L&I Adopts Small Increase in Workers' Comp Rates for 2022
The state Department of Labor & Industries (L&I) has approved a small increase in the average price employers and workers pay for workers' compensation insurance next year. It's the first time in 5 years that workers' compensation rates have gone up, but on average, premiums in 2022 would still be less than in 2017.
The 3.1% overall average rate increase is driven by cost-of-living adjustments for pensions, which were triggered by an increase in the state's average wage. This is an average, meaning some employers will see their rates go down while others will see larger increases.
Employers and workers pay into the workers' compensation system to help cover the cost of providing wage and disability benefits for injured workers, as well as medical treatment of injuries and illnesses.
In 2021, L&I took steps to help employers and workers reeling from the pandemic by tapping its contingency reserves to avoid an increase in premiums. This approach is also true for 2022. L&I will use contingency reserves next year to cover any gap between premiums and ultimate costs rather than proposing to raise rates even more.
Questions About the 2022 Premium Rates
- 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.
- Assessed over $26 million in unpaid employer premiums plus penalties.
- Collected a total of $216.9 million in delinquent money, of which $199.5 million came from unpaid employer premiums.
- Audited over 2,200 employers, of which over 700 were unregistered.
- Received nearly 4,200 employer fraud leads.
- Completed 2,700 worker investigations of fraudulently claimed workers' compensation benefits, amounting to over $3.7 million.
L&I attributes the increase to several factors, including wage inflation and the corresponding increase in cost of living adjustments for pensions. L&I will tap its contingency reserves to augment the increase. Workers and employers focusing on safety, and L&I initiatives that are helping injured workers recover sooner and reducing workers' compensation costs helped keep the increase to a minimum.
Coronavirus-related workers' comp claims didn't have a direct impact on the 2022 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.
The 3.1% 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.
The 2022 increase will cost employers and workers an average of about $38 a year per employee.
Workers pay on average about 27% of the premium, a similar percentage to that paid in 2021. 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 made up of 4 rates that provide benefits when workers are hurt on the job:
Workers and employers each contribute one-half of the medical aid, Stay at Work Program, and supplemental pension premiums. Employers pay for all the accident premiums.
Out of the state's 325 risk classes, 230 will have higher base rates in 2022.
The supplemental pension rate is increasing 14% to 15.6 cents per hour. For many of the lower-rated risk classes, the supplemental pension rate is a significant portion of the rate and will cause an overall increase to the class rate even if other parts of the rate are decreasing.
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 an employer 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.
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.
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.
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.
The chart Comparison of Wage Inflation and L&I Rate Changes Over Time shows the changes in rates (circles) and wage inflation (squares) over the past 2 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.
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.
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 surplus of between 50% and 60% above their liabilities. As of June 30, 2021, the Washington State Fund had a contingency reserve at 29.6% of liabilities, below that of other insurers.
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, providing 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.
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 employers receiving a safety inspection or safety consultation have 10 – 30% fewer claims filed by their employees.
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 (2020), L&I:
To learn more or to report fraud, visit Lni.wa.gov/Fraud.
- Lni.wa.gov/ControlMyRates: Ways you can keep your premium costs low.
- Lni.wa.gov/ClaimFreeDiscount: Learn how to earn and keep the discount.
- Video: L&I Rate Setting 101: Shows how L&I crunches the number to calculate your rate.
- Stay at Work: It's a Win-Win: Learn how the Stay at Work Program saves costs.