WORKER’S COMPENSATION IN NEW MEXICO
A SUCCESS STORY FOR EMPLOYEES AND EMPLOYERS
Al Berryman
New Mexico State University
Introduction
In the 1980’s there was a crisis in workers’ compensation in New Mexico. There
were only a few companies that were willing to write workers’ compensation insurance
and rates were high, especially for small employers. 1 A special session of the legislature
met in September 1990 and enacted a reform law that became a model for the nation.
This paper will serve as a guide for those who wish to understand the principles that
made the law successful. It will show that current benefits in New Mexico are equal to or
better than the surrounding states and point to a major threat to the success of the Act
History of Workers’ Compensation
The original concept of workers’ compensation arose in Germany in the late 19th
century. In 1897 Great Britain passed the British Compensation Act, which became the
model for the American workers’ compensation system.2 Under common law an injured
worker could not recover compensation from his employer for an injury that occurred
while he was employed, if his negligence contributed to the accident. The employer could
also assert the defense of assumption of risk, i.e. that the employee assumed the risk of
injury by work working in a dangerous environment. The fellow servant rule that came
from the 1837 English case of Priestly v. Fowler stated that employers were not liable for
injuries to employees caused by another employee. In addition, suits for negligence were
expensive, and few employees had the resources to successfully sue their employers. 3
Workers’ Compensation was designed to be a “no fault system” where the
negligence of neither the employer or of the employee is considered. An employer gives
up his due process rights and is subject to liability for injuries to his employee even if he
is not responsible in any way for the injury. An employee is entitled to benefits even if he
was responsible for the accident. In return, the employee gives up his right to sue the
employer for injuries sustained in the course of employment. 4
From a social point of view this system makes a great deal of sense for both the
worker and employer. Consider what happens when an employee is injured on the job.
There are four ways that society could deal with the problem. First, the employee could
be at the mercy of his friends, family, and own resources. Second, he could sue his
employer and hope for a favorable outcome after the delay and expense of using the
courts. Third, the employee could be assisted through government assistance or welfare.
Fourth, the worker could be entitled to prompt benefits for his medical expenses and lost
income as in workers’ compensation. In the last case the cost is shifted to the employer
who in turn shifts the cost to consumers.
The purpose of workers’ compensation insurance is well stated by the New
Mexico Statute in §52-5-1 Purpose:
“It is the intent of the legislature in creating the workers’ compensation
administration that the laws administered by it to provide a workers’ benefit system be
interpreted to assure the quick and efficient delivery of indemnity and medical benefits to
1
injured and disabled workers at a reasonable cost to employers who are subject to the
provisions of the Workers Compensation Act. (Chapter 52, Article 1 NMSA 1978). It is
the specific intent of the legislature that benefit claims cases be decided on their merits
and the common law rule of “liberal construction” based on the supposed “remedial”
basis of workers’ benefits legislation shall not apply in these cases. The workers’ benefit
system in New Mexico is based on a mutual renunciation of common law rights and
defenses by employers and employee alike. Accordingly, the legislature declares the that
the New Mexico Workers’ Compensation Act and the New Mexico Occupational Disease
Act are not remedial in any sense and are not to be given a broad liberal construction in
favor of the claimant or worker on the one hand, nor are the rights and interests of the
employer favored over those of the employee on the other hand.”
Workers’ Compensation Benefits for Employees
Workers’ Compensation Benefits can be divided into two broad categories,
medical benefits and indemnity. Indemnity payments are intended to replace the lost
income of the worker. There are two types of indemnity payments, temporary total
disability (TTD) and permanent partial disability (PPD).
TTD provides partial replacement of a worker’s wages until he has reached a state
of maximum medical improvement (MMI) or returned to work. In most states this is set
at 66 2/3 % of the pre-injury wage. This reflects the fact that these benefits are not subject
to federal income taxation and seeks to encourage the worker to return to work as soon as
possible.
A PPD benefit provides income to a worker after he has reached MMI, but still
retains some type of impairment or disability. PPD benefits are, in turn, divided into two
types. Scheduled benefits provide a specific amount of payment based upon an amount of
injury to a certain body part, such as the loss of a hand, and these are listed in the law.
Unscheduled PPD benefits provide a payment based on injury to the body as a whole,
such as a back injury.
In considering the adequacy of workers’ compensation benefits, it should be
remembered that the goal is for injured workers to be given the opportunity to return to
work as soon as possible with a minimum dependence on compensation awards. 5
Workers’ compensation benefits may be provided in two ways, either through an
insurance company or through self-insurance. Most employers take out an insurance
policy that provides that in return for the premium paid by the employer, the insurance
company will pay the benefits as required by the Workers’ Compensation Act of the
states in which the employer does business. For medium and large employers the
premium paid is adjusted based upon the actual claim experience of the employer. Large
and financially stable employers will frequently self-insure their workers’ compensation
risks and pay benefits, as claims are due. In addition smaller employers may band
together in group self-insurance programs. In all methods it is the employer who is
responsible to provide benefits. Workers do not pay for any of the benefits.
2
Current New Mexico Workers’ Compensation Benefits
Employers are responsible for 100% of the cost of medical care without any limit.
