L&I's explanation for its proposal of a 7.6 percent increase in workers' comp taxes next year is tied directly to the economy. Three factors behind the rate increase the agency highlights: reduced investment returns, fewer premiums paid because of reduced work hours, and fewer jobs to which injured workers can return.
While true to a point, focusing on the economy deflects scrutiny from underlying cost trends that have proven durable through good times and bad -- such as average missed days from work, up over 38% since 2001, or the uncontrolled awarding of lifelong pensions -- up over 300% since 1996.
Since Washington is not alone in decreased assets, premium income, and employment in this economy, it may be instructive to look at what some other states are doing with workers' compensation premiums. Among states that have so far announced statewide average premiums for 2010:
- Oregon is decreasing rates 1.3 percent next year, marking four straight years of decrease and 20 years with no rate increase;
- Hawaii has filed for a 4.1 percent decrease next year, marking a 65 percent rate decrease over the last five years;
- Florida has filed for a 6.8 percent decrease next year for a cumulative 63.2 percent decrease in the last seven years, since major legislative reform was passed in 2003;
- West Virginia, recently converted with great success from a monopoly state fund like Washington's to a private system, has filed for a 6 percent decrease;
- Texas doesn't have a state rate, but its largest workers' comp insurer is returning $75 million in premium dividends to policy holders, returning $670 million over the last decade;
- Kentucky expects a 6 percent decrease in rates, with especially safe employers seeing a drop of almost 30 percent;
- North Carolina has filed for a 9.6 percent decrease; and
- Ohio, most like Washington in terms of its size and monopoly, has had rate reductions of 5 percent in 2008, 12 percent in 2009, and now has announced a 17 percent decrease for public employers for 2010.
I'm not cherry-picking, these are rate announcements just now starting to come out for 2010. I'll be keeping track as more states announce 2010 rates -- up or down. But it's notable how many states are decreasing rates, sometimes significantly, despite the economic turmoil we all find ourselves in.
Now, to be fair, one nearby state may experience a substantial rate increase. California has filed for a 22.8 percent increase in 2010 and is experiencing many of the same dynamics as Washington (fewer claims, but higher costs). However, California's rate proposal is also tied to two recent Appeals Board decisions related to permanent disability awards that have been widely criticized as dismantling key elements of California's landmark 2004 system reform. It demonstrates the clear link between legislative reform and system costs. If those decisions flip on appeal, the rate increase would go down.
In any event, as we've said before, California isn't the economic company we want to keep.
