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Small business owners, legislators and policymakers gathered for the 2005 Statewide Small Business Conference at the SeaTac Hilton recently to discuss Washington State's business climate.
Governor Christine Gregoire gave the keynote lunch address and in a surprise announcement, laid out her plan to forgo the planned 3.8 percent workers' compensation increase for January 2006.
“We applaud the Governor's announcement to ease the burden on small businesses,” said Washington Policy Center president Dann Mead Smith. “By listening to small business owners and not implementing the planned 3.8 percent workers” compensation increase will save small businesses millions of dollars. It will not, however, fix the system, as small business owners pointed out today at our Conference.”
The Building Industry Association of Washington, an outspoken critic of the Gregoire administration, was quick to respond, calling the announcement a “sham.” “It's a shell game,” said Tom Kwieciak, BIAW's administrator of insurance programs.
According to BIAW, the statement is technically true - the amount of money collected by L&I will not increase in 2006. However, in what the group termed a “bureaucratic sleight of hand,” employers will actually be paying more and workers will be paying less in 2006 than in 2005.
In its original proposal submitted in August, L&I proposed to raise rates on the accident fund premiums (paid entirely by employers) by 12.1 percent and to raise rates on the medical aid fund premiums (paid 50 percent by employers and 50 percent by workers) by zero - meaning employers would to pick up the entire tab for what amounted to a tax increase of $56 million.
Robert Nelson, director of communications for L&I, tried to put the best face on the situation, admitting BIAW was correct, but saying, “Many employers will still see an increase. However, it is considerably smaller than the one proposed in August. Workers and employers both will benefit from a 16 percent reduction in the supplemental pension fund and the reduction in the medical aid fund. On average, workers will still pay about a quarter of the premiums in 2006. We are the only state where workers pay a substantial portion of premiums. In Oregon, for example, their contribution is five percent.”
When pressed on the issue of a Zero increase as the governor announced meaning no net increase of out of pocket dollars, Nelson became somewhat defensive, pointing out the 34 states have rates higher than Washington. When asked, “If 34 states have rates higher than ours, it also means that 15 (not counting us) have rates lower. What are they doing right that we should be doing and aren't?” Nelson replied, “They're probably not providing good benefits for injured workers,” but didn't cite any examples. He added, “And remember, workers in this state pay about a quarter of all premiums. Back out that 25 percent and our rates are probably lower than just about every other state. Also, keep in mind that Washington's cost of living and wages are higher than many other states. Wage replacement benefits are a big cost to our system.”
The bottom line is that under Gregoire's “zero” percent overall increase, L&I will still raise rates on the accident fund premiums by 12.1 percent (again, fully paid by employers) resulting in $56 million in additional premiums collected.
But now, to offset this increase, resulting in an overall “zero” percent increase, L&I will reduce premiums in the medical aid fund (paid by employers and workers) by 10 percent or $56 million. However, half of that credit will go to workers ($28 million) and half to employers (another $28 million) even though employers are paying the entire 12.1 percent - or the $56 million increase in the accident fund. And, this doesn't take into account increases in their risk class or their company's experience factor. | 
