The state Department of Labor & Industries (L&I) has announced the hard-fought workers’ compensation reform program passed in 2011 allowing structured settlements for injured workers age 55 and older is not saving the money it was expected.

The bill was originally predicted to save $1.12 billion over four years.   Fast forward two years and L&I says the program has saved $242 million less than anticipated so far.  That’s a problem, because L&I had booked those predicted savings and was counting on them to boost the troubled contingency reserve fund.

Here’s the perplexing part.  On January 21 this year, L&I officials presented the Senate Commerce & Labor Committee with an update on the 2011 reforms.  At that presentation, the agency explained the fiscal note estimate for the structured settlement reforms was pegged at $405 million for Fiscal Year 2013, but they were upwardly revising that estimate by an additional $223 million, for a total estimated savings of $628 million through Fiscal Year 2013 (June 30, 2013).

At that point in time, L&I reported 57 structured settlement agreements had been filed, 27 of which had been approved and 30 which had been rejected.  Senator Steve Conway pointed out the obvious, questioning the math behind increasing the savings by $223 million when the number of settlement agreements filed and approved was significantly lower than the 3,000 originally predicted.

“I just need some explanation of the fiscal note workers’ compensation reform savings here relative to the few number of structured settlements there are, it just doesn’t look right to me…You folks are estimating $628 million…that just doesn’t look right to me.”

L&I didn’t have a clear answer, but it turns out Senator Conway was right to question L&I’s math.

Now L&I is pondering how to reconcile having $242 million less than anticipated on its books.

One can’t help but wonder as to the timing of the good and bad news.  L&I’s presentation announcing the good news of an extra $223 million in savings took place just two days before the Commerce & Labor Committee began hearing testimony on bills to expand the structured settlement reforms, by lowering or removing the age limit and loosening the restrictive settlement pay-out schedule.  Some of the testimony against expanding the reforms centered on the argument that the program is performing and saving money and thus does not need further expansion.

Now the bad news comes as the agency begins crunching numbers to figure out the workers’ compensation rates employers will pay next year. 

Meanwhile, SB 5127, legislation lowering the eligibility age for settlement agreements to age 40, is still alive as part of budget negotiations.  Passage of SB 5127, which would dramatically increase the number of injured workers eligible for a settlement agreement, is estimated to save $500 million in the first three years.