For New Mexico small businesses with the highest cost premiums in the workers’ compensation system, a glimmer of good news: you might see a premium decrease next year. This is according to statistics presented last week by NCCI, the National Council on Compensation Insurance, the major source of data about workers’ compensation costs.
Costs have declined by about 5 percent in the “residual market” or Assigned Risk Pool, where you get your insurance if your business is so small or such a bad risk that no insurance company would voluntarily cover you. The pool is automatically more expensive than the voluntary market. This potential decrease could be a bit of relief from the regulatory and cost pressures that afflict small business.
NCCI presented this information at its annual New Mexico Advisory Forum. However, the good news on the Assigned Risk Pool is one of few bright spots.
The other bright spot is the continued, though slowing, decrease in indemnity or lost-time claim frequency. In plain English, fewer workers are getting hurt. Most claims have always been “medical-only,” involving relatively simple injuries paying only medical bills. Indemnity claims, in which the worker gets a check for lost work time, are much more expensive. The reduction in lost time claims has been dramatic over recent decades and is probably due to big improvements in safety. But the rate of reduction is slowing, so it’s not continuing to reduce costs.
The really bad news is an increase in total loss costs of 7.4 percent for the New Mexico voluntary market. Based on this number, businesses can expect an increase in premiums next year (which will vary with specific industry trends and individual company performance). For workers, that means another drain on the employer’s money and a little less job opportunity.
We don’t compare well to other states. Of the 38 states that use NCCI for these filings, 12 have decreasing costs and the rest are going up. The 7.4 percent for New Mexico is the fourth highest increase, and the highest in our region. Just what we needed to help the economic recovery.
What’s increasing costs is that lost time claims are costlier than in the past. Workers are off work for longer periods and the medical costs are higher. As a dramatic example, NCCI isolated the small number of claims that cost $500,000 or more. From 2003 – 2005, there were 13 such claims. From 2006 – 2008 there were 33 claims, and the total payments almost tripled, to $37.2 million or an an average of more than $1 million per claim. Small numbers, big bucks. Were these workers more seriously injured than those in the past? I doubt it. Something systemic has changed.
This trend is likely to continue not only because of problems in the workers’ compensation law, which are massive, but possibly also because the system relies on returning injured workers to their pre-injury employers, and in today’s economy that’s harder for employers to do. The worker who can’t do his job efficiently due to injury is more of a liability when the employer is competing harder to stay in business.
NCCI usually stays primly on the statistical analysis side and doesn’t give moral conclusions. But I do. New Mexico is well past the time when we could pat ourselves on the back for a reform that is more than 20 years old and, bluntly, now obsolete. We need to fix this system again. To do that, we need a new generation of business and political leaders who care about the numbers and the nitty gritty policy details, and also care about the human beings they represent.
Triple Spaced Again, © New Mexico News Services 2011