BILL REQ. #:  H-2344.1 

READ FIRST TIME 03/07/05.   

     AN ACT Relating to substantially improving worker safety, accident prevention, and worker outcomes through the department of labor and industries' retrospective rating program; amending RCW 51.16.035, 51.18.020, and 51.18.040; adding new sections to chapter 51.18 RCW; and declaring an emergency.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION.  Sec. 1   A new section is added to chapter 51.18 RCW to read as follows:
     The legislature reaffirms that the purposes of the department of labor and industries' retrospective rating program are to substantially improve worker safety, accident prevention, and worker outcomes. The legislature finds that certain aspects of the program are inconsistent with these purposes and, therefore, do not create the incentives necessary to ensure that workers are not significantly less likely to be injured.
     The legislature finds that retrospective rating groups granted the privilege of participating in the retrospective rating program must agree to terms and conditions of program participation that are reasonably related to achieving these purposes. These terms and conditions shall include, but not be limited to, requiring that refunds be distributed to employers, and ensuring that employers in the retrospective rating groups are substantially similar considering their risk classifications.
     The legislature declares that immediate changes are necessary to ensure that retrospective rating groups focus on safety, and consequently, to preserve the health and safety of Washington workers.

NEW SECTION.  Sec. 2   A new section is added to chapter 51.18 RCW to read as follows:
     (1) With respect to refunds made by the department to a sponsor of a retrospective rating group on or after the effective date of this section:
     (a) The sponsoring entity must distribute the full amount of the refund to the members of the retrospective rating group within one hundred eighty days of the final adjustment for the corresponding coverage period except as provided in (c) and (d) of this subsection.
     (b) The sponsoring entity must distribute the refund to the members by sending checks imprinted with the sponsoring entity's name directly to the member's last known address by certified mail, return receipt requested.
     (c) A sponsoring entity may elect not to distribute any part of a refund to a member who is in arrears for enrollment fees or other payments required to participate in the retrospective rating group, so long as any part not distributed to the member in arrears is distributed to members not in arrears within one hundred eighty days of the final adjustment for the corresponding coverage period.
     (d) A sponsoring entity may use any part of a refund to pay the department any part or all of any penalties owed for any active coverage period.
     (2) The department shall periodically inspect and review records of sponsoring entities to assure compliance with the requirements of this section.
     (3) If a sponsoring entity violates the requirements of this section, the department may disqualify the sponsoring entity from further participation in the retrospective rating program.

Sec. 3   RCW 51.16.035 and 1999 c 7 s 8 are each amended to read as follows:
     (1) The department shall classify all occupations or industries in accordance with their degree of hazard and fix therefor basic rates of premium which shall be the lowest necessary to maintain actuarial solvency of the accident and medical aid funds in accordance with recognized insurance principles. The department shall formulate and adopt rules and regulations governing the method of premium calculation and collection and providing for a rating system consistent with recognized principles of workers' compensation insurance which shall be designed to stimulate and encourage accident prevention and to facilitate collection. The department may annually, or at such other times as it deems necessary to maintain solvency of the funds, readjust rates in accordance with the rating system to become effective on such dates as the department may designate.
     (2) In providing a retrospective rating plan under RCW 51.18.010, the department may consider each individual retrospective rating group as a single employing entity for purposes of ((dividends or premium discounts)) refunds.

Sec. 4   RCW 51.18.020 and 1999 c 7 s 3 are each amended to read as follows:
     Prior to allowing ((initial entrance into)) enrollment or reenrollment in the state's retrospective rating plan, the department shall review each ((proposed)) retrospective rating group applying to enroll or reenroll in the plan to ensure that the following criteria are met:
     (1) The entity sponsoring the retrospective rating group must have been in existence for at least four years;
     (2) The entity must be exempt from federal income tax;
     (3) The entity sponsoring the retrospective rating group must exist primarily for a purpose other than that of obtaining or offering insurance coverage or insurance related services, including sponsoring a retrospective rating group;
     (((3))) (4) The entity sponsoring the retrospective rating group must have a written workplace safety and accident prevention plan in place for the proposed retrospective rating group and must propose methods by which the retrospective rating group will cooperate with department claims management activities;
     (((4))) (5) All employers in the retrospective rating group must be members of the sponsoring entity;
     (((5))) (6) All employers in the retrospective rating group must have an industrial insurance account in good standing with the department;
     (((6))) (7) Fifty percent of the original employers in the retrospective rating group must have been members of the sponsoring entity for one year prior to the group's entrance into the retrospective rating plan;
     (((7))) (8) The retrospective rating group must be composed of employers who are substantially similar considering the services or activities performed by the employees of those employers;
     (((8))) (9) The initial premium level for the retrospective rating group must be at least one million five hundred thousand dollars and shall be based on the standard premium of the proposed group members' most current previous coverage period; and
     (((9))) (10) The formation and operation of the retrospective rating group must seek to substantially improve workplace safety and accident prevention for the employers in the group.

