Questions about the Proposed 2025 Premium Rate

Why has L&I proposed a 3.8% increase for 2025?

L&I attributes the proposed increase to several factors, including wages. L&I will tap its contingency reserve to augment the proposed increase. Workers and employers focusing on safety, and L&I initiatives that are helping injured workers recover sooner and reducing workers' compensation costs are helping keep the proposed increase to a minimum.

How did L&I account for COVID-19 in the rate-making process for 2025?

L&I continues to cover prior COVID-19 claim costs and is not including these costs in the calculation of the 2025 rates. Early in the pandemic, the agency decided that COVID-19 claims would not affect employers' future rates while under a state of emergency. The COVID-19 relief was lifted July 1, 2023, and these costs will return to the rate calculations for 2026 rates. L&I has implemented measures to assist businesses adversely impacted by the pandemic, including allowing employers to defer premium payments. Go to our frequently asked questions (FAQs) on coronavirus for more information.

Why are rates for many businesses different from the proposed 3.8% increase?

The proposed 3.8% increase is an average. Individual employers may see their rates go up or down, depending on their recent claims history and changes in the frequency and cost of claims in their industry risk classification. Those changes also can increase or lower premiums paid by workers because workers in Washington pay a portion of the total premium. Go to Lni.wa.gov/WorkersCompRates to see the proposed changes for all risk classes.

How much will the proposed rate increase cost employers and workers?

The proposed 2025 increase will cost employers and workers an average of about $52.50 a year per full time employee (about $48.40 per full time employee after retro refunds).

What percent of the premiums do workers pay?

Workers pay on average about 25% (27%, if considering retro refunds, which reduce employer premiums) of the premium, and they would pay a similar percentage in 2024. The actual percentage depends on the classification of the worker's company and its recent claims history. Washington is the only state where workers pay a significant portion of the premium.

The total rate is paid into 4 funds that provide benefits when workers are hurt on the job:

• The accident rate, which pays for wage replacement benefits and disability awards.
• The medical aid rate, which pays for medical care and vocational services.
• The supplemental pension rate, which pays for cost-of-living adjustments for long-term time-loss and pension recipients.
• The Stay at Work rate, which pays for employer financial incentives to keep employees on light-duty jobs while they heal.

Workers and employers each contribute one-half of the medical aid, Stay at Work Program, and supplemental pension premiums. Employers pay all the accident fund premiums.

How many risk classes will have higher workers' comp rates next year?

Out of the state's 326 risk classes, 283 will have higher base rates in 2025 if the proposed changes are adopted.

Why do my rates go up if I haven't had a claim?

Risk is pooled across all of the risk classifications, which helps keep premiums stable for all while helping those who have had a tough year. So even if a business has an excellent safety and return-to-work program with no injury claims counting against their experience factor, their rate could go up if the rate for the risk class is increasing.

Maintaining a safe work environment and helping injured workers heal and return to work quickly and safely does have a return on investment. When costs are lower across a risk class, all employers in the class benefit.

Does L&I offer a discount on rates?

Yes. L&I offers employers a Claim-Free Discount that can lower their average base rate by 10% or more.  Learn more at Lni.wa.gov/ClaimFreeDiscount.

What can I do as an employer to reduce my rates?

As rates are based on the risk classifications assigned and your experience factor, you can help manage your insurance claim costs which in turn may affect the experience factor. Visit Lni.wa.gov/ControlMyRates for a list of resources that L&I offers to help employers control premium costs.

What if I need help paying my workers' comp premium?

In times of need, L&I's Employer Assistance Program allows an employer with a good payment history to ask for a 90-day "same as cash" payment plan, with no interest or penalties. Learn more and find out if you qualify at Lni.wa.gov/EmployerAssistanceProgram.

How have L&I's rates changed over time?

The chart below shows the changes in rates (circles) and wage inflation (squares) over the past two decades. L&I's goal is to use wage inflation as a benchmark for steady and predictable rates. Wage inflation is a good benchmark because workers' comp costs increase as wages increase.



Why are Washington's rates based on "hours worked" rather than a "percentage of payroll," which is how all other states charge for workers' compensation premiums?

Washington's current system, which charges premiums based on the worker's exposure to the risk of injury (hours worked), was established many years ago. This system doesn't negatively impact employers who pay higher wages.

In most states, rates are charged as a percentage of payroll, so when employee wages go up, more premium is collected. In Washington, rates are charged as an amount per hour. When wages go up, the rate paid stays the same.

If the proposed rate increase is adopted, the average rate per $100 of payroll in 2023 will be $1.48, which is the same as in 2024. Workers will continue to pay on average about a quarter of the premium.

How financially stable are Washington's workers' comp trust funds?

The accident, medical aid, and pension funds have enough financial assets to cover the expected benefits that will be paid over the long term to workers who have already been injured.

Consistent with insurance principles, L&I also tries to keep additional assets (contingency reserve) above the amount of these liabilities in order to cover unexpected future events that will likely occur. Unexpected events include downturns in the economy that may affect fund investments and opportunities for workers to return to work, court decisions that may increase future benefits, or natural disasters that affect workplaces.

L&I keeps a lower contingency reserve than other workers' compensation insurers, including other state workers' compensation funds. The private insurance industry and other state funds have, on average, a contingency reserve of between 50% and 60% above their liabilities.

What is L&I doing to control costs?

In recent years, L&I has been providing vocational support and assistance much earlier in claims. It's helping reduce long-term disability and improving return-to-work results for those hurt on the job. Our Stay-at-Work Program is also making a difference. Since 2012, it has provided employers more than $100 million to help keep more than 40,000 employees on light duty while they heal.

L&I has several initiatives underway that are lowering costs by focusing on better outcomes for injured workers. Some examples include promoting workplace safety, ensuring injured workers receive quality health care, providing vocational services to workers, and supporting employers who want to keep injured employees on a job.

How has the increased focus on safety in the workplace affected workers' comp costs?

Expenses associated with long-term disabilities and fatalities make up the majority of costs covered by premiums in the workers' comp system. The best way to control costs is by creating safe workplaces to avoid injuries, illness, or death.

Inspection and consultation activities by L&I's Division of Occupational Safety and Health (DOSH) make a significant contribution to reducing claim rates and costs. Studies show that employees file 10 – 30% fewer claims after their employers receive a safety inspection or safety consultation.

What is L&I doing to deter fraud and ensure employers pay their fair share of premiums?

L&I makes employers, workers, and health care providers think twice about committing fraud. The program uses systematic and innovative approaches to detect and deter fraud and abuse.

Last fiscal year (2023), L&I:

• Assessed over $23.8 million in unpaid employer premiums, penalties, and interest.
• Collected a total of $278.2 million in delinquent money, of which $258.9 million came from unpaid employer premiums.
• Audited nearly 1,900 employers, of which over 560 were unregistered.
• Received nearly 2,800 employer fraud leads.
• Completed 52 worker investigations of fraudulently claimed workers’ compensation benefits that were charged with civil and or criminal penalties totaling $2.3 million.
• Completed more than 1,580 cases accounting for over $24.3 million in cost savings resulting from workers’ compensation investigations.

To learn more or to report fraud, visit Lni.wa.gov/Fraud.