L&I assigns the same base rates, or benchmark rates, for all Washington businesses included in a given risk classification. The base rates are then used to calculate an individual business’s premiums for the year.
Base rates are calculated for 4 funds
Each business insured by L&I must pay into 4 different funds, which means that for each risk classification there are 4 different base rates.
Base rates for 3 of the funds vary by risk classification to reflect the estimated cost of insuring work in that class: the Accident Fund, Medical Aid Fund, and Stay at Work program fund. L&I collects enough premiums to pay for the current and future costs of claims that occur while the insurance premiums are in effect.
For the fourth fund, the Supplemental Pension Fund, all risk classes pay the same rate, per hour worked. Self‑insured employers pay the same rate. By law, this fund may collect only enough to cover the current cost of living adjustments (COLA) for past claims.
All businesses insured by L&I support these 4 funds:
- Accident Fund: Pays for injured workers' wage replacement, permanent disability or death benefits, and some vocational retraining.
- Medical Aid Fund: Pays for health care and private vocational counselors for covered services provided to injured workers.
- Stay at Work: Pays employers partial reimbursement for wages, training, and equipment costs provided under light duty or transitional work for injured workers.
- Supplemental Pension Fund: Pays COLAs on extended wage replacement benefits.
Setting base rates
Each year, L&I actuaries calculate base rates for each risk classification based on 5 years of claim costs by claim type and hours worked (Risk classifications with insufficient data are combined with larger classes to calculate combined base rates.)
- Expected costs include administrative expenses and retrospective premium refunds, offset by anticipated income from investments.
- L&I adjusts its calculations for each risk class to match an overall rate change selected each year by the L&I director.
- L&I will not increase rates for any class by more than 25% compared to the overall rate change.