Summary of Bill: By July 1, 2017, employers in Washington may choose to self-insure, obtain private sector industrial insurance, or purchase industrial insurance from the state fund.

Private Industrial Insurance. Starting July 1, 2017, insurers may offer to sell industrial insurance in the state subject to regulation by the Insurance Commissioner (commissioner). An insurer offering to sell industrial insurance must hold a certificate of authority issued by the commissioner. Prior to issuing a certificate, the commissioner must certify that the insurer has the capacity to provide adequate safety engineering, loss prevention, and claims management services. The insurer must also maintain a location within the state where benefit applications may be made and maintain a list of locations and telephone numbers where information may be obtained about claims.

Insurers may refuse to provide insurance to a maximum of 8 percent of employers who apply, and each insurer must participate in the assigned risk plan. Insurers must be a member of the licensed rating organization designated by the commissioner.

Insurers may insure the obligations of employers as a group subject to specified criteria.

State Fund. The Washington State Industrial Insurance Fund (state fund) is established to insure employers for their industrial insurance liability starting July 1, 2017. The state fund is subject to the same regulation, examination, reporting requirements, and disclosure as all other insurers providing insurance in Washington. The state fund can solicit employers, handle and enforce collection of premiums, handle and process industrial insurance claims, and perform all other functions that are necessary or appropriate to carry out the authorized functions. The state fund must:

allocate revenues received from investments to reduce premiums for employers and whenever possible, apply for a deviation from manual rates filed by the rating organization so premiums charged are the lowest possible rates necessary to maintain actuarial solvency;
participate in the Washington Insurance Guaranty Association in the same manner as any other industrial insurance insurer;
charge premiums based on rates filed by the licensed rating organization and approved by the commissioner;
participate in the assigned risk plan;
pay all taxes and fees as any other insurer offering industrial insurance;
operate on a parity with other insurers and be self-supporting without subsidy of any kind.

The state fund is governed by policies established by a board of five directors, appointed by the Governor and approved by the Senate. All directors must be policyholders of the state fund, and two must represent small business. Among other responsibilities, the board must employ a manager to manage the daily operations of the state fund. The manager must report annually to the board, Governor, and Legislature on the state of the state fund.

On July 1, 2017, the treasurer must transfer the assets and liabilities of the accident, medical aid, and reserve fund to the newly created state fund, along with any other assets and liabilities held by the industrial insurance division at L&I, excluding the supplemental pension fund and funds pertaining to regulatory functions of L&I.

The commissioner must issue a certificate of authority to the state fund on July 1, 2017. Thereafter, the state fund must maintain the certificate and meet all applicable insurance provisions as would any other insurer.

Commissioner. The commissioner is given regulatory oversight of the sale of industrial insurance in Washington and must ensure that each insurer providing industrial insurance meets the requirements of both the insurance laws and the workers' compensation laws. The commissioner must designate a licensed rating organization to file for approval of the following: a manual of classifications and rules, rating plans, policy forms and provisions, a payroll limitation, and a statistical reporting plan that provides data adequate for ratemaking. The commissioner must establish an assigned risk plan for all industrial insurance insurers.

The commissioner can collect assessments from industrial insurers sufficient to cover administrative costs and the payment of benefits should the insurer default. Interest may be charged on all past-due assessments at a reasonable market rate.

If benefits due under workers' compensation provisions are not paid as required, the commissioner must pay benefits out of the administrative fund. Depending on the reason for default, the employer, self-insurer, or insurer is liable for reimbursing the administrative fund. The commissioner may purchase insurance for the administrative fund to pay for defaults, and must actively pursue legal action to collect payments due to the fund. If the default results from the failure of an insolvent insurer to pay, the Washington Insurance Guaranty Association is liable for payments into the fund.

Other Provisions. The Joint Legislative Task Force on Private Competition for Industrial Insurance is established. The task force is composed of 13 members, including legislators, employer representatives, insurance representatives, and worker representatives. The task force must develop proposed legislation to conform current laws to accommodate private industrial insurance, and provide its recommendations to the Legislature by December 1, 2015.

Certain records and data at L&I must be made available to the licensed rating organization to assist in making rates. L&I must be reimbursed for the actual reasonable cost of reproduction and delivery of the records and data.