Workers Compensation Agreement Means Legislative Session Likely to End Soon

Late Sunday, Governor Gregoire and the Democrat and Republican Leaders in the Washington State Senate and the House of Representatives announced an agreement on workers compensation reforms that was voted on today, Monday, May 23, 2011.  This agreement is the results of months of meetings, hearings, lobbying, and political battles over the need for workers compensation reform legislation.  As IBA reported in April, the state’s workers’ compensation system is in serious financial trouble and desperately needs reforms to avoid a potential 20+% rate increase in 2012 and beyond or possible default in the next few years.

With this agreement on workers compensation, the agreement on the state budget for the next two years can now move forward as the Senate could not pass the budget without workers’ compensation reform passing as explained below.   .This was truly and HUGE political showdown to get this workers compensation legislation passed.

At the core of the battle over getting state workers’ compensation reforms in 2011 was the issue of “voluntary settlements”. “Voluntary settlements” allow workers who are deemed permanently disabled and unable to work as a result of a workplace injury or illness and are thus eligible for a lifetime pension benefit from the state’s workers compensation program, to voluntarily enter into a “voluntary settlement” agreement in lieu of receiving the monthly pension amounts for the rest of their life.

This is done in 44 other states and has proven to be a huge cost reducing option to control both the cost and the future premiums of state workers compensation programs.

The primary hold up to passing “voluntary settlement” legislation were two fold.  First, labor unions and trial lawyers across the state opposed any “voluntary settlement” option for any lifetime workers compensation pension benefit, even though it is commonly accepted in most other states by both business and labor.  They opposed it because they felt it was an unfair reduction of benefits due injured workers.  Second, Speaker Frank Chopp, the House Democrat leader, opposed having any vote on the issue of “voluntary settlements” because he opposed this concept of “voluntary settlements” for the same reasons as the labor unions and trial attorneys.

Even after the Senate passed SB 5566 in early March, 2011 that contained a “voluntary settlement” provision and after several attempts in the House of Representatives to force a vote on SB 5566, no vote was ever taken on SB 556 in the House of Representatives.

In the House of Representatives, 8 Democrats proposed legislation similar to SB 5566 but with some added protections for workers.  Still, Speaker Chopp blocked any vote on their proposal as he continued to object to any “voluntary settlement” provisions.

Then, the Senate Republicans and some of the Senate Democrats stated that they would not vote for the state’s budget for 2011 – 2013 unless workers compensation reform legislation was first passed by both the Senate and the House of Representatives.

This threat to stop the state’s budget forced negotiations lead by Governor Gregoire. 

The result of those negotiations are basically as follows:

“Voluntary settlements” are allowed as follows: 

• To injured workers Age 55 and older at first and then phased down to injured workers age 50 by 2016
• The “Voluntary Settlement” award must be paid out periodically (i.e., structured settlement – no lump sum as done in most other states), with an up front payment of up to six times the state's average monthly wage (SAMW) and then the remainder paid out over a period specified by the parties, with the periodic payment no less than 25% of the SAMW (about $1,000) and no more than 150% of the SAMW (a little over $5,000)
• The “voluntary settlement” must be approved by the state’s Industrial Insurance Appeals Board to ensure that the worker fully understands it and that it is in the “best interest of the worker.”
• Attorney's fees capped at 15% for settlements

Other provisions of this negotiated state Workers Compensation reform include but are not limited to:

• The "Stay at Work" program - return to work subsidy for state fund employers.  This is an incentive to have employers return an injured worker to work as soon as possible and the state’s industrial insurance program will pay part of the worker’s wages/salary if the employer returns the injured worker to work sooner than later.  Getting an injured worker back to work as soon as possible is a proven way to reduce long term disabilities and lifetime pensions.
• The prior PPD offset and no interest on periodic PPD payments
• A one year freeze in the COLA adjustment to workers currently collecting lifetime pension benefits with no “catch-up” in future years from this freeze, and a delay in next year's COLA payment
• Setting up a "rainy day fund" when state industrial insurance premiums rates are excessive and should be reduced.  This has happened several times over the past 20 years and the labor unions feel that instead of reducing state industrial insurance rates when rates are deemed excessive, that the excessive funds be put into a “rainy day” fund to be used to offset higher premium rates in the future.  IBA and others in the business community are concerned that this “industrial insurance rainy day fund” can be tapped by the Legislature in future years when the state has other budget problems and the money paid by employers and workers will be used to fund other state programs and not used to lower future state industrial insurance rates
• An occupational disease study as occupational diseases like carpel tunnel syndrome are a huge cost driver to the state’s industrial insurance system currently
• Continuation of the SHIP grants program that provides funding for various employer and workers safety and health programs to reduce workers injuries and illnesses.  An example of program funded by this SHIP grant program are the “labor neighbor” radio announcements often heard across the state.  IBA and others in the business community opposed continued funding of the SHIP grant program that comes from premiums paid by employers and workers, but it is included in this state workers’ compensation reform agreement
• A directive on a worker/provider fraud prevention initiative to attempt to reduce and investigate fraud by workers and providers in the state’s workers’ compensation program.
• A JLARC performance audit on claims management

All told, this program is project to save nearly $1.1 billion in state workers compensation costs and premiums in the next four years.  IBA is a bit skeptical that this package will save that much, but time will tell.  IBA will continue to work very hard to control the costs of the state’s industrial insurance system for small employers.

