(Written by Jack Milarch – NMHBA EVP/CEO – Originally published in the March 2013 Housing Journal)
Workers’ Compensation Changes NMHBA’s Top 2013 Legislative Issue
By the time you read this, the 2013 Regular Session of the Legislature will be history. As NMHBA President Pat Casey notes in his article this issue, the annual membership visit to the Roundhouse was a success, and with the expertise of our members who have participated regularly for years, our time was well spent and effective.
Our number one issue this year was, and is, trying to get a package of changes to our state’s workers’ compensation statutes enacted. Workers’ compensation is an insurance requirement which is created and regulated strictly by state government. We in New Mexico are in charge of our own destiny on this one!
Why is this issue our top priority? Construction is a labor intensive and often hazardous industry. Even when everyone is trying their best to avoid problems, accidents happen. Most accident-related injuries are minor and the resolution is routine and relatively inexpensive to the work comp system. Arrangements for medical care are handled, sometimes a few wage replacement checks are sent out, and then the worker is back on the job.
Unfortunately, however, our industry also produces a steady stream of catastrophic and extremely expensive accidents. By way of our workers’ compensation insurance system the cost of all these accidents is spread throughout the industry by way of the trade related basic rate system. Workers’ compensation issues are always near the top of our priority list because nearly all of our members are directly impacted by the workers’ compensation system.
Workers’ compensation costs can vary tremendously, in part because of the individual businesses’ own work-related injury record, but even more due to the carriers’ cost of “doing business”. These costs are directly related to the workers’ compensation state law, Workers’ Compensation Administration rules, and by a continuous stream of court decisions interpreting the law as they see it.
How bad can it get? Some of you may remember the “old days” before 1991 when our state’s workers’ compensation system was creating one of the worse situations in the entire country. It had become so bad that some businesses, such as roofing contractors, were paying one dollar of workers’ compensation premium for each dollar of payroll! The law encouraged disputes and the workers’ compensation claim system had disintegrated into an unpredictable lottery situation. Everybody spent all their efforts “gaming” the system. Disputed claims went through our regular court system and attorney fees were taking a big bite out of every workers’ compensation dollar. Even with those sky high rates nearly all carriers had left New Mexico because they couldn’t cover their expenses. We had an ineffective and ridiculously expensive system, but every employer was required to participate.
Some, however, found great financial reward under that situation. Those interests have not done nearly as well since the 1991 reform, and they try constantly to return our system to the “old days”. Also there are powerful politicians who believe workers’ compensation is an inadequate remedy and would like to return New Mexico to that type of system we had prior to the 1991 reform. I relate this again to warn that we could, in fact, slip back to that situation if we fail to pay attention.
NMHBA and Builders Trust participate in a coalition of business associations which constantly monitors what is happening with our Workers’ Compensation laws, court cases, and rules. Most of the groups participating in the coalition on a regular basis are construction related and most have their own self insured group like our Builders Trust. This shouldn’t surprise anyone because when the worker’s compensation system “goes bad” the business group which get to suffer first, and most, are construction related (and also mining, extractive industries, and trucking).
With the current cost pressures all NM insurance carriers are seeing, it is inevitable that workers’ compensation rates will start going up. This follows the very long period of historically low rates our businesses have enjoyed for more than a decade. Claims costs are rising due to a number of factors but definitely including decisions of our state courts which have expanded claims rights. Plaintiff attorneys work every day to get more benefits from the “system” and over the years since the reform they have succeeded in a number of areas. This expansion of rights raises our cost of doing business. The most effective way to control this problem is to change our law in response to this erosion.
Controlling our destiny was one of the reasons New Mexico Home Builders Association created our Builders Trust affiliate. Since 1987 we have been directly in the business of providing workers’ compensation coverage to our members. Every day we are helping injured workers get treated and back to work, we are collecting premium, and we are representing our members in court when we feel that is appropriate. In short, we know what is going on with our New Mexico worker’s compensation system. And we know when our law needs change – so in the 2013 Session we proposed a package of bills to put our system squarely back on track.
For this Legislative Session NMHBA and Builders Trust, in conjunction with the coalition I mentioned earlier, proposed a package of bills intended to maintain the delicate balance between the efficient delivery of benefits to injured workers and the cost of the system to our employers. These included a number of technical fixes where our “reform” law is unclear and several changes to make the Workers’ Compensation Administration operations more efficient. We also included a bill creating a strong disincentive for employees to come to work inappropriately under the influence of drugs and alcohol. We are very disappointed by the opposition to our bill from organized labor friendly legislators. Unfortunately for our side, the opposition was strong enough to stop our efforts. But we will keep trying. Our history tells us what will eventually happen if we don’t stay vigilant on this issue.