Seattle Times Editorial and Reply
Seattle Times Editorial and Reply
Fix Washington failing workers compensation system
BOEING and other employers in Washington are being wooed by locations with lower minimum wages, unemployment insurance costs and workers' compensation taxes. Unfortunately, while other states lower costs of doing business, ours is rapidly moving in the opposite direction.
Monday, the Department of Labor and Industries (L&I) recommended a $117 million workers' compensation tax increase for the upcoming year, causing deep concerns for employers, workers and legislators. As the Republicans on the state Senate Labor, Commerce and Consumer Protection Committee, we have warned such a steep tax hike will harm employers and likely mean more layoffs. What employer can afford a tax increase in this economy? Combined with an expected minimum-wage hike scheduled this fall, L&I's move could drive more employers, big and small, out of Washington.
A successful workers' compensation system gets injured workers the right treatment at the right time so they can return to their jobs. It helps injured workers make ends meet until they get back on their feet. It should do this at fair and affordable rates for both the employers and workers, who pay workers' compensation taxes.
Our system is failing to get workers back to work. Nearly half of injured workers never return to their jobs. In Washington the average injured worker misses 266 days of work — nearly three times the national average. Oregon workers miss an average of 70 days.
Despite declining claims, costs remain out of control. Since 1990, claims have dropped more than 50 percent, but workers' compensation taxes are up more than 40 percent in less than 10 years. Administrative costs alone skyrocketed 28 percent in the past year. Medical payments are well above the national average and rising faster than inflation.
As our fragile economy tries to recover, it would be irresponsible to levy a job-killing, multimillion-dollar tax increase on employers and employees without first reforming the serious flaws in the workers' compensation system. Workers and employers need a more-flexible, less-costly system that returns employees to work sooner.
Fortunately, by modeling other states' best practices, we can find solutions. Here are just a few:
• Create a settlement option. Last session, Republicans introduced Senate Bill 5465. Still awaiting action by the majority party in the Senate labor committee, the measure would allow workers, employers and the state to settle and release claims for a lump sum.
• Better define "occupational disease." We must rule out non-work-related conditions like growing older. Washington has one of the nation's broadest occupational-disease definitions.
• Stop diverting workers' comp funds. The Legislature and L&I often view workers' comp trust funds as a convenient piggy bank, diverting money to unrelated programs. Before asking people to pay more, we should make sure funds are used only as intended.
• Reform lawsuit abuse. In 2003, Florida passed tort reform to limit workers' compensation litigation costs for businesses. Employees also benefited. Returning injured workers to work sooner lets them earn more during their work years. Workers kept a greater percentage of what they were awarded for lost wages. Over five years, limits on attorneys' fees reduced Florida's workers' compensation costs 28.6 percent.
Workers' compensation taxes are already high. Unreasonable administrative expenses and a failure to return people to work in a timely manner mean out-of-control costs. Raising these costs further, without addressing the system's inefficiencies, will impact our employers' ability to protect much-needed jobs. Instead of focusing solely on refilling state coffers, we should view this as an opportunity to fix the system and reduce costs without reducing benefits injured workers need most.
Sens. Janéa Holmquist, R-Moses Lake, Jim Honeyford, R-Sunnyside, and Curtis King, R-Yakima, serve on the Senate Labor, Commerce and Consumer Protection Committee.
Fixing Workers Comp requires understanding what went wrong
By David Spring M Ed. And Maralyn Chase, Special to the Seattle Times, September 28, 2009
On September 23, 2009, the Seattle Times published an editorial by Senators Holmquist, Honeyford and King protesting an 8% increase in Workers Compensation rates proposed by the Department of Labor and Industries. Their concern is that raising rates would harm employers and cost jobs. They urge making five changes to the Workers Comp system to reduce costs. These changes include reducing administrative costs, creating a lump sum settlement option, narrowing the definition of occupational disease, reducing the ability of injured workers to sue their employers and stopping the diversion of workers comp funds away from the Workers Comp program.
