Workers’ Comp 2007: Growing Challenges --- Opportunities Lost, Opportunities Ahead

1. Workers’ Comp 2007:Growing Challenges --- Opportunities Lost, Opportunities Ahead Dave Kaplan, WSIA Kris Tefft, AWB Carolyn Logue, NFIB

2. Washington Is A High Cost State For Most Key Industries. Benefits Are High. System Costs Are High.

3. Benefits Are High. • Cash benefits are almost twice the national average. • Medical benefits are comparable.

4. Self Insured Data Shows:Costs in Washington ARE High. • Non-Profit Organization • WA Avg Cost/Claim is 6th out of 38 states • Airline • WA Avg Cost/Claim is 3rd out of 15 states • Retail Grocer • WA Avg Cost/Claim is 9th out of 22 states • Financial Institution • WA Avg Cost/Claim is 9th out of 42 states • Retailer • WA Avg Cost/Claim is 2nd out of 28 states • Hospitality • WA Avg Cost/Claim is 3rd out of 42 states • Retailer #2 • WA Avg Cost/Claim is 3rd out of 37 states • Health Care • WA Avg Cost/Claim is 3rd out of 26 states

5. New Challenges Threaten Competitiveness And Fairness Pension Trends System Complexity Cost Increases Can No Longer Be Offset

6. Pension Frequency has skyrocketed with major long-term cost implications --- Washington already had one of the highest rates in the nation.

7. Growing system complexity has led to more costly delays.

8. How Complex is the System?DLI Wage Determination Process

9. How Complex is the System?DLI Wage Determination Process (continued)

10. Costs Increases can no longer be hidden by reduced injuries. • Over the last 15 years employers have reduced injuries by 47%. • Most of the easy fixes are now done and the trend line has flattened.

11. The 2006 L&I Reform Effort: Lost Opportunities The agency package attempted to address several of the major problem areas; little remains.

12. Department’s 2006 Process April to August Input from Business and Labor “Data Driven” Bi-Weekly Stakeholder Meetings Leading to Agency Request Legislation

13. Department’s 2006 Process • DLI Proposed a New Wage Calculation Model to Simplify, Add Fairness • Wage at Time of Injury for Initial Period • Average Wage for Long-Term Calculation • Flat Rate Wage Replacement Benefit

14. Department’s 2006 Process • DLI Proposed a new definition of “occupational disease” to add fairness and reduce litigation surrounding occupational diseases leading to pensions. • Clarified in statute that diseases caused by natural aging or conditions outside the workplace are not allowed.

15. Department’s 2006 Process • DLI Proposed a Study of the Pension System • Trends and Cost Drivers • Make Recommendations to Support a Sound, Stable Pension System

16. Department’s 2006 Process • What Remains of Process? • Addressing “claims suppression” • No data to support • Serious due process issues with proposal • 2006 Agency Request Process was Lost Opportunity

17. Opportunities Ahead Employer Community Will Seek 2007 Proposals to Address System Complexity, Pension Trends, and Costs

18. Opportunities Ahead: Employer Community Proposals • Simplifying the Wage Calculation Process • Reduce Complexity and Administrative Costs • Increase Fairness in Wage Determination

19. Opportunities Ahead: Employer Community Proposals • Addressing unsustainable pension trends • A fair and detailed study of causes, cost drivers and solutions • Establishing more options for workers and employers

20. Opportunities Ahead: Employer Community Proposals • Addressing Concerns about Use of Workers’ Compensation Funds • Identifying Opportunities for Efficiencies as a Result of the Actuarial and Financial Audits • Ensuring Fair, Equitable and Accountable Premium Setting Process