(Written by Jack Milarch – NMHBA EVP/CEO – Originally published in the March 2007 Housing Journal)

Understanding What Workers’ Compensation Is NOT

I have been in Santa Fe representing our membership for the 60-day Legislative Session, and for two years we had worked with our coalitions to draft several bills for minor changes to our workers’ compensation law. Our goal was to hammer out some of the dings put into the system by the plaintiff attorneys and court interpretations over the last fifteen years. Unfortunately we couldn’t get it done because most legislators have forgotten what workers’ compensation is – and more importantly – what it isn’t. Farmington member Don Becker was with me one evening in the House Labor Committee and, hearing me discuss what happened to our bill, he suggested we talk more about how workers’ compensation actually functions. I think it was a good suggestion.

Please take the time to read on to learn enough so you can tell your workers what the workers’ compensation you provide for them and their families will actually cover.

The name not withstanding, workers’ compensation coverage provides benefits for more than just wage replacement for an injured worker – the coverage is fundamentally medical in nature. An injured worker who is covered by the employer’s workers’ compensation benefit pays nothing for subsequent medical care provided through the claims management department of the carrier. Sometimes there are issues about who does the treating, what treatment gets done, how long treatment continues, and how much treating physicians get paid, but from the employer and employee point of view it is generally understood that an injured worker can count on getting prompt and adequate medical care for a work-related injury. From the insurance carrier point of view this often is a very expensive benefit. The cost of medical care for a serious injury can easily stretch into the hundreds of thousands of dollars and medical care for a catastrophic injury will be in the three to five million dollar range.

The vast majority of all injured workers return to their jobs as soon as they can, very often with no other payments to them directly in compensation for not being able to work. If one week goes by and the worker cannot return to work because of continuing physical problems due to the work-related injury, the worker will begin to receive “indemnity payments”, which are a partial substitute for the missing paycheck. The fact that these indemnity payments are only a partial and limited substitute for regular pay begins the big misunderstanding of what workers’ compensation really is.

During the House Labor Committee hearing I mentioned earlier, a man who had been injured on the job years ago told legislators the workers’ compensation system had failed to treat him properly because he was not able to return to his old job, due to continuing pain, and he wasn’t getting enough money from “work comp” to return to his prior lifestyle. The man had been brought to the hearing by his attorney to say these things so legislators would feel sympathy for him and vote “no” on our bill.

If legislators had understood what workers’ compensation is and more importantly what it isn’t, they would have recognized that the man’s complaints were really the result of him expecting something from the workers’ compensation system that simply was not included in the coverage his employer had provided for him. (As I listened to him I wondered if his lawyer had something to do with helping him believe he deserved more than the coverage provided.)

This gets me back to the comment from Don Becker – that we should do more to make our contractors and their employees aware of what workers’ compensation actually covers.

It is important to remember that workers’ compensation is a no-fault system designed to provide prompt medical care to an injured worker – regardless of who caused the injury. Quick, quality medical care and some basic, TEMPORARY, wage replacement benefits are the cornerstones of the system. What many of our legislators fail to understand, and perhaps some of you as employers do not realize, is that the workers’ compensation system was not designed to replace wages, or wage earning capacity, for the life of the worker. The efficiency of the no-fault system means that each individual injured worker does not have to file a lawsuit against the employer to receive these prompt benefits, and in turn the benefits must have some caps and limitations to keep the coverage affordable and accessible for both employees and employers.

The very common misunderstanding about “indemnity” payments is a huge problem.

Injured workers are paid partial wage replacement until they reach “maximum medical improvement”. Here is a very important fact: These payments DO NOT continue until the injured worker is physically the same as he or she was before the accident, but only until the injured person is at the point where the doctor says the person is as well as they can be made to be by reasonable medical treatment. The worker is then given notice that indemnity wage replacement payments will cease. If the worker reaches this point and has not successfully returned to work, this is when their personal/family financial squeeze often becomes a crisis. Remember that for the period of time the worker was in medical treatment he or she was receiving only a partial wage replacement at best. After reaching maximum medical improvement, the worker MAY get a small “impairment” payment for a continuing period of time, but very rarely does it come close to replacing the wages the worker was making prior to the injury. In fact, impairment payments often amount to a few dollars per week.

Construction workers get injured. Usually it is a minor problem which simple medical care will handle, however, serious and debilitating injuries also happen and the financial crisis I described above occurs over and over with depressing frequency. How can this be avoided?

You and your workers must understand the limitations of your workers’ compensation coverage and face the realities that can happen. Consider purchasing disability coverage. Disability coverage can go a long way to avoiding a financial crisis when a worker has a long-term injury. Such coverage is very affordable and readily available especially when purchased on a company-wide basis. It is my belief that due to widespread misunderstandings about workers’ compensation coverage, disability coverage is seldom even considered.