There is no deductible or coinsurance paid by the employee. The worker is entitled to
benefits for life for reasonable and necessary care.
TTD benefits are paid for injuries that cause a disability to last for more than
seven days. If the disability lasts for more than 28 days, compensation is also paid for the
first seven days. TTD benefits are payable until the worker reaches maximum medical
improvement (MMI) subject to a maximum of 700 weeks. In the event of permanent and
total disability as defined in § 52-1-25, payments are required for the worker’s life.
The rate of compensation is 66 2/3% of the worker’s wages prior to the accident,
subject to the maximum limit, which is equal to 100% of the state average weekly wage.
In 2008, the maximum is $635.46. So a worker making $600 per week would receive a
TTD benefit of $400. A worker making $1,000 would receive the maximum of $635.46.
Benefits received are not subject to federal income taxation. Thus the actual out of
pocket loss for an injured worker is smaller than it appears.
Scheduled PPD benefits are paid for the loss or loss of use of specific body
members including a hand, arm, finger, toe, eye, sight or hearing. The loss of use is not
the same as impairment. Benefits are paid according to the number of weeks set forth in §
52-1-43. Scheduled benefits are not paid in any week in which TTD is paid. Table Four
provides examples.
In cases where there is the loss of, or loss of use of, both arms, hands, legs, feet
eyes or any combination of the two, benefits are paid for the worker’s lifetime.
PPD benefits for injuries not listed as a scheduled injury are paid based upon
impairment ratings. The benefit is adjusted based upon wages before and after the injury.
If the post injury wage is less than the pre-injury wage benefits are a percentage
compensation rate. This benefit is adjusted according to a formula that considers the
worker’s age, education, specific vocational preparation, training, and residual physical
capacity. An older, less educated worker will have the benefit increased. If the worker’s
post MMI wage is equal to or greater than the pre-injury wage, benefits are calculated by
multiplying the compensation rate by the percentage of impairment.
For whole body injuries, benefits are paid for 500 weeks if the disability rating is
less than 80%. If the rating is greater than 80% the benefits are paid for 700 weeks.
In cases of death, benefits are paid to the worker’s dependents up to a maximum
of 700 weeks. The maximum rate in 2008 is $635.46 so the maximum death benefit is
$444,882. In addition, funeral expenses up to $7,500 are paid.
Change in the 1990 Reform Act
As a result of the workers’ compensation crises of the 1980’s the New Mexico
legislature met in a special session in September 1990. A comprehensive reform package
was enacted and became effective January 1, 1991.
An Ombudsman program was established to provide both employers and
employees with a neutral source of information. This is especially valuable for injured
employees. The law and some of its benefits can be confusing for non lawyers. Having an
Ombudsman provides a means for an employee to get advice without having to hire an
3
attorney. This saves expenses for everyone. In 2006 there were 15,260 contacts and
4,798 new cases. There were 2,077 disputes submitted of which 1,400 were resolved. The
majority of the contacts, 68.4%, were from employees.6
Lump sum settlements were sharply curtailed under Section § 52-5-12. The Act
specifically states that it is in the best interest of the worker to receive periodic payments.
The Act forces workers to use the benefits for their intended purpose as a replacement for
lost income.
In order to receive a lump sum settlement a worker must first be back at work
earning at least 80% of his former wage. A provision is included for a lump sum
settlement to pay debts incurred during the course of the injured worker’s disability, if the
worker has reached MMI. The workers’ compensation judge must approve all lump sum
settlements.
Workers’ compensation medical costs typically run about 50% of claims paid. In
New Mexico medical costs in 1990 were 53% of total workers compensation costs. 7 In
2006 the percentage was 43.5%%.8 This drop appears to be the result of the use of fee
schedules and medical cost containment required by the 1990 Act.
A totally new approach to PPD was introduced by the Act. This required the use
of a formula in determining the amount of benefit using the worker’s age, education,
vocational preparation, training and residual capacity. Higher benefits are given to older
and less educated workers. The Act required the use of the American Medical
Association’s Guides to the Evaluation of Permanent Impairment in determining the
extent of disability.
The maximum benefit for a primary mental impairment was set at 100 weeks. A
primary mental impairment is a mental illness that arises out of an accidental injury
where there has been no physical injury. For a secondary mental impairment, the
maximum duration was set at either the same as for any physical impairment or 100
weeks whichever is greater. A secondary mental impairment is a mental illness that
results from a physical impairment. However, in the case of Breen v. Carlsbad Municipal
Schools the New Mexico Supreme Court ruled that this part of the law was not
constitutional. 9
A new definition for Permanent Total Disability was included that required the
loss of, or the loss of use of` both arms, hands, legs, or any combination of two. The
duration of benefits was increased from 700 weeks to life.
A requirement for vocational rehabilitation that was in the old law was
eliminated. However, the design of benefits encourages vocational rehabilitation, because
the cost to an employer is less if he can assist an employee to return to work.
The reform Act required a safety and fraud division within the Workers’
Compensation Administration to promote safety and combat fraud.
