No Need for Legislators to Alter Unbroken Retro Program

Friday, March 27, 2009 | 0

By David D'Hondt and Anthony Anton

On March 12, the Washington state Senate passed legislation affecting workers' compensation programs sponsored by business groups by a razor-thin margin of 25-24. Judging from the arm-twisting that was going on to get to 25 votes, the bill is apparently more about politics than problem-solving.

The measure, Substitute Senate Bill 6035, addresses retrospective rating plans. Through a program offered by the Department of Labor and Industries, groups of employers, including our respective associations, assume a portion of industrial insurance risk by a creating "group retro" plan under contract with the state.

There are currently scores of such group Retro programs in operation today. The thousands of individual businesses that participate in them include farms, manufacturing companies, restaurants, construction firms and more.

Employers that choose to join these plans combine their individual premiums and claim losses as a single entity. Premiums for the group are adjusted based on the group's actual claim losses during the coverage period. The group will receive a refund if the combined premiums exceed the combined claim losses, and the group will be assessed additional premiums if the combined claim losses exceed the combined premiums.

Many innovative safety programs and approaches have been developed in the state as a result of the incentive the system gives employers to enhance safety, get injured workers the help they need, and help them return to gainful employment whenever possible.

State data indicate that participants in Retro programs perform 20% better than non-Retro businesses in accident prevention and cost control.

The bottom line is that the system works very well, and has for years. So why has it become a target of legislative tinkering?

The widely-reported motivation behind the bill, which is now being considered by the House, is the fact that one of the many organizations sponsoring a group Retro program uses part of its refund money for political advertising. The bill would end this single organization's practice by restricting the ability of all sponsoring organizations to use the refunds as they wish.

As the legislation was considered in the Senate, proponents made the argument that this bill is merely about transparency. If it were merely about transparency, this legislation would be merely unnecessary. Our organizations are trade associations. By definition, we are funded and governed by our member firms.

The companies that participate in our Retro plans do so voluntarily and with every opportunity to understand how the programs operate and how any refunds are used. If they do not like how a program is operated, they are free to not participate and to join competing plans. Plus, they have the opportunity to work for changes as members of the sponsoring organizations.

This bill is not about transparency. It is an overreach of state authority, because it is unfair for the state to restrict how private entities use their own money. We emphasize "own money" because the refunds that the legislation would restrict are refunds of premiums that employers have paid  not refunds of general fund tax dollars.

Our members are not clamoring to be "protected" from their own associations' Retro programs. Rather they are asking the Legislature, "Since the system is not broken, why are you trying to fix it?"



David D'Hondt, is executive vice president of Associated General Contractors of Washington. Anthony Anton is president and CEO of the Washington Restaurant Association.


This story originally appeared in The Olympian newspaper