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Friday, August 3, 2012 - Page updated at 04:30 p.m.

Lawmakers need to keep close eye on workers' comp reforms


IN September, the Department of Labor and Industries will set next year's workers' compensation rates. The base increase should be well below double digits. The economy is still too weak to sustain anything more.

Workers' compensation is mandatory insurance paid by employers and employees to cover the cost of work-related injuries. It is a necessary part of the social-safety net — but it is also part of the cost of creating a job. A rate increase makes job creation more difficult.

The department assures that the basic increase, which it needs to break even, will be fairly small. That's good. The worry now and over the next few years is over proposals for additional increases to solve long-term problems.

The main issue is that the contingency fund for paying benefits has been drawn down from $2.1 billion in 2007 to $621 million as of March 31. This was done because the economy was weak and the state didn't want to impose an additional burden. It was the right policy then and it would be comforting to continue it now, but the fund is too low. It should be built back up. That is the long-term problem.

The reforms passed by the Legislature in 2011 should help solve it. They included an immediate cost-of-living freeze for benefits, the creation of a managed-care network, a subsidized back-to-work program and the offer of one-time payouts as an alternative to disability pensions.

But the medical network is not finished. The return-to-work program is new. So are the one-time payouts; only a few dozen of these "structured settlements" have been done.

In total, the 2011 reforms were supposed to save $1.1 billion to $1.2 billion in the first four years. The system needs those savings to avoid future rate increases on employers and workers.

Legislators may well have to revisit the system and reform it even more. If the reforms of 2011 don't generate the savings promised, they will certainly have to do it.

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