What is Retro? What does the bill do?

The first hearing on the Retro bill was yesterday. It will continue tomorrow. That gives us just enough time to sort through 1) What the retrospective rating program is and 2) What this bill would do to change it.

Retro is a program through the Department of Labor & Industries, or L&I. The industrial insurance program lets your business join with other “substantially similar” employers in a group.

Why? The larger group assumes the risk and responsibility. In return, the group must seek to improve the safety practices — and performance — of its members. If the group’s premiums exceed their actual claims for the year by a certain amount, they receive a refund. (On the flip side, if their claims exceed what they paid — again, by a certain margin — they owe more.) If a retro group receives a refund, the employers who paid into it will also get a refund. There are dozens of types and sizes of retro associations, and each one decides how, when and to whom they give refunds.

So, what does this bill do?

First, it requires an annual actuarial review of the retro program between 2010 and 2015. That means that each year, an independent reviewer would look at how L&I decides things like who gets refunds, how much and how that affects the number of accidents.

Second, any group that received a refund would have 90 days to distribute the refund amount to its members. They could only keep enough for administrative costs, which they would have to detail. And they could only keep a “reasonable amount.” The distribution plan would become a public record — though it would not include the amount each employer in the group received.

What’s the purpose? Last year, the Legislature called for the first actuarial review of L&I’s retro program. That review recently found that, since 1994 a coding error has lead the department to give back $10 to $15 million per year more than they should have.

That’s the basic framework. But there’s more: During the 2008 campaign, the state Democratic party raised concerns about the Building Industry Association of Washington (BIAW, the largest retro program) using some of its retro refund for political activity — something that is not illegal. In the public hearing yesterday, some who testified in opposition to the bill said they thought it was an attempt to curb political speech. Sen. Jeanne Kohl-Welles, a sponsor, said the bill has nothing to do with that.

Tags: retro