, “It doesn’t matter if it’s the primary cause. All it has to be is a cause, one in 100, and if there is a direct link, that employer owns the whole thing.”
Many Cost Centers
Employers are also often faced with a number of indirect costs including equipment repair, worker replacement, and legal fees. According to the National Safety Council, one dollar invested in injury prevention can yield a $2 to $6 return on investment.
Premium Hikes Hurt Low-Margin Employers
According to L&I’s “Employer Return-to-Work Guide,” the longer an injured worker receives time-off compensation, the less likely they are to return to work and the greater the employer cost. Factors in an employer’s future premium rate include time-off duration, number of employees, work performed, and frequency and costs of claims.
Another determinant is what’s called a company’s experience factor. This refers to how well one employer compares to others in the same industry, on handling workers’ comp claim costs. The stakes for employers here are high, and even a seemingly small bump upward can have a profound effect.
L&I in the guide (p. 2) detailed the impact on a small Washington grocery store of an increase in its experience rating by just one one-fifth of one point above the industry median. This resulted in a $3,168 annual boost to workers comp premiums, which are typically set for three years at a time. The kicker was that assuming an industry standard two percent profit margin, recovering those added costs would have required the grocery to earn an additional $158,400 per year.
The Back-To-Work Imperative
DT North is a private sector vocational rehabilitation counselor at Achieve Consulting Team Inc., a firm with six locations in Washington. He said workers’ comp claims management needs to be tightened up, to ensure injured workers move through the system “fairly quickly.”
North said, “There simply isn’t anyone taking on the role of case manager to assure that treatment is explained, understood, coordinated, and followed up on.”
He added, “if doctors or employers are in contact with you about what is going on, you are in a better position to return to work,” or be more informed “about how to make decisions with your case, what your rights are and what might be best for you.” This is better, North said, “than letting a fairly complicated system make decisions for you by proxy.”
L&I can reimburse premium-paying employers for up to 50 percent of the wages of a returning injured employee, who takes light transitional workloads under the “Stay at Work” program. The department also covers some training costs, tools or clothing needed to perform the transitional work duties.
Liberalizing Expedited Claims Settlements
Another tool that can benefit workers and employees is expedited, or “structured” settlement claims in Washington. However, they are only available to residents 50 years or older.
In the event of a car accident,”we assume adults in Washington will make decisions in their best interest and settle,” said FIllinger. In contrast, with a workers’ comp claim, “There is such a fear and paternalistic view” that “workers…couldn’t possibly settle…claims because” they “can’t be trusted to understand what’s in their best interest.”
That too, needs to change, according to Fillinger.