Sec. 5   RCW 51.18.040 and 1999 c 7 s 5 are each amended to read as follows:
     (1) In order to ensure that all retrospective rating groups are made up of employers who are substantially similar, ((considering the services or activities performed by the employees of those employers,)) the sponsoring entity of a retrospective rating group shall select a single, broad industry or business category for each retrospective rating group. ((Once an industry or business category is selected, the department shall allow all risk classifications reasonably related to that business or industry category into that retrospective rating group.))
     (2) The following broad industry and business categories shall be used by the sponsoring entity and the department in establishing retrospective rating groups:
     (a) Agriculture and related services;
     (b) Automotive, truck and boat manufacturing, sales, repair, and related services;
     (c) Construction and related services;
     (d) Distillation, chemical production, food, and related services;
     (e) Facilities or property management, maintenance, and related services;
     (f) Government, utilities, schools, health care, and related services;
     (g) Health care, pharmaceutical, laboratories, and related services;
     (h) Logging, wood products manufacturing, and related services;
     (i) Manufacturing, processing, mining, quarrying, and related services;
     (j) Retail stores, wholesale stores, professional services, and related services;
     (k) Temporary help and related services; and
     (l) Transportation, recycling, warehousing, facility maintenance, and related services.
     (3) The industry and business categories in subsection (2) of this section are not exclusive. In response to significant changes in marketplace demographics or the discovery of unique business or industry categories, the department may, by rule, include additional broad industry or business category selections. The department may, by rule, remove an industry covered within an industry or business category in the event that the business or industry is no longer found within this state.
     (4) ((Given the broad nature of the industry and business categories in subsection (2) of this section, the risk classification or classifications assigned to an individual employer may appropriately fall into multiple business or industry categories.
     (5) In order to simplify administration and keep the administrative costs associated with devising a different classification system for a retrospective rating plan to a minimum, the state's retrospective rating plan shall follow the same classification procedure established by the department to assign workers' compensation insurance classifications to an employer.
     (6))) (a) With respect to any coverage period, employers who have been a member of an existing, approved retrospective rating group prior to July 25, 1999, may continue in that group even if they are not substantially similar to the industry or business category selected pursuant to ((subsection (1) of this)) section 5(1), chapter 7, Laws of 1999.
     ((However, new)) (b)(i) With respect to any coverage period beginning before January 1, 2007, employers who were proposed for addition to a retrospective rating group on or after July 25, 1999, and before the effective date of this section, and who have been a member of a retrospective rating group prior to the effective date of this section, must fall within the ((selected)) industry or business category selected pursuant to section 5(1), chapter 7, Laws of 1999.
     (ii) With respect to any coverage period beginning on or after January 1, 2007, an employer who was proposed for addition to a retrospective rating group on or after July 25, 1999, and before the effective date of this section, and who has been a member of a retrospective rating group before the effective date of this section, must report more than fifty percent of its hours in one or more risk classifications in the retrospective rating group's business or industry category. If the employer reports more than fifty percent of its hours in risk classifications not in any group's business or industry category, the department shall approve the employer's participation in the retrospective rating group composed of the most similar employers.
     (c) With respect to any coverage period beginning on or after the effective date of this section, employers who are proposed for addition to a retrospective rating group on or after the effective date of this section must report more than fifty percent of its hours in one or more risk classifications in the retrospective rating group's business or industry category. If the employer reports more than fifty percent of its hours in risk classifications not in any group's business or industry category, the department shall approve the employer's participation in the retrospective rating group composed of the most similar employers.

NEW SECTION.  Sec. 6   A new section is added to chapter 51.18 RCW to read as follows:
     The director may adopt rules to carry out the purposes of this chapter.

NEW SECTION.  Sec. 7   If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION.  Sec. 8   This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect immediately.