Business leaders protest L&I’s 4.8% workers’ comp rate hike plan

(The Center Square) – A trio of Washington state business groups came out against the Department of Labor & Industries proposing an overall average rate increase of 4.8% in workers’ compensation to ensure adequate premiums to cover expected costs of 2023 claims.

Lobbyist Tom Kwieciak, representing the Washington Farm Bureau and the Building Industry Association of Washington, was the first to testify at Wednesday morning’s virtual public hearing.

“These two industries – agriculture and residential construction – represent two of the largest sectors of Washington’s economy,” he said. “And both have a vested interest in the workers compensation system and its management. In agriculture, labor costs are a major concern…as they increase from minimum wage, L&I, and unemployment insurance. All must be absorbed by an industry that cannot simply raise prices on commodities, especially when they’re competing with other states or other countries.”

He went on to say this increase, if implemented, will negatively impact the small family farms that make up 89% of all farms in Washington.

“The proposed average 4.8% rate increase will mean additional labor costs of over $10 million for these small farms in 2023,” Kwieciak said.

He added that many of the risk classifications in agriculture means some farms will see an increase that is triple that amount.

“Builders and subcontractors face the same challenges,” Kwieciak said, “as they see continual increases in labor costs, as well as labor shortages.”

He predicted the result would be a rise in the costs of housing of all types in the state, exacerbating the current housing crisis.

“As you can see, when combined with other labor costs and current economic conditions, even a 4.8% average rate increase is not welcome news for employers,” Kwieciak said.

He was especially critical of L&I’s dipping into its contingency reserve fund to keep rate increases lower than they would be otherwise, instead of coming up with a long-term plan to deal with rising costs at a time of uncertainties associated with the COVID-19 pandemic and the global economy.

In 2021 and 2022, L&I tapped its contingency reserves to avoid a larger increase in premium rates, and plans to do the same next year.

“Instead we continue to fall back on the contingency reserve to cover our shortcomings and cost control,” Kwieciak said. “This cannot continue. Employers will certainly be the ones bearing the brunt of making the system solvent when we eventually run out of contingency reserve money. We must face the fact that our system needs to be reformed.”

According to L&I, as of June 30, the state’s contingency reserve as a percent of liabilities stood at 27%, down from the low 30% range over the previous year.

Todd Snarr, part owner of an accounting business, pointed out the proposed rate increase will affect workers, too.

“It’s not just the employers that pay these costs,” he said. “The employer pays the biggest part of the L&I coverage, but each employee, they do have a payroll deduction taken out of their paycheck each pay period.”

If adopted, the increase would mean employers and workers would jointly pay an additional $61 a year, on average, for each full-time employee. Workers will continue to pay about 25% of the premium.

“I just don’t see it a wise decision right now to be raising more costs for everybody,” Snarr said.

Bob Battles, general counsel and government affairs director for the Association of Washington Business, referenced record-breaking inflation in making his case against the proposed rate hike that “hits at a time when employers are facing the highest inflation in 40 years, as well as other cost pressures, including unemployment insurance, paid family medical leave, and other issues.”

He continued, “With record inflation, Washington is missing the opportunity to lower costs for employers and to help them navigate this economy.”

September’s annual U.S. inflation rate hit 8.2% year over year, with the high cost of food, gas, and energy currently on the minds of many Washingtonians.

L&I workers’ compensation insurance covers about 2.6 million workers and about 187,000 employers in Washington.

Final rates will be determined on Nov. 30 and will go into effect on Jan. 1, 2023.

Written testimony can be emailed to Jo Anne Attwood, administrative regulations analyst, at [email protected]. All comments must be received by 5 p.m. on Friday.