L&I Announces Rate Hike

At the 9/21/09 WCAC meeting, the Department announced it's preliminary take on upcoming rate increases for the State Fund. The agency noted that "indicated" premium rate increases for 2010 should either be 21.5% or 19.4%. However, in consideration of the state's current economic circumstances, the Department is proposing a 9.3% or 7.6% average rate increase. The difference between the two rates will depend on whether the Department passes regulations dealing with the inclusion of unassigned occupational disease claim costs in the retrospective rating calculation. Since the adoption of the occupational disease regulations is likely, it is anticipated that the proposed 7.6% average premium rate hike is the one that will be adopted.

In our opinion, the rate increases are a concern for several reasons. Although a 7.6% rate increase is better than a 19.4% increase it is still too large an increase for business to absorb in these difficult economic times. Even though the timing could not be worse for an increase of this magnitude, the unfortunate fact is that that 7.6% increase does not meet the Department's anticipated financial exposure for 2010.  This means that at some time in the near future the bill is going to come due and all of us are going to have to pay the piper.  In addition, for those involved in retrospective rating programs, those programs are at risk for poor performance given this suppressed rate.  The Washington State retrospective rating plan requires premium rate adequacy to function properly. With hugely suppressed rates, in 2010, retro participants should be prepared for some rocky performance numbers for their 2010 plan years.