Most American states enacted workers’ compensation laws between 1911 and 1913 with the last to adopt in 1948. These laws, in brief, created workers’ compensation indemnity for employers in exchange for employees giving up the right to sue employers. The fundamental purpose of these programs is to treat and retrain injured workers so they can return to work.
Initiative 1082, which will appear on Washington’s ballot next month, provides sweeping changes to how these services are delivered. The measure would authorize employers to purchase private industrial insurance beginning July 1, 2012 and direct the legislature to enact conforming legislation by March 1, 2012. It would also eliminate the worker-paid share of medical-benefit premiums.
The Building Industry Association of Washington (BIAW) proposed this initiative to the last legislature. The association claimed that passage would lower workers’ compensation premiums, which was its primary concern. The proponents of I-1082 claim:
- Washington is one of only four states that forbids private competition.
- Workers’ compensation rates are falling across the nation but rising in Washington.
- Washington has the second-highest workers’ compensation cost per employee and third-most-generous benefits package.
- Workers’ compensation rates in Washington are 50 percent higher than they were 10 years ago.
The opponents of I-1082, led by the Washington State Labor Council, are concerned that privatized workers’ compensation will result in higher employer costs and reduced benefits to injured workers. They view this as a profit grab by big insurance companies, one of which is the largest workers’ compensation insurer in the nation: AIG.
The opponents claim:
- The Washington Department of Labor & Industries (L&I) operates on 18 percent overhead, compared to 68 percent that is typical for private workers’ compensation insurers. The current Washington system has room for improvement but is reported as one of the top three systems, in terms of injured worker benefits, in the country and operates with premiums that are less than the premiums in half of the other states.
- Handing over the public, not-for-profit system to private insurers is less about getting injured workers back to work and more about profits and market share.
- Private insurance will cherry-pick employers resulting in higher costs for those who elect to stay in the state system.
- Ending the 27 percent employee contribution to medical benefit premiums will shift costs to already-strapped businesses and decrease job creation and recovery.
- Transparency of claims processing will be eliminated because private insurers will view claims processing as proprietary.
- This initiative exempts private insurers from claim oversight. The Insurance Guaranty Act prevents insurers from collecting premiums and not paying claims, which is why Washington’s insurance commissioner and state auditor both oppose I-1082.
- Some states have seen a 200 percent increase in premiums since adopting similar competitive systems.
It is my opinion that if Washington adopts I-1082, the initial reported savings to the public would be the result of premium discounts designed solely to capture market share. Because of increased costs, like marketing, profits and executive bonuses, private insurers would pressure health care providers into steeply-discounted or reduced services and added utilization management duties, similar to what we have seen from managed-care health plans. Providers who choose not to participate in these discounts and added duties will contribute to decreased access and services for injured workers. The incentives of a competitive, less controlled, private insurance system are always to earn profits and gain market share which may also negatively impact the injured workers’ benefits.
Both opponents and proponents agree that Washington currently has a rich benefits package for its injured workers. The proponents cite 50 percent premium growth over a 10 year period as negative. I would add to this another piece of data: health care premiums have risen 106 percent in Washington during the same period of time under the management of the same companies that would run the privately insured workers’ compensation system. As advocates for our patients we should be concerned about I-1082.
If I were to offer a solution to both sides of this argument, it would be to continue our low overhead system and then look for improvements in a transparent, legislative manner that would retain the best of what we have and still improve the overall system. I think this is what the legislature had in mind when it took no action on the BIAW’s proposal during the last budget pressing session.
If passed, I-1082 will have significant affects on the injured workers served by PTWA members. As advocates for our patients it is important that we are informed and that we help educate our members and our patients beyond the slogans and the sound bites of this initiative.
PTWA Payer Liaison