A major complaint in the 1980’s was the lack of good information on Workers’
Compensation in New Mexico. This was addressed in two ways. First, under section 525-3 the director of the Workers’ Compensation Bureau was given access to information
from insurance companies, employers, the state Human Resources Department, the
Taxation and Revenue Department, the Department of Insurance and required to make
annual reports of statistical information on workers’ compensation. The department has
done a great job of providing not only statistical type information, but also a great deal of
4
information for employer and employees. They have a website with a great deal of
information at www.state.nm.us/wca/.
Second, a new insurance company was created to write workers’ compensation
with an emphasis on small and medium size employers. The company is not a state
agency and receives no state appropriation. The New Mexico Mutual Casualty Company
was initially capitalized with ten million dollars of state bonds. The company repaid these
bonds ahead of schedule and has been quite successful.
As a result of these changes we now have good information available on workers’
compensation in New Mexico for the years following the Reform Act.
How well has the 1990 Reform Act Worked?
The purpose of the Reform Act was to reduce employer costs, eliminate wasteful
litigation, provide prompt benefits to employees, and to aid the state economy as a whole.
There were many changes in the Act and the logical question is this: Did they accomplish
the objectives that the legislature intended?
In 1992 45.9% of the insurance premiums for workers’ compensation were in the
assigned risk plan, which is a program for employers who are unable to find an insurance
company who will write their insurance. In 2006 this percentage was 9.5% which mirrors
the national average of 9.5%. 10
Employer costs are much lower than prior to the Act. In 1994 New Mexico’s
employers paid an average of $5.75 per $100 of payroll. In 2006 employer’s paid an
average of $2.41 per $100 of payroll.11 From 1992 to 2000 insurance rates declined
52.4%. Premium rates increased from 2001 to 2006, but decreased in 2007. 12
The number of insurance companies writing workers’ compensation in New
Mexico in 2006 was 197.13 This compares to only four in 1990.
The graph below shows the underwriting results for companies writing workers’
compensation in New Mexico for the period 1988 to 2005. The “combined ratio”
includes claims, claims expenses, taxes, and other expenses, divided by the premium. It
does not include investment income. A company with a combined ratio of 1.00 would be
paying out in claims and expenses exactly what it is taking in
revenue.
NEW MEXICO COMBINED RATIO
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
NCCI, Policy Year Underwriting results valued as of December 31, 2006.
5
This is a great example of the free market at work. As workers compensation
insurance became profitable, companies entered the marketplace and prices went down.
It is especially interesting that these gains have been made while benefits have
increased during this period. Benefits in New Mexico are indexed to the State Average
Weekly Wage, so that the maximum benefits payable keep pace with changes in wages
and inflation. The increases in maximum benefit levels are shown in Table one in the
appendix.
Despite rapidly increasing medical costs and increases in benefits to workers the
costs paid by employers is less than they were in 1990.
Why was the Reform Act so successful?
Workers’ Compensation insurance rates are influenced by many factors, including
investment returns, claim costs and the level of competition. However, the primary driver
of rates is the frequency and severity of claim costs.
There has been a significant drop in the reduction of claims as a proportion of
employment in the state.
STATE
FIRST
REPORTS PER
YEAR
EMPLOYMENT
REPORTS
100 WORKERS
1991
543,347
40,527
7.46
1992
560,092
36,145
6.45
1993
580,782
37,436
6.45
1994
611,512
44,730
7.31
1995
647,137
45,189
6.98
1996
650,966
43,605
6.70
1997
663,412
43,402
6.54
1998
676,271
40,728
6.02
1999
682,982
36,292
5.31
2000
697,362
40,279
5.78
2001
702,234
42,434
6.04
2002
719,014
41,055
5.71
2001
728,216
40,799
5.60
2004
744,278
40,921
5.50
2005
759,473
40,234
5.30
2006
791,352
37,007
4.68
Source: 1989-2006 Annual Reports Workers’ Compensation Administration.
The trends in indemnity claims show an even sharper decline.
YEAR
1991
1992
1993
1994
STATE
EMPLOYMENT
543,347
560,092
580,782
611,512
INDEMNITY
CLAIMS
8,344
8,000
7,530
7,172
CLAIMS PER
100 WORKERS
1.54
1.43
1.30
1.17
6
1995
1996
1997
1998
1999
2000
2001
2002
2001
2004
2005
2006
647,137
650,966
663,412
676,271
682,982
697,362
702,234
719,014
728,216
744,278
759,473
791,352
6,836
6,580
5,300
5,919
5,996
6,108
6,121
5,771
5,280
5,765
5,799
5,189
1.06
1.01
0.80
0.88
0.88
0.88
0.87
0.80
0.73
0.77
0.76
0.66
Source: 1989-2006 Annual Reports Workers’ Compensation Administration
In addition the percentage of indemnity claims to first report of injuries has also
shown a significant decline.
FIRST
INDEMNITY
REPORTS
CLAIMS
PERCENTAGE
1991
40,527
8,344
20.6
1992
36,145
8,000
22.1
1993
37,436
7,530
20.1
1994
44,730
7,172
16.0
1995
45,189
6,836
15.1
1996
43,605
6,580
15.1
1997
43,402
5,300
12.2
1998
40,728
5,919
14.5
1999
36,292
5,996
16.5
2000
40,279
6,108
15.2
2001
42,434
6,121
14.4
2002
41,055
5,771
14.1
2003
40,799
5,280
12.9
2004
40,921
5,765
14.1
2005
40,234
5,799
14.4
2006
37,007
5,189
14.0
Source: 1989-2006 Annual Reports Workers’ Compensation Administration
These figures indicate that employers in New Mexico have been doing a good job
in reducing both the frequency and severity of employee injuries.
