Washington is one of four states in the country without a private insurance option for workers’ compensation. Busting the state monopoly on sales of workers comp policies to those employers who are not self-insured would bring badly needed relief, especially to small businesses who are being “squeezed to the brink,” according to a former manager in the state’s system. Other states opening up their markets have benefitted.
Washington businesses must either purchase workers’ comp insurance through the state Department of Labor and Industries (L&I) or self-insure. However only the biggest and most fiscally-sound companies have the latter option.
The state needs to offer a third pathway, of private insurance policies, in addition to L&I-issued coverage and the self-insured route, said Natalee Fillinger. She is a former Self-Insured Program Manager for L&I, and now an attorney for Holmes Weddle and Barcott.
Undoing Public Sector Monopolies
Fillinger said, “Private insurance would likely reduce premiums for many Washington employers. But more importantly, it would bring desperately-needed reform…We are not getting great workers’ compensation at low rates in Washington. We are getting poorly managed workers’ comp at very high rates. It is time to join the rest of the United States by allowing private insurance in workers’ compensation.”
Undoing public sector monopolies for issuance of workers’ comp insurance has yielded gains in other states.
Nevada’s Governor Kenny Guinn reported $2 billion in state liability relief after privatizing the state’s system.
After West Virginia added a private option, the state insurance commissioner reported “142 carriers are writing coverage… treatment of injured workers has improved and rates have been reduced over 30 percent.” The state’s first private insurance for workers’ comp began in 2006, and competition started in 2008.
Although workers’ comp reforms were made in 2011 in Washington, including a new “Return to Work” incentive program for injured workers, and structured settlements for older employees, workers’ comp remains life or death for small employers, according to Fillinger.
‘Squeezing Small Businesses To The Brink’
“Workers comp is killing the little guy” who “does not have the power, money, or access to do anything about it. Where a self-insured employer will grin and bear a claim of questionable validity, the little guy can’t pay for his kid’s wedding because of that one claim that raised his L&I premiums $70,000 a year for three years. Workers’ comp is squeezing small businesses to the brink – and they are powerless in the face of the bureaucracy and anti-business case law,” said Fillinger.
State Sen. John Braun (R-20), Vice Chair of the Senate Commerce and Labor Committee, shared similar concerns. “Small businesses can’t self-insure, their one option is the state…to make it work, you have to drive the claim manager to get people to the doctor…small businesses don’t have the people power to do that. It’s just more regulation, more complication and is particularly hard to manage if you are a small business,” he said.
Only a handful of employers have the option of self-insurance, according to Braun. “I think we are poorly served by our current model both for employers and employees, in part because there is no competition,” said Braun.
Private insurers “understand the real value to get the person treated quickly, both for the individual and the employer, said Braun. “Culturally, our L&I is broken. I think you have to provide some level of competition to fix it.”
Legislation Stalled Previously
Braun introduced legislation in 2013 for private insurer options in the state industrial insurance system, but it stalled in Commerce and Labor. The bill was reintroduced in 2014, but stalled once more.
Prospects in the House were considered dim. Whether the reform initiative can gain leverage in the high-stakes biennial budget session of 2017, remains to be seen. One key legislator hints at the possibility of a renewed charge, on the issue.
State Sen. Michael Baumgartner (R-6), is Chair of the Senate Commerce and Labor Committee. He said, “Everything should be on the table with workers’ compensation. Just because it’s politically difficult, doesn’t mean we should not fight for it…”
Baumgartner added that privatizing workers’ comp insurance would save money “instead of wasting precious tax dollars on an inefficient state-run monopoly…have the private insurance market handle it.”
A private option would ultimately give workers better care and get them back on the job quicker, according to Baumgartner. “It would be good for business and the state’s economy…the absurdly-high workers’ comp rates in the state slows employment growth. We’d have more jobs and money in the state budget for things like education and public safety,” he added.
Employees Do Share Costs
State Sen. Steve Conway (D-29) also sits on the Commerce and Labor Committee. An often overlooked fact, he said, is that employees pay for a portion of workers’ comp costs. This is often left out of related studies, since Washington is unique in doing this, he added.
Under Washington law, one-half of the Medical Aid Fund rate, Stay at Work rate and Supplemental Pension Fund assessments for workers’ comp premiums must come from employee paychecks. Some employers pay the full premium amount instead.
“In Washington state, employees are actually putting money in the system. As a result…not all of the burden is on the employer community, it also falls on the employees paying…somehow that is lost in some of the political arguments around this workers comp system,” said Conway.
The state is already making strides to lower workers’ comp costs, according to Conway. L&I estimated the “Stay at Work” program saved around $76 million from its implementation in June 2011 through December 31, 2013.