Unfortunately, four of their five proposed solutions would merely transfer costs of workers comp from employers to our State’s tax payers – thereby reducing funds for important State services such as funding public schools. Our State already gives away $50 billion dollars a year in tax breaks – most of which goes to major corporations and millionaires. This results in our State having the most unfair tax structure in America with our middle class paying the highest taxes in the nation while millionaires pay among the lowest taxes in America. It also results in our State being 47th in the nation in school funding. Four of the five suggested changes would only make this unfair system worse by granting even more hidden tax breaks to the richest few.
We will briefly take a look at the problems of the five proposed solutions and then offer an option which would address the real problem dragging down our Workers Comp system.
Reducing Administrative Costs: The 3 Senators claim that “administrative costs skyrocketed 28% in the past year.” But is this true? According to the Workers Comp annual financial reports, 2009 administrative costs were $256 million in the year ending June 30, 2008 and rose to $274 million in the year ending June 30, 2009. This was an increase of only 7%. But as a percent of claims, administrative costs actually fell from 24% of claims in 2008 to 19% of claims in 2009. Thus, our administrative costs are much less than the national average of 30%. While we are all in favor of lower administrative costs, if you go too low, you risk having abuses which cost tax payers more money in the long run.
Creating a lump sum settlement option: Lump sum settlements are a bad idea because workers may have hidden problems they are not aware of. Under the current system, claims can be re-opened should hidden problems occur down the road. If this option were closed, and injured workers were unable to work due to problems down the road, tax payers would have to pick up the hospital bill instead of the employer.
Narrowing occupational disease definition: This is another example of transferring medical bills from employers to tax payers. When a worker is ill due to a work related injury, someone has to pay the bills. If employers don’t pay, then tax payers will be stuck with the tab.
Reducing the ability of injured workers to recover damages: Current law is very clear. Only under very narrow circumstances (involving an employer intentionally causing the workers injury or death) can workers recover damages beyond the normal Workers Comp medical and lost wages benefits. Apparently, the three Senators want to go back to 1911 and re-write the Workers Comp agreement. All this proposal would do is reward reckless employers and harm everyone else – including workers, tax payers and responsible employers. Each year over 100 people die from work related injuries. Another 30,000 workers suffer injuries so severe that they must take time off from work. Less than one percent of these injured workers ever goes to Superior Court. If a worker is killed due to an employer’s intentional negligence, shouldn’t their family be able to recover reasonable damages? Even if we completely eliminated any right to sue, the problem is so small that most employers would save less than one dollar per year.
Stopping the diversion of workers comp funds: There is only one area where workers comp funds are being diverted with no public benefit and that is the $200 million dollars per year of tax payer money being used to prop up the Retro Subsidy program. In August 2009, an independent auditor (Wyman Actuarial) published a report finding several “actuarially unsound” practices with the Workers Comp program. The major problems all had to do with errors in calculating premiums and subsidies for retro programs. A computer coding error caused retro subsidies to be S150 million dollars too high. A disease assignment error further inflated retro subsidies by $300 million during the past 10 years. These two “errors” (and others like them) are the real reasons the Workers Comp program lost a billion dollars in the past 5 years. The solution is simple. Correct the errors that inflate retro subsidies and tax payers will save a billion dollars.
Ironically, the three Senators who wrote the Times editorial all voted against Senate Bill 6035 which would have reigned in Retro’s diversion of hundreds of millions of dollars in Workers Comp funds.
We agree that we should do everything possible to reduce Workers Comp problems before increasing rates. But we will not solve problems until we stop the diversion of Workers Comp funds. Hopefully, the 2010 legislative session will finally pass a Retro Reform bill and we can end the diversion of hundreds of millions of tax payer dollars into a program that has no public benefit. If we had real retro reform, there would be no need to raise Workers Comp rates. For more information about the causes and solutions of Workers Comp problems, please visit our website: retroreform.org
David Spring, M. Ed. is the Director of the Fair School Funding Coalition, a non-profit, non-partisan educational organization dedicated to restoring school funding to the national average.
Maralyn Chase is a State Representative for the 32nd Legislative District