Another factor in lowering costs was the dramatic decrease in the amount of
attorney involvement in workers’ compensation cases. This was the result of the
ombudsman program, limiting attorney fees, and the reduction of lump sum settlements.
7
Money spent by either the worker or the employer on litigation reduces the amount
available to compensate employees.
One disturbing item to note is the percentage increase in mediation cases. Since
2001 there has been an alarming increase in the number of claims that involve some sort
of litigation. Table Two in the appendix provides more information on the litigation
trends. Note the bottom section which shows the percentage of indemnity claims that
involve some type of litigation. In 1989 36.2% of indemnity claims required mediation.
This dropped to the low to mid twenties after the passage of the Act. Starting in 2002 this
began rising. In 2006 this increased to 36.1% of all indemnity claims, which is about the
same as in 1989. Formal trials as a percentage of indemnity claims are still less than
before the Act, but have also begun to increase. More than one out of every three
indemnity cases now involves some type of litigation!
Mediation Conferences as a % of Indemnity Claims
40.0%
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
0.0%
It is unclear what is driving the dramatic increase in litigation; however there have
been a series of court cases that have undermined the key concepts of the Reform Act.
We will look at only two, is Lucero vs. Smith 118 N.M.35 and Delgado vs. Phelps Dodge
Chino, Inc.
As we noted, one of the reasons for the success of the 1990 Reform Act was to
make the benefits as objective as possible in order to reduce costs and provide a speedy
remedy for workers. Lucero v. Smith undermines this key concept.
Scheduled PPD benefits are in addition to TTD. The total for both cannot exceed 700
weeks. Scheduled PPD benefits are listed in §52-1-43 of the Workers Compensation law.
Part A lists the body parts covered and give the number of weeks of compensation that would
be paid at the workers compensation rate. Thus a worker who lost his arm at the shoulder
would receive his weekly compensation rate for 200 weeks.
Part B of this section provides for the partial use of one of the body parts listed in
Part A and says that the worker shall receive compensation based on the degree of partial loss
of use payable for the number of weeks listed.
Part C allows a Workers’ Compensation Judge to increase the duration of
benefits to greater than those in Part A in cases of actual amputation where the worker is
likely to be disabled longer that the periods shown due to his age, lack of education or
8
lack of training. The judge cannot increase the duration by more than twice the number of
weeks in Part A.
After the 1990 Act was passed employers and insurance companies had used the
AMA guidelines to determine the amount of partial loss for scheduled injuries. This made
both practical and legal sense. It was practical in that this was the standard used for nonscheduled partial disability under the preceding §52-1-42. It made legal sense in that the
Court of Appeals in Witcher v. Capitan Drilling 84 N.M. 369 (ct. App. 1972) had said that
“Each of the three sections are part of the same legislative act and are to be read together so
as to give effect to each of the sections.”
However, in Lucero v. Smith the Court of Appeals noted that New Mexico
courts have always distinguished between impairment and disability. The court also noted
that in 1986 when the legislature began a series of changes in workers’ compensation it did
have a requirement that the percentage of loss of use in both sections would be determined by
the AMA guidelines. The next revision removed the use of the guidelines for both sections.
When the 1990 Reform Act was written the AMA guidelines came back, however they were
specifically included only for §52-141 but not included in §52-1-43.
The issue is confusing or, as noted in Maschio v. Kaiser Steel 100N.M. 455, (Ct.
App.1983) “Sections 52-1-41 and 52-1-43 NMSA 1978 may seem inconsistent and hard
to understand to some lay and professional people, but these provisions are the Law in
New Mexico”.
The problem with Lucero v. Smith is that it has introduced a large degree of
subjectivity into the determining benefits under this section. Employers do not have a
clear way to determine what they owe. Awards may vary from judge to judge and may be
influenced by whether they are represented by an attorney.
As an example of where this may lead we only have to look at the situation in
California, where more workers get some type of PPD, but are less well compensated in
terms of loss of actual earnings. Subjectivity leads to more litigation and less money for
employees.
Another case that will impact New Mexico employers and employees is Delgado v.
Phelps Dodge Chino, Inc. 2001 NMSC 34. As previously noted, it is the general rule in all
states, that workers’ compensation benefits are the exclusive remedy for injuries that arise out
of and in the course of employment. This is clearly stated in the New Mexico Act §52-1-9.
During the last 50 years, there has been a long list of New Mexico decisions that
have affirmed the exclusive remedy for employees. “The New Mexico Workman’s
Compensation Act expressly makes the remedies provided by the act the sole and exclusive
remedies available to an employee for claims against this employer or insurer.” Dickson v.
Mountain States Metcash. 98 N.M. 479 (1982). This is the essential bargain in workers’
compensation. The employer agrees to provide benefits even in cases where the accident is
the sole negligence of the employee.
