The Department of Labor and Industries said today that reforms to the workers compensation system that were passed in May are saving $1.1 billion and putting the state-run system on track for a break-even year in 2012. But L&I leaders want to raise rates by 4.5 percent to 8 percent to rebuild depleted reserves.
The agency plans to outline its formal rates proposal on Sept. 20. L&I director Judy Schurke outlined the concepts today in a briefing of its Workers’ Compensation Advisory Committee, which includes representation by business and labor interests.
Business groups may argue against rate hikes, on grounds that any increases translate into lost hiring opportunities for businesses living on the edge. L&I put out a press release that says, in part:
L&I drew down its contingency reserves by $332 million over the last three years to hold down rate increases for employers and workers during the recession. At today’s meeting, L&I actuaries told the WCAC that Washington state’s current reserves are low by industry standards. For every dollar held in reserves by other public industrial insurers, Washington state has 20 cents in reserve.
“It’s critical that we restore the workers’ comp reserves. Savings from the reforms create an opportunity to do this without large rate increases,” Schurke noted.
After hearing from the WCAC and other stakeholders, the agency will announce the proposed rates for 2012 on September 20. Public hearings will be held in October and the final rates will be announced in early December.
Go here for details on HB 2123 impacts and here for details on provider networks created by SB 5801.
L&I cited passage of reforms in House Bill 2123 and Senate Bill 5801 for bringing the fund back toward long-term solvency.
The first measure was a major sticking point that was not resolved until the end of the Legislature’s special session this year.
L&I spokeswoman Renee Guillierie said that breaking even means the agency can now pay all claims it expects in 2012. She also said that the agency has a contingency reserve that was worth about $786 million as of the end of the last investment quarter, June 30.
“But our projection is that by the end of this year it is going to go down to $563 million. It’s due to our projected declines in the stock market,’’ Guillierie said.
Guillierie said a sum greater than $1 billion is the preferred cushion for the contingency accounts. The contingency is a guard against further market investment declines and drops in the number of hours worked (the system is funded by hourly assessments on employers and workers).
L&I investment returns have improved since 2007, despite the more recent volatility on Wall Street, and a financial expert for L&I told the advisory panel more volatility is expected. Increased employment since the recession’s bottom has provided just “marginal” gains in revenue so far, according to.
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