The Washington State Fund was founded in 1911 with the sole purpose of delivering "sure and certain relief to injured workers by reducing to a minimum their suffering and economic loss." However, by the mid-1980s the system was failing to fulfill its obligations. The State Fund was losing $18 million a month, ending the 1985 fiscal year with a $144 million operating loss. In order to close this deficit, a 40 percent premium rate increase would have been necessary. But these financial woes were just the start: workers were receiving inadequate and often inappropriate care; businesses were demanding an end to the state monopoly; and labor feared privatization would put profit before workers. The State Fund was deadlocked by rival interests and mired in its own inertia.
In 1984, Washington Governor Booth Gardner was elected to office on a platform that espoused running government in a business-like manner. Governor Gardner enlisted an experienced business executive and a respected labor leader to turn the industrial insurance system around. Business and labor needed to work together in order to alter the performance of this huge bureaucracy. The reform started by shifting the focus of the agency from one simply dedicated to paper processing, collecting premiums, and paying bills to a full service insurance company that incorporated injury prevention programs, efficient benefit delivery systems, and strong financial management strategies. To accomplish these goals, the agency developed a strategic plan that focused the organization around the customer. The State Fund invested heavily in technology to improve efficiency and provided its employees with extensive training and recognition programs.
Labor and management teams tackled rising health care costs, which were eating 40 percent of the system's expenditures, through an aggressive cost containment program which cracked down on fraud, encouraged home treatment, and sped up the return of injured workers to their jobs. They implemented employee and worker suggestion programs to solicit new approaches, and reassigned workers to implement their own ideas. The State Fund began to review records of physicians, chiropractors, and other medical providers who showed a pattern of submitting high health bills. The state legislature was convinced to repeal a mandatory vocational rehabilitation law, adopted in 1985, which had been a major factor in increasing injured workers' time off the job. The State Fund also persuaded employers to offer new, less-taxing jobs to injured workers, at least temporarily, to ease them back to work and off full disability.
The Washington Workers' Compensation System has proven to be more efficient than public and private insurers in controlling premiums, speeding claims, and increasing customer satisfaction. By 1987, the Washington's State Fund deficit had been eliminated, only two years after the new management team was put into place, and the State Fund was generating a surplus of $340 million dollars by 1992. Washington's Workers' Compensation System has successfully transformed an overwhelmed bureaucracy and rescued a statewide system from fiscal and political bankruptcy by applying better business practices to a public agency.