In Delgado v. Phelps Dodge Chino, Inc. 2001 NMSC 34, the New Mexico
Supreme Court recognized the intent of the law, the near unanimity that exists in other
states and the fact that it had applied this standard for decades. The Supreme Court threw
out the actual intent standard and replaced it with a new standard. It is important to note
that the new standard applies to both employers and employees. The court’s new standard
states that workers’ compensation will not apply in cases where there is “willfulness” on
the part of either the employer or worker. The court’s new standard for ‘willfulness” has
three parts. For purposes of the Act willfulness occurs when:
1) the worker or employer engages in an intentional act or omission, without just
9
cause or excuse, that is reasonably expected to result in the injury suffered by
the worker;
2) the worker or employer expects the injury to occur, or has utterly disregarded
the consequences of the intentional act or omission; and
3) the intentional act or omission proximately causes the workers’ injury.
The first threshold is fairly objective, although there will be different opinions
about the meaning of “just cause”. The court noted that the second prong will require “an
examination of the subjective mind of the worker or employer”.
The court’s reasoning was somewhat tortured but looked to § 52-5-1 and noted
that the act requires that “the Workers’ Compensation Act…(is) not to be given broad
liberal construction in favor of the claimant or employee on the one hand, nor are the
rights and interests of the employer to be favored over those of the employee on the other
hand.” It chose to ignore the preceding sentences in the same paragraph, which clearly
stated that the intent of the legislature was that the workers’ compensation act was to be
based on a mutual renunciation of the common law rights and defenses of both employers
and workers. It also ignored the previously quoted §52-1-9 that provides that workers’
compensation is the sole remedy as long as the conditions laid out in the law are met.
Delgado will add uncertainty for both employee and employer.
There have been several other cases that have affected Workers’ Compensation
since the Act was passed. The overall affect has been a dramatic increase in litigation.
How do New Mexico Benefits compare to other states?
An important issue for New Mexico is how well injured workers are
compensated. As a matter of good social policy an injured worker should be well treated.
On the other hand if costs are too high, New Mexico will be at a cost disadvantage to
other states in attracting and retaining jobs. This is an important factor since New Mexico
has one of the lowest per capita incomes in the country.
In making a comparison it makes sense to compare benefits with the neighboring
states of Arizona, Colorado, Texas and Utah. All five states provide unlimited medical
care for workers’ compensation injuries.
In terms of TTD New Mexico ranks third. However, two of the states, Texas and
Utah pay benefits for a much shorter duration. New Mexico pays for up to 700 weeks
compared to 104 for Texas and 312 for Utah.
TTD COMPARISON
$800.00
$700.00
$600.00
$500.00
$400.00
$300.00
$200.00
$100.00
$-
ARIZONA
COLORADO
NEW MEXICO
TEXAS
UTAH
1
10
The states have similar death benefits. New Mexico’s benefit is limited to 700
weeks whereas most states continue until the children are 18 and/or remarried. The
amount of the benefit would depend upon the ages of the children in the other states.
Utah has a limit of 312 weeks. See Table Three in the appendix for more information on
TTD benefits.
It is difficult to compare PPD benefits between states due to differences in law,
types of industry, firm size, and income. The Rand Institute for Civil Justice did a study
comparing actual wage losses for injured workers in the states of California, Oregon,
Washington, Wisconsin and New Mexico. In California more than 40% of the workers
received PPD benefits, compared to 18.1% in Wisconsin, 23.4% in Washington, 35.6 %
in Oregon and 26% in New Mexico.14
Injured workers in New Mexico received better compensation for their loss of
income than those in California.15 New Mexico’s approach to PPD is more responsive to
pre-injury income that other states.16 New Mexico was the only state to adjust their PPD
ratings for age, education, vocational preparation and training as well as loss of physical
capacity. This seems to be a much better approach from a point of view of society as a
whole.
The Rand report felt that benefits in New Mexico were adequate when viewing
results for a five year period following injury, but were inadequate when viewed over 10
years. The Rand report used data for the years 1994 to 1998. They noted that changes in
the law may have already changed the result. In 2000 the percentage of the average
weekly waged used to compute benefits were increased from 85% to 100% of the state
average weekly wage. As shown in Table 3 in the appendix, benefits for scheduled
injuries are generally higher than the neighboring states.
Overall, the benefits in New Mexico are slightly above average. In considering
the fact that New Mexico is an economically poor state the benefits for injured workers
must be considered very good.
One Problem in New Mexico
Workers’ Compensation provides an injured worker with replacement of lost
income and medical care. In addition, every effort should be made to return the worker to
earning his pre-employment wage. Getting back to work is the primary goal.
Workers benefit from prompt return to work because delays cause a loss of
income. Workers who are out of work for an extended period of time lose skills. Their
job may be taken by a replacement worker. Other employers may see a previously injured
worker as less desirable.
