Something has to be done, says Judy Schurke, director of the Department of Labor and Industries. With her at the Tuesday hearing of the Senate Labor, Commerce and Consumer Protection Committee is Peter Bogdanoff of the governor’s office.

By Erik Smith

Staff writer/ Washington State Wire

OLYMPIA, Feb. 2.—The director of the Washington workers’ compensation program called the state-run insurance system “unsustainable” Tuesday, but a proposal from Gov. Christine Gregoire that aims to keep it functioning was slammed by both labor and business.
State officials are being blunter than usual as they try to sell the Legislature on a complicated plan that aims to address some of the big problems in the state-run system. Problems like skyrocketing taxes, a growing tendency to award costly pensions to injured workers, and time-loss figures that grow every year.
But business groups said the measure doesn’t go far enough, labor groups said it goes too far, and the first hearing on the bill may have proven the governor right when she called it a balanced proposal. There was something about it for everyone to hate.

            In a telling bit of testimony Tuesday, a representative of the Boeing Co., once as immovable as Mt. Rainier, pointed out that worker comp rules in “other states” don’t drive up costs the way they do here. Boeing is now building its next assembly line in South Carolina. Those same pressures led one business organization, the Building Industry Association of Washington, to press an ultimately unsuccessful initiative last year that would have broken the state’s monopoly on injured-worker insurance. Washington is one of only four states that doesn’t allow private competition.

            The governor’s plan aims to trim $720 million in costs over the next four years, which are borne by employers and workers through workers’ comp payroll taxes.

Yet the usual labor-versus-business conflict that has snarled up the issue for years looks like it might be a problem here, too. State Sen. Jeanne Kohl-Welles, D-Seattle, chairwoman of the Senate Labor, Commerce and Consumer Protection Committee, said compromise between the interest groups appears to be a long way off. “There are parts of this bill that most people seem to like and there are parts of the bill that most people seem to don’t like,” she said. “And they are not the same for different groups, so we have a challenge for us.”

            The Big Beefs

            The governor’s proposal, introduced last week in the Senate as SB 5566 and in the House as HB 1686, is a weighty and complex proposal that tries to settle at least part of the argument. A negotiating committee with representatives from both sides managed to agree on one thing last year – stricter standards for doctors who receive state money for treating injured workers. So that’s in the bill – in the form of a state-managed “provider network.”

            But the governor’s proposal goes a good deal further, and that’s where it runs into trouble. Here are the big beefs:

            * There’s a proposal to increase state payouts for permanent partial disability claims by 30 percent. The Department of Labor and Industries says that might reduce costs in the long run, and business just isn’t buying it.

            * There’s a proposal that would allow lump-sum settlements to workers over age 55 who would rather retire than enroll in time-consuming retraining programs. Fine, says business, but why not offer that option to all workers? Meanwhile labor wants to make sure that doesn’t happen, and considers the proposal a dangerous first step.

            * And then there’s a proposal to cut off some disability pensions when workers reach retirement age and qualify for Social Security. Business likes it, labor hates it – and so do their allies among the state’s trial lawyers, who are among the biggest beneficiaries of state worker-comp settlements.

            System Unsustainable, Schurke Admits

            These days even L&I is saying that something has to be done. Business groups have been sounding the warning bell for the last couple of years now – last year employers got an average 7.6 percent tax increase, and they got another 12 percent this year. The state auditor’s office has joined in, arguing those increases aren’t big enough to make up for the state’s big losses on the stock market and fast-rising costs incurred by the program. One big chunk of the program is already insolvent, it says, and another is heading that direction.

Department Director Judy Schurke said Tuesday that the percentage of long term time-loss claims that become pension claims – the costliest of outcomes – has doubled over the last ten years, from 32 percent to 60 percent.

“There is no question Washington has some of the longest lasting claims involving time loss compensation,” she said. “These claims are becoming lifetime pension claims, and are creating a cumulative effect on liabilities that is becoming unsustainable for our system.

“Even more troubling, though, is both the loss of skill and productivity our workforce, and the human cost associated with these disability numbers, including the price injured workers and their families pay in terms of lost opportunities and loss of family income.”

            Generous Benefits

The proposal takes a rather small step toward reining in one of the system’s big cost drivers. Right now, Washington allows permanent lifetime pensions to be awarded when a workplace injury is only a minor contributing factor – pre-existing and other medical conditions aren’t a disqualifier. The proposal wouldn’t block or reduce pension awards in those cases, as is done in other states, but it would cut those pensions off when recipients qualify for full Social Security pensions at age 67.

  “The fundamental question is about what the worker compensation system should be responsible for, and ultimately it has an effect on the rates we set for employers and workers,” Schurke said. “In Washington we have arguably one of the most liberal standards. A work-related condition only has to be a proximate cause for a worker to be entitled to a lifetime pension.”

            Proposal Hurts Workers, Labor Says

That proposal may not go very far, but the unions and the lawyers hate it. What if you have a worker who doesn’t have much of a work history, and who doesn’t qualify for much Social Security? An ex-con, an ex-soldier, or a homemaker returning to work?

“Those are exactly the vulnerable people we would be cutting off at age 67,” said Kathy Comfort of the Washington State Association for Justice, a trial-lawyer group.

They also don’t like the idea of voluntary lump-sum settlements as an alternative to pensions, now allowed in 44 states. The governor’s proposal on that one is pretty modest as well, allowing them only when injured workers are over 55. The department says it wouldn’t affect many workers – about 360 would be eligible each year and maybe half would take the deal.

But labor doesn’t like even that. It says workers shouldn’t have the option, because they might be tempted to settle for too little. Said Dave Johnson of the Washington Building and Construction Trades Council, “This is particularly close to the slippery slope of ‘compromise and release,’ and when we get into that area it turns into a lottery, and [it depends on] who’s got the best attorney.”

            Business Has a Different Problem

Business groups like both of those ideas, and would like them better if they went further. But they’re opposed to the proposal that would increase payouts for permanent partial disability claims by 30 percent – for things like the partial loss of the use of a limb.

The department argues that more money might reduce pressure for total disability awards, which are more costly.

Labor likes the idea of bigger benefits, of course.

Kris Tefft, lobbyist for the Association of Washington Business, says that where labor is concerned, that part might be “the spoonful of sugar that makes the medicine go down.” But business interests maintain the case for bigger payouts is weak. And just like labor, they’re calling for a rewrite of the bill.

            “The governor’s proposed language is a starting point in attempting to reduce the numbers of pensions filed with the department,” said Tina Coakley, legislative analyst for the Boeing Co. “We believe that it will reduce costs for Boeing, particularly with our aging workforce. However, we believe that this bill can be improved upon by expanding the availability of final settlement agreements to all who are interested.”

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