WSIA

L&I has adopted final rules spelling out, for the first time, how a decertified municipal or group self-insurer actually pays for the claims it leaves behind. The rule was adopted July 14 and takes effect August 15. You can see the Department's notification here. It's worth a closer look, both for what it does and for a side conversation it kicked up along the way.

Filling a gap nobody wanted to talk about

Since the 2023 "good faith and fair dealing" law took effect, everyone in this space has understood the stakes of a "three strikes" decertification for a self-insured employer. What's gotten less attention is a more basic question facing municipal and group self-insurers: if a decertification ever actually happened, who pays for the open claims the Department would take over?

Unlike private self-insured employers, municipal and group self-insurers aren't required to post surety or pay into the insolvency trust fund. So when L&I worked through what decertification would actually mean in practice, it found a funding hole. The Department went to the Legislature in 2025 with HB 1275, which created RCW 51.14.500 and directed L&I to write rules addressing this. These are the rules that are now final.

What the rule does

The centerpiece is new WAC 296-15-184. When a municipal or group self-insurer is decertified under RCW 51.14.080, L&I takes over administration and payment of the claims, the same way it would if the employer had defaulted. To fund that, the decertified employer has to make L&I whole, through whichever of these applies:

• If the employer already secured its program with a bond or escrow account, L&I draws against it in full.
• Otherwise, the employer owes L&I an initial deposit equal to six months of claim payments, due within 30 days of the decertification notice. That deposit is recalculated every two years, and L&I bills the employer quarterly for costs incurred.

The employer doesn't get its money back until every claim is closed and it's gone ten years without a bill. Even then, it stays on the hook for reopenings and new occupational disease claims tied to its period of self-insurance.

The rule package also cleans up some related language in WAC 296-15-121, -123, and -151, mostly to remove what the Department viewed as redundant carve-outs and to base credit-rating-triggered surety increases on "total outstanding liabilities" rather than "estimated claim liabilities." L&I's required cost-benefit analysis document concludes none of this creates new costs for employers in good standing, and one commenter (Association of Washington Cities) pushed L&I to confirm that cleaning up the old public-entity exemption in -121 wasn't quietly creating new obligations for entities that aren't decertified. L&I agreed and says the cross-references in -151 and -184 make clear it isn't.

Worth remembering: this whole framework applies only to municipal self-insurers (which, for these purposes, is a wide net covering essentially any public agency self-insurer) and to "group" self-insurers, which under RCW 51.14.150 means public hospital districts and school districts. Private self-insured employers are untouched by any of this—they already post collateral and pay into the insolvency trust fund, so the gap this rule fills never existed for them.

It's also worth noting that, three years into the good faith and fair dealing law, L&I still hasn't issued a single violation, despite multiple strike requests from the claimants' bar. Our sense continues to be that both the Department and the self-insured community would rather focus on compliance than see this rule ever actually get used. The penalties are severe, and taking over a decertified employer's claims is a heavy lift for L&I too. But that doesn't mean there won't be constant pressure on the Department by those who would use this law opportunistically against self-insured employers and their claims handlers.

A comment that went beyond the rule, but not beyond notice

One comment in the record deserves a mention. The Washington Federation of State Employees used the comment period to raise concerns about self-insured employers' payment practices toward Language Access Providers, citing L&I data on interpreter invoices more than 90 days past due. L&I's response was correct as far as it goes: that issue is outside the scope of this particular rulemaking, and the comment was forwarded to L&I's medical program staff instead.

But we'd be doing you a disservice if we didn't flag it. That comment, unrebutted in the rulemaking record, leaves an impression that self-insured employers are routinely sitting on interpreter invoices. Employers we've heard from tell a more complicated story: bills that never reach them because the provider set up the interpreter directly, invoices that arrive in batches long after the appointment, and, in at least one case, outright fraudulent billing. None of that is an excuse for legitimate invoices going unpaid, but the LAP billing relationship has real problems on both sides, and it's not accurate to lay them entirely at self-insured employers' feet. We'll be watching for where this conversation resurfaces, since it clearly isn't going away just because it didn't belong in this rule.