There are some key indicators in returning employees to work. Workers who
return to their former employer have less time off. Workers with an intermittent
employment history before the accident stay out of work longer. Employees at smaller
firms are less likely to return to their pre-injury employer. Higher compensation benefits
lead to longer time off. Workers who return to pre-injury wage levels do so sooner. 17
The Rand report did a study on return to work outcomes for workers injured in New
Mexico during the period 1994-96 and compared those to outcomes in Oregon, Washington
and Wisconsin, using various time periods from 1989-1994 for each state. They defined
“return to work” as “at the end of temporary disability benefits, did the worker receive
wages?” They used unemployment insurance data to estimate the number of days off of
11
work. They noted that the method may cause an overstatement of work for those who move
into work not covered by New Mexico unemployment, but since they used the same method
25
for all four states the comparisons will still be valid.
The study examined several employer and worker characteristics, including
whether the employer was insured or self insured, employer size, age, tenure, whether the
pre-injury employment was continuous or intermittent, by return to the at injury
employer, and by gender. Gender shows virtually no relationship to early return to work.
Age did not have a large impact. Larger employers had much shorter times to return to
work. Workers whose prior work history was intermittent had longer return to work
times.
The most interesting outcome of the study was the huge difference for those
workers who returned to work at the at-injury employer. The median time for 50% of
injured workers to return to work was 34 days to the at-injury employer vs. 480 days for
another employer. The median time for all employees was 77 days. As the study pointed
26
out these results would also be influenced by the severity of the injury. with more severe
injuries you will have longer times off of work and it is therefore more likely that an
employer will have hired a replacement worker.
The Rand report next compared return to work outcomes for New Mexico to the other
three states. In terms of the duration of TTD New Mexico is average or slightly below.
However, when the time to “return to work” is measured there is a different result. Half of
the injured workers had not returned to work within 77 days after injury compared to 45 for
27
Washington 39 for Oregon, and 41 for Wisconsin. These results should be considered with
some caution because of the differences in types of employers. New Mexico has a higher
percentage of employees working in mining and construction and has a higher number of
small employers. In addition local economic conditions at the time of the survey could
influence the result. It would be very helpful to have comparisons with states whose
economies are closer to New Mexico. The study did attempt to control for interstate
differences. The results were pretty much the same with New Mexico continuing to have
the poorest “return to work”. This is the real problem facing New Mexico policy makers.
The important thing is that for all states, returning to work at the pre-injury
employer resulted in faster return to gainful employment.28
Time off of work can be influenced by whether the at-injury employer offers a job.
Many employers encourage workers to return to work by offering light duty jobs, sometimes
at a lower wage. In New Mexico if an injured work returns to work prior to reaching MMI at
less than his pre-injury wage he will continue to receive a TTD benefit equal to two thirds of
the difference between his pre-injury wage and the post injury wage. §52-1-25.1C.
New Mexico law also requires an employer “who is hiring” to rehire an injured
worker who applies for the at-injury job. §52-1-50.1 However, this is subject to the workers’
treating physician certifying that the worker is fit to carry out the duties of the job and that
the employer has a job available.
Summary and Recommendations
The benefits for injured workers under the New Mexico Workers’ Compensation
Insurance are equal to or superior to those of surrounding states. Since benefits for TTD
and PPD are now automatically indexed to 100% of the state average weekly wage they
will automatically keep place with inflation and wage growth.
12
There has been a dramatic increase in the amount of litigation in the workers
compensation system. The reasons for this increase should be determined and the sources
of conflict should be removed.
Two areas that should be amended would be require the use of AMA guidelines
when determining PPD and making workers compensation as the sole remedy for injured
employees.
For example, sections § 52-1-42 and §52-1-43 should be amended so that they
read as a single section. Scheduled injuries should be based upon the latest edition of the
AMA guidelines.
Section 52-1-11 that denies compensation for employees where the accident was
considered willful or was due to intoxication should be deleted. Workers’ compensation
should be the exclusive remedy for injured workers. Both employees and employers
should be held to the same standard. This will expressly overturn the Delgado decision.
Under current law employers of less than three employees, domestic servants and
farm and ranch laborers are not required to carry workers compensation coverage. This
leaves many New Mexico workers without protection for workplace injuries. It may
make more sense to require all employers to cover all employees.
We should look for ways to encourage workers to return to work as soon as
possible. This could be done by amending § 52-1-25 to increase benefits from the current
66 2/3% to 75% of the difference between the pre-injury wage and the post-injury wage,
We should keep the following goals in mind when considering changes in the
workers’ compensation law:
1. Return workers to work as soon as possible
2. Reduce transactions costs as much as possible.
3. Provide coverage to all workers.
13
REFERENCES
1990-2006 Annual Reports, New Mexico Workers’ Compensation
Administration, Albuquerque, NM
American Jurisprudence, 2nd Edition, Lawyers Cooperative Publishing, Rochester
NY
Galizzi, M., Boden, L.I. (1996) What are the most important Factors Shaping
Return to Work? Evidence from Wisconsin, Workers Compensation Research Institute
Policy Year Underwriting Results, (2007) National Council on Compensation
Insurance, Boca Raton, FL
Reville, R.T., Boden, L.I., Biddle, J.E.& Christopher, M (2001) An Evaluation of
New Mexico Workers’ Compensation Permanent Partial Disability and Return to Work.