The labor unions have come out strongly opposed to this workers compensation reform agreement and lobbies to stop it to the last minute.

The agreement was put into HB 2123 and was introduced on Monday morning in the House of Representatives.  It passed the House of Representatives on Monday afternoon after some very long caucuses by House Democrats.  Several very harmful amendments proposed by a few House Democrats opposing this legislation were defeated and HB 2321 passed the House of Representatives by a vote of 69 yea to 26 nay and 3 excused.  HB 2123 passed the Senate on Monday evening by a vote of 35 yea, 12 nay and 2 excused.

Clearly, HB 2123 is not perfect, but it is a huge step forward to keep state workers compensation (industrial insurance rates) from going out of control.

Below are the Legislators who voted yea and those who represent you who voted yea deserve your “Thank You”  Call 1-800 562-6000 before April 25^th to express your “thank you.”

District 2: Senator Randi Becker

District 2: Rep. J.T. Wilcox

District 3: Senator Lisa Brown

District 4: Senator Jeff Baxter

District 4: Rep. Matt Shea

District 4: Rep. Larry Crouse

District 5: Senator Cheryl Pflug

District 5: Rep. Jay Rodne

District 5: Rep. Glenn Anderson

District 6: Senator Michael Baumgartner

District 6: Rep. Kevin Parker

District 6: Rep. John Ahern

District 7: Senator Bob Morton

District 7: Rep. Shelly Short

District 7: Rep. Joel Kretz

District 8: Senator Jerome Delvin

District 8: Rep. Larry Haler

District 8: Rep. Brad Klippert

District 9: Senator Mark Schoesler

District 9: Rep. Susan Fagan

District 9: Rep. Joe Schmick

District 10: Senator Mary Margaret Haugen

District 10: Rep. Norma Smith

District 10: Rep. Barbara Bailey

District 12: Senator Linda Evans Parlette

District 12: Rep. Mike Armstrong

District 12: Rep. Cary Condotta

District 13: Senator Janéa Holmquist Newbry

District 13: Rep. Judy Warnick

District 13: Rep. Bill Hinkle

District 14: Senator Curtis King

District 14: Rep. Norm Johnson

District 14: Rep. Charles Ross

District 15: Senator Jim Honeyford

District 15: Rep. David Taylor

District 15: Rep. Bruce Chandler

District 16: Senator Mike Hewitt

District 16: Rep. Terry Nealey

District 16: Rep. Maureen Walsh

District 18: Senator Joseph Zarelli

District 18: Rep. Ed Orcutt

District 18: Rep. Ann Rivers

District 19: Senator Brian Hatfield

District 19: Rep. Dean Takko

District 19: Rep. Brian Blake

District 20: Senator Dan Swecker

District 20: Rep. Richard DeBolt

District 20: Rep. Gary Alexander

District 23: Senator Phil Rockefeller

District 23: Rep. Christine Rolfes

District 24: Senator James Hargrove

District 24: Rep. Steve Tharinger

District 24: Rep. Kevin Van De Wege

District 25: Senator Jim Kastama

District 25: Rep. Hans Zeiger

District 25: Rep. Bruce Dammeier

District 26: Senator Derek Kilmer

District 26: Rep. Larry Seaquist

District 26: Rep. Jan Angel

District 27: Senator Debbie Regala

District 27: Rep. Laurie Jinkins

District 27: Rep. Jeannie Darneille

District 28: Senator Mike Carrell

District 28: Rep. Troy Kelley

District 28: Rep. Tami Green

District 30: Senator Tracey Eide

District 30: Rep. Katrina Asay

District 31: Senator Pam Roach

District 31: Rep. Christopher Hurst

District 31: Rep. Cathy Dahlquist

District 32: Rep. Ruth Kagi

District 34: Rep. Eileen Cody

District 35: Senator Tim Sheldon

District 35: Rep. Kathy Haigh

District 35: Rep. Fred Finn

District 36: Senator Jeanne Kohl-Welles

District 36: Rep. Reuven Carlyle

District 38: Rep. John McCoy

District 39: Senator Val Stevens

District 39: Rep. Kirk Pearson

District 39: Rep. Dan Kristiansen

District 40: Rep. Jeff Morris

District 41: Senator Steve Litzow

District 41: Rep. Marcie Maxwell

District 41: Rep. Judy Clibborn

District 42: Senator Doug Ericksen

District 42: Rep. Vincent Buys

District 42: Rep. Jason Overstreet

District 43: Rep. Jamie Pedersen

District 44: Senator Steve Hobbs

District 44: Rep. Mike Hope

District 44: Rep. Hans Dunshee

District 45: Senator Andy Hill

District 45: Rep. Larry Springer

District 46: Rep. David Frockt

District 47: Senator Joe Fain

District 47: Rep. Pat Sullivan

District 47: Rep. Mark Hargrove

District 48: Senator Rodney Tom

District 48: Rep. Ross Hunter

District 48: Rep. Deb Eddy

District 49: Senator Craig Pridemore

District 49: Rep. Jim Moeller

District 49: Rep. Jim Jacks