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Washington Workers’ Compensation Rates to Remain Flat in 2012

Washington Worker

The Department of Labor & Industries (L&I) recently announced that no increase to workers’ compensation rates will occur in 2012. This marks the first time since 2007 that L&I has refrained from an annual rate increase.

Earlier this fall, the department proposed a 2.5% increase for L&I rates. Yet following public testimony regarding the impact of the recession – as well as positive trends in the claims duration – L&I ultimately determined to hold rates flat next year.

An online L&I rate table has been published on the Labor and Industries website; employers can also expect to receive a rate notice soon.

The decision to hold rates flat next year, coupled with savings from the 2011 workers’ compensation reforms, will save Washington businesses $150 million.

However, while there will not be a general rate increase, individual employers may experience rates increases or decreases depending on L&I claim histories and changes in the number and cost of claims in their particular industry.

A total of 171 risk classes will experience a rate increase in 2012, while rates for 146 risk classes will drop or remain the same. For example:

  • Construction and forest products – 3% increase
  • Agriculture – no increase
  • Retail and restaurants – decrease by 3%

Past years have seen large variations in workers compensation rates for L&I claims. While higher than expected investment returns in 2007 led to a 2% rate cut, the Department of Labor and Industries began hiking rates in 2008, first incrementally (by 2 or 3%) and then dramatically: in 2010 L&I implemented a 7.6% average rate increase, which then jumped another 12% in 2011. Officials at the Department of Labor and Industries claimed that, “L&I kept the increase as low as it did by aggressive cost-cutting measures, budget reductions and drawing down the reserves by another $117 million.” However, many businesses were debilitated by the increase in costs   With the passage ofWorkers’ Compensation Reforms in 2011, $1.1 billion in savings is projected over the next four years, enabling the stabilization of Workers’ Compensation rates for 2012.

General Information about the Department of Labor & Industries and 2012 Workers’ Compensation rates

 

L&I in Washington State

Washington’s workers’ compensation system is the 7th largest workers’ compensation insurer in the U.S.  L&I insures 162,000 employers and 2.3 million workers; the money to pay work injury claims comes from premiums and investment income. The State Fund does not receive money from state taxes that go into the state General Fund or from the federal government. Each year, about 100,000 L&I claims are filed for work injuries and work-related illnesses. The Department of Labor and Industries maintains administrative costs for managing and processing claims at about 10%, which is approximately one-third of the administrative costs found in many other state funds.

How does L&I help employers meet their obligations?

L&I’s Employer Assistance Program assists Washington businesses that are struggling to pay premiums. L&I can establish a payment plan, and in some cases will agree to waive late penalties and/or interest.

Why did my rates go up when I’ve never had a claim?

In Washington State, all employers that perform similar operations and have similar exposures are classified and grouped together within the same workers’ compensation risk class. Premium rates are set according to the total costs for the risk class. Medical costs and wage compensation for lost workdays also drive up premium rates for an industry risk class. Therefore, if your risk class had higher costs overall, the general rate will be higher for everyone, even if a particular workplace has a good safety record and workers do not file L&I claims as often as other businesses.

Emery Reddy