Businesses worry about I-1082 costs

By Pratik Joshi, Herald staff writerSeptember 2, 2010 

Small-business owner Carolyn Wang is worried about Initiative 1082.

The November ballot initiative calls for allowing private insurance companies to compete with the state Department of Labor & Industries to sell workers' compensation insurance to employers in Washington. The initiative was filed by the Building Industry Association of Washington.

Wang, who owns Smoovies in Richland, is worried the proposed measure, if passed, will increase her costs. I-1082 will shift the burden of paying half of the premium for workers' comp medical coverage from workers to employers, she said.

Many small businesses including hers may not be able to handle the additional burden, she said. It potentially means businesses may close down or not hire more employees, she said. Privatization of insurance is no guarantee that premiums will go down, said Wang, who has owned her restaurant for four years and employs 10 people.

The initiative will undermine the existing system, which is based on distributing risks instead of making money, said Alex Fryer, communications director for the No I-1082 campaign, which is supported by various labor groups and small businesses.

Fryer made a stop Wednesday in Richland for a presentation before heading to Yakima. It is essential that business owners realize the initiative will hurt them, he said. The premiums, which now are based on hours worked for employees, will instead be based on an employer's payroll. That will contribute to raising the burden on a small business, he said.

Among other provisions of the initiative, private insurers won't be allowed to sell insurance until 2012, but employers will have to pay increased premiums immediately.

I-1082 will hurt taxpayers as well, Fryer said. If the initiative is approved, local governments will pay more to cover premiums, he said. For example, the city of Kennewick would pay annually an extra $96,000; Pasco an additional $90,000; and West Richland about $11,500. The city of Richland is self-insured, but follows the same rules governing the L&I coverage.

In theory, privatization and competition bring down cost, but in reality -- as seen in several states where workers' comp is privatized -- it means higher premiums, denial of claims and difficulty in getting insurance for high risk occupations, Fryer said. In West Virginia, volunteer firefighters can't afford risk insurance, he said.

Supporters of I-1082 point out that the state's monopoly has resulted in inefficiencies in the existing system including ever-increasing workers' comp taxes.

The Building Industry Association of Washington claims while workplace injuries have decreased 55 percent in recent years, L&I's costs to manage these fewer injured worker claims have increased by more than 80 percent, and injured workers stay off the job more than two times longer in Washington than any other state.

Forty-six states allow private insurers in the industrial insurance market.

-- Pratik Joshi: 582-1541; pjoshi@tricityherald.com; Business Beat blog at www.tricityherald.com

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