The work comp system is slipping a little

This year’s big news about workers’ compensation is that things are getting slightly worse, slowly, though some of the trends are not so bad.  In other words, it’s not big news.  As a factor in the state’s economic competitiveness, it’s not good news.

The National Council on Compensation Insurance, NCCI, presented its annual New Mexico statistical report recently.  NCCI provides the analysis used by the insurance industry to set rates in workers’ comp.

Premiums will be going up.  That’s never good news. New Mexico businesses insured in the voluntary market (where most businesses buy insurance) will see an average increase of 4 percent in the coming year.  The residual market, also called the Assigned Risk Pool, will see a 2.2 percent increase.  This market is for businesses that can’t get coverage in the voluntary market, usually because they are new, very small or higher risk.  It always costs more.

About half the states that report to NCCI are showing premium reductions rather than increases this year.  New Mexico’s 4 percent increase is among the highest in the country.

The Assigned Risk Pool is growing.  Statistics do not reveal whether this is good or bad news.  It could mean that small businesses are getting kicked out of the voluntary market because insurers don’t want them (bad) or that new businesses are starting and are not yet ready for the voluntary market (good).  To some extent it reflects the growth of oil and gas, high-risk industries where many companies will always be in the assigned risk marketplace.  As of June 2013 there were 2440 policies in the pool, representing 8.6 percent of New Mexico policies (these statistics do not include self-insured employers, businesses covered through self-insured groups or the public sector).

New Mexico has had a sharp increase in very large claims.  In 2012, insurers paid $27 million on claims higher than $4 million each.  Since indemnity costs are capped by law, these claims must have had staggeringly high medical expenses.  For policy years 2009-2011, an estimated $73 million was paid for 29 claims.  These are very atypical numbers; no explanation is offered.

Medical costs continue to increase.  This year’s report did not break down the details, but, as I have written previously, addictive prescription painkillers are an increasing factor.  New Mexico’s medical costs for lost time claims in 2011 averaged $42,000, compared to a national average of $29,000.

Claims are stretching out longer. This means insurers are paying benefits to injured workers for a longer period.  It implies that these workers are not going back to work at their previous jobs or at previous wages.  The issue of return to work, or the lack of it, has been neglected in New Mexico for some years.  New Mexico had 403 permanent partial disability claims per 100,000 workers, compared to a national average of 331.

Indemnity costs (cash benefits paid to injured workers) are relatively steady but still the highest among several Western states.

These statistics require some interpretation to make sense.  NCCI presents its numbers every year with the implied assumption that increasing costs are bad.  That’s not always true, because there are other factors besides cost, but this year it is.  The trend simply means that New Mexico is slipping further behind the national average, not managing claims as well as other states, not taking badly needed action to curb workplace drug and alcohol use, not getting a handle on painkiller addiction and not moving its injured workers back into the workforce.

So the workers’ comp system is not helping New Mexico in the competition for jobs and industry.  Repeating what I’ve said in previous columns, our much vaunted workers’ comp reform is 23 years old and sagging.

Triple Spaced Again, © New Mexico News Services 2013

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