Proposal for Another Task Force Meets With Little Enthusiasm – Initiative Campaign in Offing

Marty Brown of the office of Gov. Christine Gregoire and Judy Schurke, director of the Department of Labor and Industries, defend the state's worker's compensation system at Monday's hearing.

By Erik Smith

Staff writer/ Washington State Wire

OLYMPIA, Feb. 2.—After all the debate of the last few months on worker’s compensation, and all the fierce arguments between business and labor interests, it appears that the Legislature’s solution is more study.

            State Sen. Jeannie Kohl-Welles, D-Seattle, chairwoman of the Senate panel that oversees business and labor issues, said Monday she will not allow any proposals to advance unless they have support from both sides. At a legislative hearing Monday Kohl-Welles said she will push a bill creating a task force on worker compensation issues that will meet when this year’s legislative session is over.

            Some of the state’s business lobbying organizations say they’re tired of talking – they’ll take it to the voters instead. Immediately after Monday’s hearing three business associations issued a statement denouncing the idea of further negotiations with labor. One of them – the Building Industry Association of Washington – already has filed an initiative that would private insurance companies to compete for the worker’s compensation business. Not all business interests take that stand, however – particularly the Association of Washington Business, which did not indicate Monday that it would reject a seat at the table.

            Kohl-Welles’ proposal, Senate Bill 6775, would create a task force to study worker compensation issues. The talks would be convened by the state Department of Labor and Industries, which oversees the current state-managed system.

            “There is some talk of reforming our worker compensation system, and the chair is of the opinion that there is not sufficient time in this legislative session to accomplish that,” Kohl-Welles said. “Rather, we need to approach this in a thoughtful and deliberative manner. And the first part of this is to get accurate information on the table.”

            Kohl-Welles said she would schedule a vote on the bill, possibly today.

            Business Divided

Business has been seeking cost-cutting changes to the state-run system for decades, and matters have been brought to a head by a hefty rate increase this year, together with the promise of more to follow. The state insurance system took a $1 billion loss last year, due to the Wall Street collapse and fast-rising claims costs. Business proposals for changes to the existing system have met with fierce opposition from the Washington State Labor Council and other labor organizations. Negotiations last fall reached an impasse, and Democratic leaders in the House and Senate so far have refused to take action on a business proposal for more moderate changes to the current system.

            “A task force on workers’ compensation would be a waste of time and we would boycott it,” said Patrick Connor, Washington state director for the National Federation of Independent Business. “The governor tried bringing labor and business together last year to see if something could be worked out, and like Igor in Young Frankenstein, labor could not see the hump on its own back. A task force would accomplish nothing, and legislators who vote for SB 6775 should honestly acknowledge they are throwing up their hands and walking away in surrender on this issue.”

            Joining NFIB in the statement were BIAW and the Washington State Farm Bureau. The organizations are the largest individual business players in the workers’-comp debate, operating “retro” programs that offer members partial premium refunds in return for good claims experience.

            Kris Tefft, lobbyist for the Association of Washington Business, acknowledged that business is divided on the idea of further talks. He carried with him a copy of a report from a 1984 blue-ribbon commission on worker’s compensation issues. The concerns really haven’t changed much since the Spellman administration, he said. There really isn’t much common ground between business and labor, he said, and the Legislature’s rebuff this year seems to many to indicate that nothing ever will be done.

“There is an incredible frustration with the adequacy of this approach and the brick wall that this proposal has run into,” he said.

Meanwhile, labor interests said they’re happy to talk, and pointed out that there already is an advisory panel to the Department of Labor and Industries where talks have been going on for years. Said David Johnson, executive secretary of the Washington Building and Construction Trades Council, “We believe what you’re asking for already exists.”

            Horror Stories Recounted

            The hearing Monday before the Senate Labor, Commerce and Consumer Protection Committee laid out the arguments for and against the system. Washington is one of four states nationwide that do not allow private competition, although large employers are allowed to self-insure. Business contends Washington is one of the costliest states in the country for worker compensation – a point labor and the state Department of Labor and Industries is quick to dispute.

            The business panel did not call for privatization of the system, but it urged reforms that don’t sit well with labor. They include allowing employers to make one-time lump-sum settlements with injured workers in lieu of permanent pensions, and a new definition of “occupational disease” that would force workers to prove that their claims of chronic conditions were caused by work. Business also called for establishment of managed care networks to provide medical care for workers filing claims.

            One reason for the agitation is that the state has had little reason to take a hard line on costs, said Rick Anderson of Sakuma Farms, a large fruit grower in Skagit County. “It’s been convenient to blame the recession for the rate increase, but it’s not the principal factor driving costs,” he said. “Our current state-run system doesn’t efficiently manage claims.”

            This year’s increases in worker compensation and unemployment premiums has cost the farm $85,000, Anderson said. “We wanted to hire a safety director for the coming year, but with the increases in worker’s comp and unemployment, we’re not able to do that,” he said. “The money just isn’t there.”

            Anderson told of one worker who claimed carpal-tunnel syndrome after the second day of work. The Department of Labor and Industries approved the claim.

            Linda Carlson, vice president of self-insured Sellen Construction in Seattle, told of a worker who filed a claim six months after retirement for neck, back and shoulder injury. So far the company has paid out $313,811.13 on the claim – and that doesn’t include the permanent disability pension.

            The problem with such claims, she said, is that the rules don’t impose a high standard of proof. “Many people have degenerative conditions due to natural factors or outside activities and need treatment for their back, shoulder or knees. As I get older I know I do, and I haven’t been in a physical heavy labor position. People have different lifestyles and different outside activities that make it very difficult for employers to review and determine whether the occupational disease really arose out of employment. We need to change the definition to make sure these problems are really occupational. If we don’t this problem is going to continue to grow.”

            Business representatives said lump-sum settlements have proven an important cost-containment tool in other states. “We have heard it is not a solution for Washington because workers will be taken advantage of in some way,” said Katrina Zitnik of Costco Wholesale. “Reasonable solutions that work in other states need to be addressed rationally and farily. Reasonable people can disagree about the solution. But the voluntary settlement option is not inherently evil and it should be on the table in any discussion about solutions to the problems in this state.”

            Labor Defends System

            Labor’s representatives, with an eye toward the upcoming initiative campaign, spent most of their time denouncing privatization. “We have a pretty well-run system,” said Washington State Labor Council President Rick Bender. “It doesn’t mean we can’t improve it, but we don’t have to pay for all those extraordinary costs that are a part of the private insurance industry.”

            With a state-run system Washington employers and workers don’t have to pay for executive salaries and bonuses, advertising and lobbying, he said. “I mean, we just saw two weeks ago an insurance executive with a salary of $10 million get a $73 million bonus. We don’t have to pay for those costs in Washington state.”

            And he said that when business argues for choice, it doesn’t mean choice for workers.

            Tom Rankin, past president of the California State Labor Federation, said private competition in the Golden State has been a disaster for that state’s insurance system. Until the early ‘90s that state’s system operated relatively smoothly, allowing private insurers to compete with the state system. But heavy lobbying by the insurance companies prompted the state to relax regulation. For a time average premiums went down. Then insurance companies started going bankrupt. The state was forced to impose a surtax on premiums to cover the liabilities, and when that wasn’t sufficient it was forced to issue bonds as well.

            At the worst part of the crisis worker compensation rates were 6.5 percent of payroll, compared to 1.7 percent in this state, Rankin said.