Workers’ compensation rates in Washington are set to rise by 3.8% in 2025, the Washington State Department of Labor and Industries (L&I) announced.

AM Best reported that the department attributed the increase to several factors, including wage growth.

Although the average rate increase is nearly 4%, L&I stated it would require a 5.5% hike to achieve its projected break-even point. To cover the shortfall, the department plans to draw from its reserves. On average, the increase will cost employers approximately $52.50 annually per employee.

“This modest change helps us cover the higher cost of crucial wage and medical benefits for workers, while keeping rates steady and predictable,” L&I director Joel Sacks said in a written statement to AM Best.

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Unlike many states, Washington calculates workers' compensation premiums based on the number of hours worked rather than as a percentage of payroll. L&I explained that rising wages in the state have a direct impact on its costs for providing coverage.

Between 2012 and 2023, the state’s average wage increases generally outpaced workers' compensation premium hikes, except in 2022 when wage inflation was 2% compared to a 3.1% rise in premiums.

Currently, employees in Washington contribute 24% of their workers' compensation premiums, a structure that L&I noted is uncommon compared to other states. The department indicated that the employee portion is expected to remain consistent with prior years.

L&I determines rates by analyzing various factors, including the expected costs of benefits, its contingency reserve levels, wage and benefit inflation, operating costs, and investment returns.

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The 3.8% increase is an average, with rates varying depending on industry classifications and individual claims history. For example, beer, wine, and soft drink distributors are projected to see a 16% average rate increase, while shake and shingle mills could experience a 33% decrease.

Washington’s increase contrasts with trends in other states like Colorado, where workers' compensation premiums are forecast to decline by 4.3% in 2024.

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