Dave Kaplan

WSIA Executive Director

February 2010

I’ve finally had a chance to stop and reflect on what WSIA has been involved with over the past few months.

Where to begin?  With so much happening it truly is difficult to know where to begin with all of the things the Washington Self-Insurers Association is doing on your behalf.  I’ll limit my ramblings to just a few issues.

WSIA’s Legislative Efforts

We started our legislative efforts with an indication in the fall that we might (just might) have some political leverage with the Legislature in getting some modest reforms adopted.

Why the leverage?  First, The Boeing Company was in the process of considering the location of a second line to construct the 787 Dreamliner.  No one wants to see Boeing move out of state.  So, on the heels of the Governor’s aerospace task force which noted a comparison of significantly higher costs in Washington (including workers’ comp costs), everyone who cares knows that something needs to be done to keep Boeing here in the long-run – including changes to our workers’ compensation system.

Second, the Department of Labor & Industries postponed their rate setting until the last minute while the Governor decided whether or not to take the full indicated State Fund rate increase of 20%, or to take a lesser amount (the eventually adopted 7.6%).  While hoping that the business community would be pleased with a lower proposed rate, the Department and Governor were greeted by a number of small employers who testified that they didn’t want ANY State Fund rate increase until things change in terms of claims management.

Third, this past fall only a handful of states were announcing rate increases, and NONE of the increases are as large as Washington’s 7.6% State Fund rate increase.  Some twenty-three or more states are actually LOWERING their rates.

Fourth, the Department’s independent actuarial report by Conning Asset Management demonstrated that the State Fund is operating at an unsustainable loss ratio and combined ratio in comparison with all of their comparable State Funds and private insurers.  As an example, the State Fund’s Combined Ratio averaged 146% for 2004-2008 (in contrast with 106% for all State Funds and 97% for private insurers), and their Loss Ratio averaged 106% for that same period (in contrast with 88% for all State Funds and 81% for private insurers.)   No private insurance company would be in business for any length of time while sustaining such losses.

Lastly, the Washington State Auditor’s Office issued their actuarial report on the State Fund, making waves with their statement that the rates for 2010 should have been 30% to 33% higher, not the 7.6% adopted rate nor the indicated rate increase of 20%.  The Audit Report also noted that the State Fund’s Accident Fund has a 75% chance of becoming insolvent (liabilities greater than assets plus premiums) within 2 years.  All of these factors gave the employer community some hope that common sense would reign in the 2010 Legislative Session.

With an eye toward moderating our long-term desires, the Employer Coalition settled on three, moderate and proven systemic issues to pursue: Voluntary Settlement Agreements; a slightly narrower definition of “occupational disease”; and Medical Provider Networks.  All of these issues have been priorities for the self-insured community for awhile.  The Department, the Governor, and labor tried to kill off the momentum to get this proposal passed by holding a series of meetings before the Legislative Session.  While it did slow down our efforts, we still felt we had a good basis to argue for immediate change.

Of course, you can always count on certain legislators to stymie even rational proposals.  House Commerce & Labor Committee Chair Steve Conway indicated that he would hear our bill (HB 2950), but later back-tracked once a bill was finally introduced.  Senate Labor, Commerce & Consumer Protection Chair Jeanne Kohl-Welles never made such promises, and fought to keep anything from coming up for consideration.  In the end, she held a “workshop” on the issue of workers’ compensation, then held a hearing on her proposal to essentially continue the pre-session discussions with the Governor’s office and the Department.  As of Friday, February 5, 2010 the Employer Community’s proposal has yet to receive a hearing, and is considered “dead” in the House and Senate committees.  Senator Kohl-Welles “task force” proposal passed out of committee, and is moving through the process.

WSIA’s position has been that the “mini-reform” proposals offered up should be acted on this year, and that additional study or review of issues won’t help make the changes we want.  At the same time, you can never really say “no” to sitting down to talk.  We will be offering up amendments to make the “task force” more palatable and fair, assuming that it will ever pass the legislature.  Watch for more current updates as we progress between now and March 12, 2010 … the last day of the 2010 Legislative Session.

Assessment Issues

For a number of years WSIA, as well as an independent group of self-insured employers, have been considering potential changes to the assessments that self-insured employers pay.  As an example, legislation was passed a few years ago to experience rate a portion of the Second Injury Fund.

This year, WSIA has legislation to make a few modest changes to the Insolvency Trust Fund.  The first change would charge pensions (which would otherwise be charged off to the Second Injury Fund) against a defaulted/insolvent employer’s surety, then socialize any remaining costs in the Insolvency Trust Fund after the surety has run out.  The second change would allow the Department to socialize any remaining surety from a defaulted/insolvent employer, after a period of 10 years with no open claims, thus offsetting the socialized liability of the employers paying into the Insolvency Trust Fund.

The biggest issue of concern centers on the Supplemental Pension Fund.  The fact that this assessment is based on hours, and that the underlying liability continues to grow with the increasing number of pension and long-term open time loss claims in the State Fund, creates all sorts of problems for self-insured employers.  As part of determining what the long-term solutions might be, the WSIA Board of Directors has taken a stance in support of quantifying how much of the approximately $11 billion unfunded liability in the Supplemental Pension Fund belongs to self-insurers, and how much belongs to the State Fund.  This is important because self-insurers are paying a disproportionate amount of assessment in relation to the estimated liability.  That means you’re paying for someone else’s liabilities!  A simple bifurcation of the amounts would help ensure that self-insurers will only pay their proportionate share of the costs.  The Association is attempting to get the Department to segregate out these liabilities administratively.  If they don’t, then legislation will be pursued to force the issue.  Quantifying the liabilities will allow for an honest, thoughtful discussion by the self-insured community of potential changes in how the assessment is collected in the future.  Watch your emails and the WSIA website for more information on this important issue, as it becomes available.

Annual Conference … “Back to the Future!”

The theme for the 2010 WSIA Annual Conference … to be held at the Three Rivers Convention Center in Kennewick, WA … is “Back to the Future!” While more will be coming shortly on that theme, I wanted to share a few pieces of the presentations we have lined up for you.  General Sessions: Frank King on “Three Little Words;” Vocational Rehabilitation Pilot Project Update; a summary of the 2010 Legislative Session; presentation by DLI Director Judy Schurke and/or Governor Christine Gregoire (invited); An Economist’s View of Gearing Up for the Economic Rebound; Federal Issues Affecting Workers’ Compensation; and John Evan’s presentation on Screening vs Employment Law Discrimination in the Hiring Process.  In addition to these great General Sessions, we have  four Learning Lab Tracks: a Legal track; an Assessments track; a Medical track; and a Claims Management track.  Each learning lab will only be presented ONCE, so you’ll want to bring lots of co-workers to sit in the other sessions.  As with everything, watch your emails and WSIA website for more information on what promises to be a GREAT Annual Conference!

As I noted above, these are but a few of literally dozens of things WSIA is working to address on your behalf.  But what really makes it all work?  You do!  Your dues, your time, your emails and phone calls and suggestions all make this work.  This is a volunteer organization, and without your efforts and ideas the Washington Self-Insurers Association would just be a mediocre group of individuals, instead of a vibrant, active and respected member of the employer community.

Thank you for all that you do.

Until next month …

Dave Kaplan

WSIA Executive Director

dave.kaplan@wsiassn.org

Posted 9 February 2010

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