BILL REQ. #:  H-4459.1 

Read first time 01/28/2004.   Referred to Committee on Commerce & Labor.

     AN ACT Relating to oversight of industrial insurance premium rates; amending RCW 51.16.035; adding a new section to chapter 51.16 RCW; and creating a new section.

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

Sec. 1   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:
     (a) The lowest necessary to maintain actuarial solvency of the accident and medical aid funds in accordance with recognized insurance principles; and
     (b) Designed to attempt to limit fluctuations in premium rates.
     (2) The department shall formulate and adopt rules ((and regulations)):
     (a) 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)) achieve the objectives under this section, readjust rates in accordance with the rating system to become effective on such dates as the department may designate; and
     (b) In consultation with the workers' compensation advisory committee:
     (i) Regarding the level of the contingency reserve needed to maintain actuarial solvency of the accident and medical aid funds and limit premium rate fluctuations. This may include more than one level, with the level in effect to be determined by economic factors or other conditions specified in the rules; and
     (ii) When the level of the contingency reserve exceeds the amount required under the rules:
     (A) Prohibiting dividends or other similar measures that give refunds, or account credits, to employers of premiums paid or of surplus funds; and
     (B) Establishing a process under which the department may temporarily reduce rates below the rates fixed under subsection (1) of this section, but only if: (I) Employers are notified of the fixed rate, the temporary rate, the period over which the temporary rate applies, and the reason for adopting a reduced rate; and (II) the appropriate committees of the legislature are notified of any proposed action under this subsection (2)(b)(ii)(B) at least sixty days before taking the action.
     (((2))) (3) 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.

NEW SECTION.  Sec. 2   A new section is added to chapter 51.16 RCW to read as follows:
     (1) Within ten working days after the department files proposed rules adopting industrial insurance rates, the department shall, at the request of either the labor members or the business members of the workers' compensation advisory committee, or both, contract for an independent actuarial audit of the rate-setting process. The scope of the audit may include, but is not limited to, a review of whether the assumptions used by the department in setting rates are appropriate to ensure actuarial solvency of the accident and medical aid funds as required in RCW 51.16.035, and whether the department's rate-setting process is appropriately designed to limit premium rate fluctuations.      (2) The results of the actuarial audit, and any auditor recommendations, must be reported to the workers' compensation advisory committee, the governor, and the appropriate committees of the legislature.
     (3) The cost of the audit shall be paid from the accident and medical aid funds.

NEW SECTION.  Sec. 3   Section 1 of this act applies to industrial insurance rates adopted by the department of labor and industries that take effect on or after January 1, 2005.