Santa Monica, CA. Rand Institute for Civil Justice
WORKERS’ COMPENSATION AND OCCUPATIONAL DISEASE DISABILITY
RATES (1975-2008) (Data File) New Mexico Workers’ Compensation Administration.
Wests Encyclopedia of American Law (1998) West Publishing, St. Paul, MN
14
.
ENDNOTES
1
WCA Annual Report 1992
2
Wests Encyclopedia of American Law p. 373
3
82 Am Jur 2d §1
4
82 Am Jur 2d §19
5
New Mexico Statutes 1978, § 52-1-26
6
2006 Annual Report
7 1990 Annual Report
8
2006 Annual Report Workers’ Compensation Administration, p 27
9
Breen vs. Carlsbad Municipal Schools, 2005-NMSC-028, 138 N.M.331, 120 P.3d 413
10
NCCI Residual Market Summary 2006 p.16
11
Oregon Department of Consumer and Business Services, November 2006
12
2006 Annual Report Workers’ Compensation Administration p 23
13
2006 Annual Report Workers’ Compensation Administration p 4
14
Rand p. 41
15
Rand p. 41
16
Rand p 57
17
Rand p. 24, Galizzi
15
APPENDIX
WORKERS’ COMPENSATON BENEFITS IN NEW MEXICO AND
COMPARISONS TO OTHER STATES
16
TABLE ONE
CHANGES IN THE ACT 1990-2008
%
CHANGE
1990
2008
TEMPORARY TOTAL DISABILITY BENEFITS
MAXIMUM WEEKLY BENEFIT
PERCENTAGE OF PRE-ACCIDENT WAGE
TIME LIMIT
MAXIMUM AMOUNT
$343.24
66 2/3
700 WEEKS
$204,255
$635.46
66 2/3
700 WEEKS
$444,822
SURVIVOR DEATH BENEFITS
BURIAL BENEFIT
MAXIMUM WEEKLY BENEFIT
PERCENTAGE OF PRE-ACCIDENT WAGE
TIME LIMIT
MAXIMUM AMOUNT
$3,000
$343.24
66 2/3
700 WEEKS
$204,255
$7,500
635 1/2
66 2/3
700 WEEKS
$444,822
150.0%
85.1%
$12,500
$16,500
32.0%
ARM AT SHOULDER
$68,648
200 WEEKS
$127,092
200 WEEKS
HAND
$38,443
112 WEEKS
$71,172
112 WEEKS
LEG AT HIP
$68,648
200 WEEKS
$127,092
200 WEEKS
EYE
$44,621
130 WEEKS
$82,610
130 WEEKS
HEARING BOTH EARS
$51,486
150 WEEKS
$95,319
150 WEEKS
ATTORNEY FEES
WORKER ATTORNEY FEES
NOTE: THE EMPLOYER USUALLY PAYS 50% OF ATTORNEY FEES
85.1%
117.8%
117.8%
SELECTED SCHEDULED PERMANENT PARTIAL DISABILITY
ONE EAR
$13,730
$25,418
40 WEEKS
40 WEEKS
THE NUMBER OF WEEKS IS MULTIPLIED BY THE WORKERS' WEEKLY WAGE. THE DOLLAR AMOUNTS
SHOWN ARE THE MAXIMUM BENEFIT PAYABLE.
To be eligible a worker must have an impairment rating given by a health care provider. For impairments less than
80% benefits are paid for a maximum of 500 weeks and for 700 weeks if the impairment is 80% or greater.
If the workers' post maximum medical improvement wage is equal to or greater than his pre-injury wage benefits
are limited to the impairment rating. If the post injury wage is less that his pre-injury wage then the rating is
17
TABLE TWO
LITIGATION TRENDS 1989-2006
Mediation Conferences as a % of Indemnity Claims
40.0%
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
1989
1990
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
0.0%
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
8,344
8,000
7,530
7,172
6,836
6,580
5,300
5,919
5,996
6,108
6,121
5,771
5,280
5,765
5,799
5,189
2,661
2,212
1,780
1,658
1,462
1,284
1,448
1,369
1,519
1,419
1,645
1,674
1,906
1,783
1,875
3,209
2,645
2,711
2,374
1,962
1,533
1,737
1,779
1,512
1,294
1,128
1,021
982
1,011
1,065
884
489
447
345
235
186
144
105
127
122
104
100
90
105
80
120
133
Indemnity Claims
7,946
10,245
Mediation Conferences
2,877
2,646
2,880
Lump Sum Dispositions
2,202
3,288
Formal Trails
343
427
Source: Workers Compensation Administration Annual Reports 1989-2006
18
Mediation as a % of indemnity claims
36.2%
25.8%
34.5%
33.3%
29.4%
24.8%
24.3%
22.2%
24.2%
24.5%
22.8%
24.9%
23.2%
28.5%
31.7%
33.1%
30.7%
36.1%
18.4%
17.7%
18.6%
17.5%
18.4%
17.0%
1.6%
1.6%
2.0%
1.4%
2.1%
2.6%
Lump Sum as a % of indemnity claims
27.7%
32.1%
38.5%
33.1%
36.0%
33.1%
4.3%
4.2%
5.9%
5.6%
4.6%
3.3%
28.7%
23.3%
32.8%
30.1%
25.2%
21.2%
Formal Trials as a % of indemnity claims
2.7%
2.2%
2.0%
2.1%
2.0%
1.7%
TABLE THREE
TEMPORARY TOTAL DISABILITTY BENEFITS (2006)
$800.00
$700.00
$600.00
$500.00
$400.00
$300.00
$200.00
$100.00
$ARIZONA
COLORADO
ARIZONA
MAXIMUM BENEFIT
% OF WEEKLY WAGE
% OF STATE AVERAGE
TIME LIMIT
$
374.01
NEW MEXICO
TEXAS
COLORADO
NEW MEXICO
$
$
697.20
585.89
UTAH
TEXAS
$
UTAH
540.00
$
589.00
66 2/3
66 2/3
66 2/3
70
66 2/3
N/A
91%
100%
100%
100%
DURATION
DURATION
700 WEEKS
104 WEEKS
312 WEEKS
19
WAITING PERIOD
RETROACTIVE AFTER
SOURCE:
7 DAYS
3 DAYS
7 DAYS
7 DAYS
3 DAYS
2 WEEKS
2 WEEKS
4 WEEKS
4 WEEKS
2 WEEKS
U.S.DOL Employment Standards Administration
Office of Workers' Compensation Programs in effect as of
January 1, 2006.
