Initiative 1082 will create a market for private insurers to sell Labor & Industries Insurance (L&I, aka workers comp) in Washington State. The state is currently the only provider of workers comp, except in cases of large employers, and some argue that this initiative, heavily backed by major insurance carriers, would create an unregulated market for private insurers to exploit.
The opposing campaign, VoteNo1082.com, points out that certain text in the initiative would allow the licensed rating organization (LRO) to pre-emptively issue manual rates before the Commissioner approves them. The LRO is delegated this responsibility, by the Commissioner (by law), and it is composed of a representative from every L&I insurer.
All of the laws governing the amount and provision of workers’ comp benefits are set in statute by the Legislature and all workers’ comp insurers must follow them. According to the Office of Insurance Commissioner, who I-1082 gives regulatory authority over approving and licensing private insurers, they “will be subject to the regulatory requirements of the state insurance code, involving admission, financial, solvency and market analysis oversight,” they “will be subject to the unfair claims practices rules and statutes,” the OIC will have authority to approve or deny variations from rates filed by an independent ratings bureau, and “consumers who disagree with claims decisions made by private insurers will be able to file complaints with the OIC.
The oversight of insurers provided by I-1082 is actually stronger than current law. The Industrial Insurance program at the Department of Labor & Industries is not subject to consumer protection laws, the Insurance Fair Conduct Act or other laws commonly used to govern insurance companies. I-1082 corrects this and provides greater protection for small businesses and injured workers.
If we assume the best, the LRO and Commissioner will work closely to ensure that rates and other necessary regulations are handled through open and public discourse. If we assume the worst, insurance companies will not need approval to enforce new rates. I assume that if the commissioner were to veto a suggested rate adjustment, the insurer(s) would have to roll back rates to those approved previously.
As far as I can tell, there is some initiative text that supports oversight from the State Insurance Commissioner, but the vagueness of the initiative could lead to varying interpretation, stalling techniques, and a potentially biased ratings organization. Additionally, there are many concerns regarding a lack of regulation because Washington State has been the sole arbiter of coverage and has therefore not needed to manage the market externally.
I think that more clearly defined rules for government oversight of this newly created commodity market would ease voter concerns, but only vague defenses have been issued thus far.