The Puget Sound Business Journal published this column on October 29, 2010.

For a hundred years our state’s industrial insurance system has been run by the Department of Labor and Industries as a state government monopoly.  And unless you are one of a relatively small number of businesses that have the financial assets to self-insure, you have but one choice as to who provides your workers’ compensation insurance.  Initiative 1082 seeks to change that.

Given the complexity of the workers’ compensation system, Initiative 1082 may be the most difficult to understand of all the measures on this year’s ballot.  However, it boils down to this: will voters reform Washington’s workers’ compensation system to allow competition to the state’s fund, or will they stick with the current monopoly system?

As voters decide which initiatives to enact, and which to cast aside, the success or failure of any initiative is based upon the question: does it solve a nagging problem that the legislature refuses to fix?  In the case of Initiative 1082 the answer is yes.  While the initiative does not solve all the problems inherent in the state’s workers’ compensation system the foundation on which the system is placed will change and will make further reforms easier.

Each year all businesses, particularly small businesses or those in construction and manufacturing, wait anxiously for state officials to announce the new workers’ comp rates, hoping that the increase will not be enough to stunt their growth.  Last year, the Department raised rates an average of 7.6%, even though inflation levels were flat or declined.  This year businesses will have to wait a little longer. L&I decided to hold off releasing its new rates until after the November election; an unfortunate move that will only cause the business community more uncertainty as they plan for 2011.

But workers’ compensation in this state has not been all bad news. For two decades the number of injury claims has decreased significantly. However, the cost of the system has increased dramatically.

In other words, businesses are keeping up their end of the bargain by providing safer workplaces, yet the cost of insuring their workforce rises almost every year.  What does it say to a cash-strapped business community that has reduced risk, only to be given a disincentive for doing so in the form of higher rates? That’s like paying more in auto insurance every year even though you sport a spotless driving record.

This creates a dangerous precedent that reducing risk -- thereby increasing the reward of a lower insurance premium -- is not to be taken seriously.  Obviously, no business wishes harm to any of its employees, but a company would strive to pursue more innovations towards making workplaces safer if it were rewarded with lower premiums.

The Joint Task force set up if the initiative passes would have important work ahead.  As opponents of the initiative like to point out, insurance companies would not be subject to the Consumer Protection Act and the Insurance Fair Conduct Act.  But this is a mere technicality.  Because industrial insurance providers have been outlawed in this state, there was no need to include oversight provisions in either of these acts for nonexistent entities.  Hyperbole aside, the Joint Task force and the legislature can, and would, fix this.

Monopolies are rarely a good thing -- regardless of whether the monopoly comes from the private sector or government. The last two states to introduce competition into previously state-run workers’ compensation systems saw premiums drop, customer satisfaction rise, and are able to get injured workers rehabilitated and back on the job faster. State officials are expecting fully half of the 170,000 employers to jump into the private sector workers’ compensation pool. This means that today, at least half of Washington’s employers are being under served or overcharged by the state’s monopoly provider.

Initiative 1082 would help focus the industrial insurance industry in our state on what it was originally intended to be: a true insurance plan which mitigates risk for employers, provides fair and reliable benefits for injured workers, and contributes to a stable business environment for all Washington citizens.