wa-law.org > bill > 2025-26 > HB 2188 > Original Bill

HB 2188 - Industrial insurance rates

Source

Section 1

  1. The legislature finds that:

    1. Open and transparent governance is an absolute necessity for any state program. With it, the people the government serves are fully informed of its successes and can appropriately address its shortfalls. In its absence, failures continue onward unchecked. At a minimum, the lack of transparent decision making shakes the public's confidence in the state;

    2. This axiom is strained during the premium rate-setting process for the state's workers' compensation program. It has become common practice to artificially limit the premium rate change for certain risk classes below what it should be based on actuarial principles. Meanwhile, the rate classes limited, their actual premium, and how the limited rate is subsidized across other risk classes is not presented in a clear and concise manner;

    3. This practice leads to increased use of contingency reserves to further limit proposed rates. The department of labor and industries has utilized contingency reserves to cap the proposed premium rate for three consecutive years. In the latest rate setting this is an 8.1 percent reduction from the "break-even" rate, leading to a $240,000,000 reduction in contingency reserves. Use of reserves to limit the annual rate increase, while laudable in the short term, is not a sustainable option;

    4. This practice clouds the workers' compensation program's true costs, leaves the people uninformed, and makes the legislature slow to the draw on potential reforms.

  2. Therefore, it is the intent of the legislature to promote open and transparent governance, and to ensure the continued health of the state's workers' compensation program, through the proper reporting of annually proposed premium rates.

Section 2

  1. The department shall classify all occupations or industries in accordance with their degree of hazard and fix therefor basic rates of premium which shall be:

    1. The lowest necessary to maintain actuarial solvency of the accident and medical aid funds in accordance with recognized insurance principles; and

    2. Designed to attempt to limit fluctuations in premium rates.

  2. The department shall formulate and adopt rules governing the method of premium calculation and collection and providing for a rating system consistent with recognized principles of workers' compensation insurance which shall be designed to stimulate and encourage accident prevention and to facilitate collection. The department may annually, or at such other times as it deems necessary to achieve the objectives under this section, readjust rates in accordance with the rating system to become effective on such dates as the department may designate.

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    1. After the first report is issued by the state auditor under RCW 51.44.115, the workers' compensation advisory committee shall review the report and, as the committee deems appropriate, may make recommendations to the department concerning:

      1. The level or levels of a contingency reserve that are appropriate to maintain actuarial solvency of the accident and medical aid funds, limit premium rate fluctuations, and account for economic conditions; and

      2. When surplus funds exist in the trust funds, the circumstances under which the department should give premium dividends, or similar measures, or temporarily reduce rates below the rates fixed under subsection (1) of this section, including any recommendations regarding notifications that should be given before taking the action.

    2. Following subsequent reports issued by the state auditor under RCW 51.44.115, the workers' compensation advisory committee may, as it deems appropriate, update its recommendations to the department on the matters covered under (a) of this subsection.

  4. In providing a retrospective rating plan under RCW 51.18.010, the department may consider each individual retrospective rating group as a single employing entity for purposes of dividends or premium discounts.

  5. The department shall publish the actuarially indicated rate for each risk classification as part of its proposed premium rates for the upcoming year.

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    1. If the director limits the maximum premium rate increase for any risk classification below the level indicated by applying generally accepted actuarial principles to the risk class, the department must publish information about the limitation when it proposes its premium rates for the upcoming year. Such information must include, but is not limited to:

      1. The rate classifications limited by the director and the respective proposed rate;

      2. What the rate for the class would have been according to generally accepted actuarial principles had a maximum increase limitation not been set by the director;

      3. The premium rate increase imposed upon other risk classes as a result of the limitation.

    2. The department shall publish the information described in this subsection (6) on its website and as part of its proposed premium rates for the upcoming year.

    3. The department shall submit the information described in this subsection (6) to the appropriate committees of the legislature and to the workers' compensation advisory committee.

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