Area businesses are bracing for the largest state workers’ compensation insurance rate increase in seven years, which is expected to cost tens of thousands of dollars starting Jan. 1. Businesses struggling to cut costs in the recession, such as C&C Logging in Kelso, say the timing couldn’t be worse.

“To see a rate increase like that at this time seems like such a travesty, with the economy as it is,” company administrative manager LeeAnne Beech said Wednesday.

The company already has shelled out about $400,000 in workers’ comp premiums this year, and the costs are expected to rise by at least $80,000 next year, Beech said.

Labor leaders say the 7.6 percent increase proposed by the state Department of Labor and Industries is necessary to preserve an important benefit for 2.5 million workers statewide. The insurance pool covers injuries and time lost for workers hurt on the job.

L&I officials will make a final determination on the rates at the end of November. If approved, the rates would go up for the third straight year. Business would pay about 4 cents more per hour for each employee, according to L&I.

The rates went up 3 percent this year and 3.2 percent in 2008. The increase would be the largest since 2003, when the agency imposed a 29 percent hike.

The state requires most businesses and employees to pay into the workman’s compensation program. Premiums are based on the number of hours worked, claims paid out, rate of injuries and revenue the state earns by investing the premiums.

About one-third of businesses statewide — mostly big firms such as Microsoft Corp. and Weyerhaeuser Co. — are self-insured, according to L&I.

While businesses say the recession makes any further rate increases a challenge, L&I officials say the recession is making the increases necessary. The program has seen a drop in investment returns, and rising unemployment means companies and workers are paying less into the system. In addition, rising health care costs are putting higher demands on the program.

L&I officials originally proposed a 15 to 20 percent preliminary increase in June.

“We have pushed this proposed rate increase down to the lowest possible level given the uncertain state of our recovery from this deep recession,” agency director Judy Schurke said in a written statement.

The rate increase hits logging companies particularly hard. It can be a dangerous industry, so the state sets rates high for loggers and their employers already.

Increases in worker’s compensation rates mean C&C Logging will have to tighten its belt even more, said Beech. In June, the company cut $5,000 per month from its employee medical insurance plan by imposing a deductible for workers. The company has shed about 20 workers this year, leaving it with about 85.

“We’re just going to hang tough, and we’ll have to have more efficiencies,” Beech said.

C&C will continue to hold safety meetings to minimize slip, falls and other small claims, hoping to reduce injuries that drive up its workers’ comp premiums, Beech said.

“The biggest benefit is seeing less claims.”

Dale Lemmons, owner of Interstate Wood Products and Signature Transport, said he expects the rate increase will cost his Kelso trucking business an extra $25,000 next year.

He paid about $300,000 in workers’ comp premiums last year, which he says is about 5 percent of his gross revenue. To offset the cost, Interstate Wood would likely raise shipping rates for mills in the area, Lemmons said.

“We try to be careful in how much we do pass on,” he said.

A rate increase will hit workers, too. Washington is the only state that requires employees to pay into the workers’ compensation fund. Under the proposed increase, workers will fund 27.8 percent of the program costs, up from 27 percent.

Workers are sharing more of the load, but it’s a reasonable jump, said Jeff Washburn, business agent for the Longview-based Plumbers and Steam Fitters local 82.

“The workers are bearing a fair brunt of it,” Washburn said.

He’s had few union members take issue with the rate increase because they’re more concerned about finding work.

“Right now, it’s really slow.”

The insurance pool is an important benefit to workers, so they’ll pay more money to keep it going, said Dave Myers, business manager for the Longview-based International Brotherhood of Electrical Workers local 970.

“If the increase is needed to keep it healthy and whole, then we support it,” Myers said.

“I don’t think our members will have any heartbreak over the rate increase,” he added.

Related article:

State proposes 7.6 percent workers' comp rate hike  (Sept. 21)