With only a few days remaining in the 30-day special session, the Legislature has high-centered over one provision of workers’ compensation reform.
Gov. Chris Gregoire, a bipartisan majority of the state Senate, House Republicans and a bloc of moderate House Democrats want to allow injured workers the choice to accept lump-sum settlements of workers’ compensation claims.
Currently, 44 states provide these voluntary settlement options (also called compromise-and-release). We’re not breaking new ground here.
Labor leaders oppose the agreements, contending that injured workers may be pressed to accept a deal counter to their best interests. So far, House Speaker Frank Chopp has refused to bring the reform to a vote, saying the majority of his caucus opposes it.
The battle now overshadows the budget debate. Senate leaders say they won’t vote on a budget until the House votes on the voluntary settlement option. The speaker says that’s not happening. Since the stalemate can’t last forever, it won’t.
The House should allow the vote.
Currently, the state workers’ compensation system approaches insolvency. In 2011, Washington employers saw an average premium hike of 12 percent, the highest in the nation. Without reform, there will be another double-digit increase next year.
Small businesses, trapped in the state monopoly, will be particularly hard hit. Even a 10 percent premium hike – far below what most analysts expect – would amount to a $200 million tax on jobs in 2012.
Employers cannot afford that. The state economist just issued another cautionary update, noting risks from rising energy prices, a weak housing market, high unemployment and international economic turmoil. Adding to payroll costs by boosting workers’ compensation premiums will further discourage hiring.
Fixing the system should have been the easy challenge this session. The governor set goals for reform that include returning workers to employment more quickly, “bending the cost curve” and avoiding steep premium hikes.
More effective rehabilitation, wage subsidies for returning workers, and retraining are relatively noncontroversial proposals for accelerating return to employment. And some steps have been taken to reduce system expenses. The voluntary settlement option, however, offers the best chance of controlling costs and forestalling rate hikes.
As the governor notes, 8 percent of claims account for 85 percent of costs. Too many time-loss claims turn into pensions here, with escalating costs and no ability to reach an acceptable settlement to close the case.
Action is long overdue. Washington’s workers’ compensation system pays the second-highest benefit payments per covered worker. Those benefits are associated with high costs – costs masked in recent years by dangerously reducing reserves, a trend that cannot continue.
A study conducted by Oregon finds Washington premiums rank 26th in the nation, up significantly from the 38th-place ranking two years earlier. Had the state charged the actuarially recommended premiums, our costs and rank would have been much higher. Although the Oregon study has limitations, it’s clear that we’re moving in the wrong direction.
Since the session began, however, reformers have been left to negotiate among themselves. Labor and House Democratic leaders have refused to budge. They point to the reforms they’ve accepted and say they’ve done enough. Wrong. They’ve refused to allow a vote on the reform that matters most.
Bipartisan Senate legislation set the stage. Similar to union-supported legislation passed in Oregon, the Senate bill allowed settlements for all workers for any claim. Analysts estimate it would reduce system costs by $1.2 billion in the first two years, with biennial savings of more than $500 million thereafter.
In the House, moderate Democrats offered similar legislation, with more worker protections. Among them: excluding medical benefits from settlements and requiring a six-month waiting period after injury before entering into a settlement. Leadership refused to bring it to the floor, where it would likely pass with strong bipartisan support.
Having set the right goals, the governor continues to press for resolution. With the Senate bill and the House alternative, the right vehicles for reform are in play.
Without reform, employers face steep increases in payroll costs. And injured workers will continue to be denied a voluntary option available in most states.
House leadership should allow the vote, get on with the budget, and bring the session to a satisfactory, if untimely, close. Bainbridge Island resident Richard S. Davis is president of the Washington Research Council. Email him at rsdavis@simeonpartners.com.