TABLE FOUR
MAXIMUM BENEFIT PAYMENTS AND NUMBER OF WEEKS FOR SELECTED
SCHEDULED PERMANENT PARTIAL DISABILITIES
ARIZONA
COLORADO
NEW MEXICO
TEXAS
UTAH
ARM AT SHOULDER
$79,200
260
$45,639
208
$112,664
200
HAND
$66,000
217
$22,819
104
$70,415
125
$65,856
168
LEG AT HIP
$66,000
217
$45,639
208
$112,664
200
$49,000
125
52,800
173
$22,819
104
$64,781
115
$34,496
88
EYE
$39,600
130
$22,819
104
$73,231
130
$47,040
120
HEARING BOTH EARS
$79,200
260
$30,499
139
$84,498
150
$42,728
109
FOOT
N/A
$85,456
218
20
HEARING ONE EAR
$26,400
87
$7,679
35
$22,532
40
$21,363
54.5
Source:
U.S.DOL Employment Standards Administration
Office of Workers' Compensation Programs
In affect as of January 1, 2006
NOTES
Texas does not have scheduled injuries. Ratings
for all injuries are according to the 4th
Edition of the AMA guides.
TABLE FIVE
NON SCHEDULED PERMANENT PARTIAL DISABILITY BENEFITS
ARIZONA
COLORADO
NEW MEXICO
TEXAS
UTAH
55
N/A
66 2/3
70
66 2/3
% OF
WEEKLY
WAGE
MAXIMUM
BENEFIT
$
374.01
$
354.90
$
585.89
$
378.00
$
392.00
% OF
STATE
AVERAGE
WEEKLY
WAGE
N/A
91
100
70
66 2/3
TIME LIMIT
DURATION
DURATION
700 WEEKS
300 WEEKS
312 WEEKS
21
MAXIMUM
AMOUNT
NONE
$
Source:
120,000
$
410,123
$
113,400
$
122,304
U.S.DOL Employment Standards Administration
Office of Workers' Compensation Programs
In affect as of January 1, 2006
TABLE SIX
DEATH BENEFITS FOR SURVIVORS
% OF WEEKLY
WAGE
MAXIMUM RATE
% OF STATE
WEEKLY WAGE
DURATION
$
ARIZONA
COLORADO
NEW MEXICO
TEXAS
UTAH
66 2/3
66 2/3
66 2/3
75
66 2/3
369.27
$
593.81
N/A
91
WIDOW OR
WIDOWHOOD:
CHILDREN
UNTIL 18 OR
MARRIED
WIDOW OR
WIDOWHOOD;
CHILDREN
UNTIL 18
$
492.98
$
533.06
$
450.00
100
100
85
700 WEEKS
WIDOW OR
WIDOWHOOD;
CHILDREN
UNTIL 18
312 WEEKS
22
BURIAL
ALLOWANCE
$
5,000
Source:
$
7,000
$
7,500
$
6,000
ORDINARY
BURIAL
COSTS
U.S.DOL Employment Standards Administration
Office of Workers' Compensation Programs
In affect as of January 1, 2006
TABLE SEVEN
ATTORNEY'S FEE IN WORKERS' COMPENSATION
ARIZONA
ATTORNEY'S FEE
FEES BY STATUTE,
RULE, POLICY,
INDIVIDUAL CASE
COLORADO
NEW MEXICO
TEXAS
UTAH
25%
20%
$16,500
MAXIMUM
25%
20% 1ST
$15,000,
15% NEXT
$15,000,
10%
BALANCE ,
MAXIMUM
$10,850
STATUTE
STATUTE
STATUTE
STATUTE
RULE
23
ARE FEES ADDED TO
AWARDS IN CERTAIN
CASES
YES
YES
YES
YES
Note:
This table refers to attorney fees for claimants.
Source:
U.S.DOL Employment Standards Administration
Office of Workers' Compensation Programs
In affect as of January 1, 2006
NO
24