On May 23, the House passed reform of the workers' compensation program. The legislation now goes to the Senate for consideration before the May 25 deadline for the special session adjournment.
Our House Republican lead on the negotiations had this to say: Condotta says workers’ compensation reform bill is a step in the right direction.
This page explains the problem, the solution and details of the legislation to change this program that is costing job creators more and more each year.
The state's workers' compensation program, also called industrial insurance, provides medical and limited wage replacement coverage to workers who experience job-related injuries and illnesses. Employers and employees pay for this insurance and any rate increases the Department of Labor and Industries determines. The program covers more than 168,000 employers and 2.5 million workers. Three funds make up the workers' compensation program:
- Accident Fund: This pays partial wage replacement (time-loss), permanent disability benefits, pensions, and vocational retraining costs. 100 percent employer funded.
- Medical Aid Fund: This pays for health care and private vocational services for injured workers. 50 percent employer funded and 50 percent employee funded, if employer chooses to deduct this from workers' paychecks.
- Supplemental Pension Fund: This pays for annual cost of living increases. 50 percent employer funded and 50 percent employee funded.
While workers' compensation taxes are decreasing nationwide, Washington employers and workers rates increased $117 million in 2010. The average rate increase is about 12 percent this year, amounting to a $196 million rate increase.
Unfortunately, it's not enough, according to the Department of Labor and Industries. A 33 percent rate increase would be required for the Accident Fund to break even.
The state auditor's office, in its audit of the workers' compensation program through June 2010, stated:
"The Accident Account is insolvent and the proposed rate increase will not be sufficient to restore the contingency reserve and maintain the solvency of the account over the next five years."
What does 'insolvent' mean? It means the account would no longer be able to pay what it owes to injured workers and become bankrupt.
An independent actuarial firm assessed that there is a:
- 94.5 percent chance the Accident Account will remain insolvent over the next two years, 95.9 percent over the next three years and 96.4 percent over the next five years.
- 21.7 percent chance the Medical Aid Account will become insolvent in two years, 52.9 percent within three years and 94.1 percent within five years.
The governor herself has stated that 8 percent of workers drive 85 percent of the costs for the entire program.
House Bill 2123 was supported by our caucus May 23. It would reform the workers' compensation program to:
- allow negotiated, voluntary structured settlements for workers over age 55, reduced to 50 in 2016;
- offset any permanent partial disability received from the final settlement;
- incentivize return to work sooner by providing subsidies for employers to allow for light duty or transitional work options for employees;
- significantly reduce rate increases in 2012 and beyond for employers;
- provide payments for continued medical treatments and reopening of claims if medical condition gets worse;
- freeze cost of living adjustments for one year; and
- create a rainy day fund to prevent future drastic rate increases.
This legislation is projected to save $1.12 billion in four years. It now goes to the Senate for consideration. Both chambers must pass the same version before it can move to the governor for her signature.
Myths and truths about workers' compensation reform (House Bill 2123)
- MYTH: Settlements are unfair to workers.
TRUTH: The structured settlement is a voluntary option, not a requirement for injured workers. We are not interested in forcing someone to do something that doesn't meet their needs, we want to give workers the choice. In fact, the proposal includes important protections for workers to ensure a settlement is in the best interest of the worker. The proposal requires a waiting period and requires the Board of Industrial Insurance Appeals to approve the settlement if the worker does not have a lawyer.
- MYTH: If an injured worker has additional medical expenses, they would be at financial risk.
TRUTH: Workers will continue to receive payments for medical treatments. In addition, the proposal allows for the reopening of claims if a medical condition gets worse. Workers will continue to receive benefits until a final settlement is reached, preventing a situation where someone feels they have to settle because they are no longer getting benefits.
This reform proposal is critical to getting Washington back to work, as well as save the state money and provide a more efficient government for the people of the state. Read our proposals to create jobs here.
What others are saying about workers' compensation reform:
Workers' compensation - Let this bill live (Wenatchee World)
Adding choice best for workers, companies (Spokesman Review)