Article by Erik Smith. Published on Wednesday, September 17, 2010 EST.

Delays Worker-Comp Rate Announcement Until After Election Day – No Fuel for I-1082

Judy Schurke, director of the Department of Labor and Industries

By Erik Smith

Staff writer/ Washington State Wire

OLYMPIA, Sept. 15.—The Department of Labor and Industries won’t announce next year’s workers’ comp rates until after the election – and supporters of a workers’ comp initiative on this year’s ballot say the move stinks of politics.

            Next week the department was expected to announce a huge rate increase for 2011. Not that it appears to have much choice, but the announcement would have fueled the campaign for Initiative 1082, a measure that aims to cut the department off at the knees. The initiative would end the state monopoly on workers’ comp insurance by letting private insurers compete for the business.

            Instead, the department found another way out. If it can’t say something nice, it won’t say anything at all.

The department declared Wednesday it would postpone the rate announcement until after the election. L&I had delayed its announcement a month already, citing delays in gathering data. This time it blamed the initiative. The measure would change the way rates are calculated, said department director Judy Schurke. So there’s no point making an announcement until voters have their say.

            “To be most fair to businesses, our rates proposal needs to be based on the decision that voters make on Nov. 2,” she said.

            Bad News Seemed Certain

Critics called the move a blatant attempt to delay bad news the public deserves to hear before the election. This year the department raised rates by 7.6 percent, but the department’s own actuaries and the state auditor’s office said the increase wasn’t big enough. The program lost $1 billion in 2009 when the stock market plummeted and claims shot through the roof.

Exactly how much the department is planning to raise rates next year is anyone’s guess. But the state auditor’s office concluded last December that a rate increase of about 30 percent was needed to make the program actuarily sound. Without a massive rate increase it said the state’s biggest insurance fund, the state accident fund, faced a 74 percent chance of insolvency within two years.

            Obviously bad news was on the way, said state Rep. Cary Condotta, R-Wenatchee, and the department was between a rock and a hard place. If it proposed a big rate increase, it would light a fire under the initiative. If the rate increase was small, the department would be hammered for playing political games.

            But not making an announcement at all? That’s ducking the issue, and that’s even worse, he said.

            “This is so blatant, I’m just shocked,” he said. “There’s no way for them to win, so they just bailed.”

            Rate Increases Fuel Initiative

            The fast-rising insurance rates are the main reason for the initiative. Businesses went into a froth this year when state unemployment insurance and workers’ comp rates skyrocketed at once, at a time when employers are battered by the recession and struggling to keep workers on the payroll. Many businesses saw increases far higher than 7.6 percent, because claims history also is included in the calculation.

            And the rate hike brought to a head a long-simmering debate about the program itself. Washington is one of just four states that do not allow private competition for the workers’ compensation business, so for the 168,000 Washington businesses that are not large enough to self-insure, L&I is the only game in town. Business interests contend the monopoly gives the state no incentive to keep costs low. Claims, pension awards and employee lost-time are all higher than the national average, they say.

            In the Legislature this year, business groups advanced a package of modest cost-cutting reforms. Labor unions balked. Democrats backed them up. A business coalition, headed by the Building Industry Association of Washington, decided the time for talking was through. They launched the signature drive that sent I-1082 to the ballot.

            The key point in the department’s announcement Wednesday was that the initiative would require a change in the way rates are calculated. Right now Washington bases rates on the number of hours worked. Under I-1082, the rates would be based on payroll, as they are in every other state.

            The approach is so radically different than the current practice that any announcement at this point would be confusing, Schurke said. In a letter to members of a worker compensation advisory committee, Schurke explained, “I think the clearest course for our businesses is to present one proposal and hold one set of hearings, once we know what the voters have decided.”

            Baloney, Says Business

            The state Labor Council is backing the decision. “They can’t make any projections because the whole thing is going to change if I-1082 passes,” said spokeswoman Kathy Cummings. “This is an entire change in the way they calculate rates.”

But business groups say the explanation is baloney. The whole point of an election is to give voters a choice, they say. If the state keeps mum, how can anyone compare?

“Labor and Industries has been working on the indicated rate for months, and they must know what the rate is,” said Patrick Connor of the National Federation of Independent Business. “This must prove what we’ve said along – that a massive tax increase is coming. If it was good news they would be shouting it from the rooftops.”

            Important Stats Won’t be Released

The delay is a big change from normal practice. Traditionally L&I announces the “indicated rate” in late August. That’s the amount the department’s actuaries say will be needed to keep the insurance funds sound. The department follows in late September with a formal rate proposal, which is often different than the figure the actuaries recommend. Hearings and a final decision normally come in November.

But Schurke pointed out in her letter that the department doesn’t have to play it that way.

At the same time Schurke canceled the rate announcement, she canceled a workers’ comp advisory committee meeting which also had been delayed since August. The latest statistics for the program were to have been announced at the meeting.

Connor said there was a good chance the stats would have shown declining performance. They cover such matters as employee time loss, cost of claims, administrative costs and pension awards. If the numbers looked good, the department surely would release them, he said. And keeping them from the public is the wrong thing to do when voters are about to decide the fate of the program. 

           Incompetent or Diabolical?

“The delay proves once again that L&I is either incompetent or playing politics on the public’s dime,” he said. “Either way, small business should not be held hostage to an inept, corrupt and failing government monopoly any longer.”

Erin Shannon, spokeswoman for the Building Industry Association of Washington, said the tactic shows L&I is looking for a way to prevail on election day – and that’s not a proper role for a government agency to play.

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