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A Bipartisan Call for Washington Workers’ Compensation Reform

workers compIn a recent Seattle Times op-ed piece, “More changes to state workers’ compensation system needed,” Christopher Hurst and Cathy Dahlquist argue that the Washington Legislature must implement more cost-saving changes within our workers’ compensation system if it hopes to resolve a $1.1 billion shortfall over the next decade.

Christopher Hurst is a Democratic State Representative for Enumclaw, and chairs the Government Accountability and Oversight Committee. Representative Cathy Dahlquist, also from Enumclaw, is the ranking Republican on the House Education Committee.In their bipartisan op-ed, the two representatives remind readers that for years now, the State Auditor’s Office has been warning the Department of Labor & Industries about its insufficient reserves. Auditors also worry about problems with L&I’s method for determining lifetime payments to injured workers.

Over the next 10 years, L&I will find itself in a $1.1 billion hole.  At the moment, the department’s only solution is to balance the deficit by hiking up taxes on workers and businesses.

Dahlquist and Hurst argue that a more sensible approach would be for the Legislature to make more (and more effective) cost-saving improvements to Washington’s workers’ compensation system.

This past fall, Labor & Industries officials announced no increase in the workers’ compensation tax rates that employers and workers pay to cover this state-run system providing benefits and medical care to injured workers.

Dahlquist and Hurst point out that the biggest news within that announcement was the impact that the 2010 Legislature’s workers’ compensation reform bill would have on the system. Those changes included a medical-provider network, a new system facilitating faster return to work for injured workers through the Preferred Worker Program, and new benefits for workers 55-years-old and up who agree to settle workers’ compensation claims without turning to litigation over their benefit entitlements.

As the Department of Labor & Industries argues, in the absence of savings from that landmark reform, workers and their employers would already be shouldering costs for a significant rate increases.

Drawing on these various factors, Hurst and Dahlquist consider it to be clear that reforms work when they save money and reduce employment taxes. Yet they maintain that stopping short on rate increases is not the way to resolve the remaining – and quite serious – deficit.

In September, L&I outlined a scheme to make up for the estimated $1.1-billion hole in its reserve fund by incremental tax increases up through 2023.

The new voluntary settlement option for injured workers proves to be the biggest projected savings of all from the 2011 reforms. This measure allows injured workers over 55 (subject to the approval of an administrative judge) to settle certain aspects of a worker’s comp claim in exchange for periodic payments (also known as a structured settlement). This reform measure promises more closure for workers with injuries or illness, and aims to help Washington workers move on with their lives through retirement, relocation, or non-work-related medical treatment.

Hurst and Dahlquist show that this aspect of the 2011 reform was initially projected to yield $335 million in savings for 2012, and $545 million in savings through 2015. Yet in reality, only 22 settlements have been approved this year. Moreover, L&I booked only $47 million in savings, putting the Department a long way from the $335 million they had pledged the Legislature.

Hurst and Dahlquist propose two main solutions for this unacceptably slow uptake in the very centerpiece of the 2011 reforms:

1. They take issue with the age restriction that excludes workers under 55 from pursuing the settlement option, pointing out that this is not found in any other workers’ compensation system. This age restriction has “arbitrarily and unfairly” reduced the number of workers who qualify for this voluntary benefit, and should be eliminated.

2. Second, the settlement program has been mishandled by the board charged with determining settlements. While the Legislature made available a detailed approval process for injured workers without legal representation, as well as a streamlined process for workers with attorneys, the board rejected the streamlined process for workers represented by a lawyer. This has created delays and ambiguity within the legal community, and continues to worry employers who might have considered settlements with their workers.

In conclusion, Hurst and Dahlquist recommend that the Legislature correct these misinterpretations of the original law.  As they write in their op-ed: “the workers’ compensation system is a critical part of our economy and our social-safety net. High costs can imperil job creation and jeopardize worker benefits.  These additional reforms will strengthen the fund and add flexibility for workers.”

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Emery Reddy