Today the Department of Labor & Industries (L&I) proposed increasing average workers’ compensation rates by 3.1% for 2022. According to L&I, base rates will increase for 230 of the state’s 325 risk classes (here are the proposed rates by risk class).

If the rate increase is adopted later this year, it will be the first average rate increase since 2017 and the largest average rate increase since 2011.

Still, L&I said it “will use contingency reserves to cover any gap between premiums and ultimate costs rather than proposing to raise rates even more.” It did the same thing for 2021, when rates were kept steady. This was a way “to help employers and workers reeling from the pandemic.”

According to L&I, today’s proposal “is driven by cost-of-living adjustments for pensions, which were triggered by an increase in the state’s average wage.” As I wrote in June, the state’s average annual wage grew by 10.1% in 2020—its highest growth ever. As a result, in July, L&I announced that workers’ compensation time-loss and pension benefit payments will also increase by 10.1%. The Employment Security Department attributed the high average wage growth to “the fact that thousands of lower-paid workers lost their jobs during the pandemic and higher-paid workers remained employed.”

The workers’ compensation premium is made up of four components: the accident rate, the medical aid rate, the supplemental pension rate, and the stay at work rate. Next year, the supplemental pension rate component will increase by 14%.

Washington consistently has the nation’s highest workers’ compensation benefit costs, and a significant factor in that ranking has been Washington’s supplemental pension fund. There’s a data lag in the national numbers from the National Academy of Social Insurance, but as I wrote last year, “From 2009 to 2018, Washington’s supplemental pension fund benefits increased by 40.4 percent while total benefits paid in Washington increased by 9.8 percent. In 2009, supplemental pension fund benefits accounted for 16.8 percent of total benefits. In 2018, that share increased to 21.5 percent.”