THE State Auditor’s Office has long warned the state Department of Labor & Industries of its inadequate reserves and criticized the system’s method for calculating its lifetime payments to injured workers.
The department’s hole is $1.1 billion over the next decade. In response, the department offered a plan to balance this shortfall solely through raising taxes on employees and businesses.
A better approach would be for the Legislature to make more cost-saving improvements to the workers’ compensation system.
In late November,the Department of Labor & Industries announced no overall increase in the workers’ compensation tax rates that employers and workers pay to support the state-run system that provides benefits and medical care to injured workers.
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The biggest news coming out of the rate announcement was the impact of the landmark reforms to the workers’ compensation system we passed in the Legislature in 2010.
These reforms included a new medical-provider network, a new program encouraging faster returns to work for injured workers, and a new benefit option for workers over 55 years of age to consider settling workers’ compensation claims without resorting to costly and uncertain litigation about benefit entitlements.
According to the Department of Labor & Industries, without savings from the reform package, employers and workers would be facing significant rate increases.
The message is clear: Reforms work by saving money and reducing employment taxes. However, holding the line on rate increases will not solve the serious shortfall.
At its rate presentation in September, the department described the plan to fill the estimated $1.1-billion hole in its reserve fund over the next decade by gradually increasing taxes through 2023.
The single largest projected saving from the 2011 reforms was a new voluntary settlement option for certain injured workers. It allows injured workers age 55 and over, after a waiting period and subject to the approval of an administrative judge, to settle the nonmedical care aspects of a worker’s claim for a lump sum by periodic payments. It’s called a structured settlement.
This reform measure provides closure, and allows recipients to get on with life — retire, relocate or obtain non-work-related medical care.
For the system, the reform was originally projected to save $335 million in 2012, and $545 million through 2015. But only 22 settlements have been made and approved this year. In its 2013 rate-making, the department booked $47 million in savings, a far cry from the $335 million the Legislature was pledged.
Why the extremely slow uptake in this centerpiece of the 2011 reforms?
Two areas for improvement come to mind. The first is the age restriction limiting the settlement option to workers age 55 and over, a restriction found in no other workers’ compensation system.
Unfortunately, the age restriction has arbitrarily and unfairly limited the population of workers in the system eligible to take advantage of this voluntary benefit.
Without changing any of the important worker protections built into the settlement program, it’s time to remove this arbitrary age restriction and make the program more widely available.
Second, the settlement program has been misinterpreted by the board charged with approving settlements. The Legislature provided an intensive approval process for injured workers with no legal representation. The law also provided a streamlined process for workers with attorneys.
Unfortunately, the board has rejected the streamlined process for workers with attorneys. This has caused delays and uncertainty in the settlement process for the legal community and casts a chilling effect on employers who are considering settlements with workers.
The Legislature should correct this misinterpretation of the original law.
We look forward to sponsoring both of these reforms this legislative session, in a bipartisan fashion.
The workers’ compensation system is a critical part of our economy and our social-safety net. High costs can imperil job creation and jeopardize worker benefits.
These additional reforms will strengthen the fund and add flexibility for workers.
State Rep. Christopher Hurst, D-Enumclaw, left, chairs the Government Accountability and Oversight Committee. Rep. Cathy Dahlquist, R-Enumclaw, is the ranking Republican on the House Education Committee.