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September 9, 1997

L&I proposes $50 million cut in workers' comp premiums for 1998

TUMWATER - Washington employers and their workers would be able to put $50 million more into their pockets in 1998 if a proposed 5 percent cut in workers' compensation contributions is approved.

The Department of Labor & Industries today announced a proposed 5 percent reduction in 1998 premiums. L&I is the agency that manages the workers' compensation system in Washington

"This is good news for Washington's economy," said L&I Director Gary Moore. "A rate cut means employers have more money to invest and workers have more money to take home."

Moore cited three factors behind L&I's proposed rate reduction:

  • Better-than-expected performance in State Fund investments, particularly returns on stocks. The workers' compensation system in Washington is often referred to as the State Fund. The department sets aside monies for investment income to help pay future benefits for injured workers.
  • Continued reduction in the number of long-term claims for injured workers. These claims require the most money to be set aside to meet future payments. Since 1990, long-term disability claims have dropped by 25 percent in Washington, which mirrors a national trend in workers' compensation.
  • Continuing low medical inflation -- 3 percent in Washington during the last year. This is important because medical payments account for 40 percent of all claims costs.
Public hearings on the proposed 5 percent general rate reduction are scheduled for:
  • November 3 -- 10 a.m. to noon, Labor & Industries building, auditorium, 7273 Linderson Way SW, Tumwater.
  • November 6 -- 10 a.m. to noon, Labor & Industries, main conference room, Spokane, 901 N Monroe St.
The proposal marks the fourth straight year of no general rate increases. L&I did not raise general rates for 1997 and temporarily cut rates by $300 million in 1996 because of a prudent investment strategy, low medical inflation and a decline in claims. These have been factors in previous rate adjustments:
  • 1995 -- No increase.
  • 1996 -- A permanent 10 percent decrease and a nine-month temporary.
  • 1997 -- No increase.
Washington ranks ninth-lowest in the nation for workers' compensation costs, according to a 1996 study by the Oregon Department of Consumer and Business Services.

The proposed 5 percent reduction is an average. Some employers may see larger decreases and others increases depending on individual claims and accident history.

For example, pulp and paper products manufacturing is slated for a 12 percent reduction, mechanized logging would drop 14 percent and convenience grocery stores would see rates fall by 17 percent.

The workers' compensation system in Washington covers 157,000 employers and 1.3 million workers. The system pays for lost wages, medical bills and pensions when employees are injured on the job.

Benefits are financed through premiums that employers and workers pay and by department investments. Even with the proposed 5 percent general rate decrease for 1998, the State Fund will remain financially strong with sufficient reserves to meet anticipated claims costs in the future.


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