BILL REQ. #:  S-1314.1 

Read first time 02/09/2005.   Referred to Committee on Labor, Commerce, Research & Development.

     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; adding a new section to chapter 51.08 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:
     (1) With respect to any enrollment fees and other payments made on or after the effective date of this section by the group's members to the sponsoring entity solely to participate in the group, a sponsoring entity must return to the group's members any portion of the enrollment fees and other payments not used to administer the group's program or retained as reserves to meet any assessments made by the department.
     (2) Any portion of the enrollment fees and other payments not returned to the group's members must be used to administer the group's program or retained as reserves to meet any assessments made by the department. Funds used to administer the group's program may be used only to pay for expenses directly related to substantially improving worker safety, accident prevention, and worker outcomes as specified in section 5 of this act, and not for any other purposes.

NEW SECTION.  Sec. 2   A new section is added to chapter 51.18 RCW to read as follows:
     (1) With respect to incentive payments made on or after the effective date of this section by the department to a sponsoring entity to recognize substantial improvements in worker safety, accident prevention, and worker outcomes, a sponsoring entity must return to the group's members any portion of the incentive payments not used to administer the group's program or retained as reserves to meet any assessments made by the department.
     (2) Any portion of the incentive payments not returned to the group's members must be used to administer the group's program or retained as reserves to meet any assessments made by the department. Funds used to administer the group's program may be used only to pay for expenses directly related to substantially improving worker safety, accident prevention, and worker outcomes as specified in section 5 of this act, and not for any other purposes.

NEW SECTION.  Sec. 3   A new section is added to chapter 51.18 RCW to read as follows:
     (1) With respect to interest earned on or after the effective date of this section on reserves maintained by the sponsoring entity to meet any assessments made by the department, a sponsoring entity must return to the group's members any portion of the interest not used to administer the group's program or retained as reserves to meet any assessments made by the department.
     (2) Any portion of the interest not returned to the group's members must be used to administer the group's program or retained as reserves to meet any assessments made by the department. Funds used to administer the group's program may be used only to pay for expenses directly related to substantially improving worker safety, accident prevention, and worker outcomes as specified in section 5 of this act, and not for any other purposes.

NEW SECTION.  Sec. 4   A new section is added to chapter 51.18 RCW to read as follows:
     If a retrospective rating group is disqualified or does not reenroll in the program, the sponsoring entity must return to the group's members any portion of reserves maintained by the sponsoring entity that are not used to administer the group's program as specified in section 5 of this act or fully pay the group's final obligations.

NEW SECTION.  Sec. 5   A new section is added to chapter 51.18 RCW to read as follows:
     For purposes of this chapter, expenses directly related to substantially improving worker safety, accident prevention, and worker outcomes may include:
     (1) Safety education and safety education activities;
     (2) Risk management activities;
     (3) Claims monitoring activities;
     (4) Return-to-work program-related assistance;
     (5) Legal expenses related to the group's program; and
     (6) Investment-related expenses for reserves retained to meet any assessments made by the department.

NEW SECTION.  Sec. 6   A new section is added to chapter 51.18 RCW to read as follows:
     (1) Each sponsoring entity shall report annually to the department in a form specified by the department on:
     (a) Funds used to administer the group's programs and retained as reserves to meet any assessments made by the department; and
     (b) Expenses directly related to substantially improving worker safety, accident prevention, and worker outcomes.
     (2) The department shall periodically inspect and review records of sponsoring entities to assure that the purposes of this act are fulfilled.

Sec. 7   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)) incentive payments to recognize substantial improvements in worker safety, accident prevention, and worker outcomes.

Sec. 8   RCW 51.18.020 and 1999 c 7 s 3 are each amended to read as follows:
     Prior to allowing initial entrance into the state's retrospective rating plan, the department shall review each proposed retrospective rating group 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 sponsoring the retrospective rating group must exist primarily for a purpose other than that of obtaining or offering insurance coverage or insurance related services;
     (3) 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) All employers in the retrospective rating group must be members of the sponsoring entity;
     (5) All employers in the retrospective rating group must have an industrial insurance account in good standing with the department;
     (6) 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)(a) With respect to any coverage period beginning before the effective date of this section, 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; and
     (b) With respect to any coverage period beginning on or after the effective date of this section, the retrospective rating group must be composed of employers, a majority of whom are classified in the same two-digit NAICS classification;
     (8) 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) 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. 9   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))) With respect to any coverage period beginning before the effective date of this section:
     (a) 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)) section 5(1), chapter 7, Laws of 1999.
     ((However,)) (b) New employers proposed for addition to a retrospective rating group on or after July 25, 1999, and before 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.
     (2) With respect to any coverage period beginning on or after the effective date of this section:
     (a) Except as provided in this subsection, employers who have been a member of an existing, approved retrospective rating group prior to the effective date of this section may continue in that group even if they are not classified in the same two-digit NAICS classification as a majority of the employers in that group. However, such employers may not continue in that group if, during any enrollment period beginning on or after the effective date of this section, they are classified in the same two-digit NAICS classification as a majority of the employers in a different group.
     (b) New employers proposed for addition to a retrospective rating group must be classified in the same two-digit NAICS classification as a majority of the employers in the group. If new employers are not classified in the same two-digit NAICS classification as a majority of the employers in any group, the department may approve addition of new employers to the retrospective rating group that is composed of the most similar employers.

NEW SECTION.  Sec. 10   A new section is added to chapter 51.08 RCW to read as follows:
     "NAICS" means the North American industry classification system.

NEW SECTION.  Sec. 11   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. 12   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.