A few years back, a city employee in Las Cruces, New Mexico fell from a ledge on a city garbage truck when he attempted to remove a trash bin that had gotten stuck in the truck’s hopper. The employee and his supervisor climbed on the truck on opposite sides to attach chains to the dumpster in order to pull it out. But when the employee reached for the chain, he lost his balance, fell, and was seriously injured. While accusations were made that the employee was intoxicated at the time of the incident, the employee was eventually awarded full workers’ compensation benefits.
Neither the worker nor the supervisor could have predicted how this incident would transpire as they went about their daily tasks. Accidents can happen at any workplace, from manufacturing plants to construction sites, and even at offices and stores. Workers’ compensation insurance makes it possible for workers to pay their medical bills and be compensated for lost wages if they are injured on the job. In New Mexico, most employers are required to purchase workers’ compensation insurance for incidents like this one and all kinds of job-related illnesses and injuries.
New Mexico Workers’ Compensation Laws
New Mexico’s state legislature passed its first workers’ compensation law in 1929. The Workers’ Compensation Act requires employers to purchase workers’ compensation insurance that provides benefits to injured workers regardless of fault. Injured workers cannot sue the employer for liability for their injuries. Employees receive the medical care and wage replacement benefits they need, and the employer can better predict costs based on their workers’ compensation premiums.
In 1986, the New Mexico Workers’ Compensation Administration (WCA) was created. The WCA handles workmans’ comp administration, allowing for faster resolution of cases, quick and efficient delivery of benefits to injured workers, and reasonable costs for employers.
The Basics of New Mexico Workers’ Compensation
Who Is Covered?
Any employer with three or more employees in New Mexico must purchase workers’ compensation insurance. This includes charities, non-profits, and religious organizations.
Employers must count every employee to determine if they need workers’ compensation insurance, including:
- Family members
- Part-time and seasonal workers
Proprietors and partners are excluded from coverage but have the option to include themselves.
Some types of employees are included in coverage, but can exclude themselves:
- Corporate officers or members of an LLC are included in coverage but have the option to exclude themselves if they own 10% or more of the company.
- Officers who have exempted themselves must be included in the count of employees to determine if workers’ compensation coverage is required.
Construction companies have additional requirements:
- All construction businesses must be licensed under the Construction Industries Licensing Act and must purchase workers’ compensation insurance regardless of the number of employees.
- A construction corporation, partnership or LLC must have coverage even if there is only one executive employee, but executive employees can exempt themselves with approval from the state.
Other special rules apply as follows:
- Real estate agents and domestic employees are exempt from New Mexico workers’ compensation coverage.
- Employers do not need to provide workmans’ comp coverage for independent contractors, but if you employ independent contractors, you must understand the rules for determining an employee’s status.
- Farm and ranch workers are exempt from coverage if they spend the majority of their time actually growing or harvesting produce, meat or dairy products.
- Workers who pack, process and transport agricultural products must be covered by New Mexico workers’ compensation insurance if the farm or ranch employs three or more workers.
There are also special considerations for employers who operate on an Indian reservation:
- Tribes frequently choose to have New Mexico workmans’ comp insurance for their tribal businesses, and may also require private businesses located on their land to purchase New Mexico workers’ compensation coverage.
- The New Mexico Workers’ Compensation Administration cannot enforce the workers’ compensation law on tribal lands, but the tribal government can enforce it.
What is Covered?
New Mexico workers’ compensation insurance covers wage replacement and medical bills for employees who are injured on the job. It pays for medical care resulting from a work-related illness or injury, as well as wage replacement if the worker is unable to work as a result of the injury or illness. Benefits can be extended if the worker is totally disabled or has a permanent impairment.
Where Can You Buy It?
New Mexico has a private workers’ compensation market. This means that you can purchase it from any private insurance carrier or agency that is licensed to sell it in the state of New Mexico. Businesses can self-insure with approval from the New Mexico Workers’ Compensation Administration. Employers in the same or similar industry may join together to self-insure as a group with WCA approval. Businesses with poor safety records or that are in high-risk industries that cannot get coverage in the voluntary or self-insurance markets can get coverage from the state assigned risk pool.
How Much Does New Mexico Workers’ Compensation Insurance Cost?
Workers’ compensation insurance costs more for high-hazard industries than for low-hazard industries. New Mexico workmans’ comp premiums are determined by how many employees an employer has, the type of jobs performed, and the employer’s history of accidents and workers’ compensation losses. New Mexico partners with the National Council for Compensation Insurance (NCCI), an independent rating and data collection bureau, to assign workers’ compensation rates for every industry.
The NCCI assigns classification codes to each occupation, and each class code is then assigned a base rate for workers’ compensation insurance. To determine an employer’s workmans’ comp premium, the annual payroll at the beginning of the policy period is divided by 100 and then multiplied by the base rate. For example:
- Classification Code 8380: Auto Shop
- Base Rate: $2.19
- Employer payroll: $100,000
- Premium calculation: $2.19 per $100 of employer payroll (or 2.19% of payroll)
- Estimated annual premium: $2,190.00
Most employers will have employees in more than one class code. An auto shop owner might employ mechanics, cashiers and other types of workers. All of its applicable classifications and related premiums are combined to determine its annual New Mexico workers’ compensation insurance premium. The New Mexico workers’ compensation market is competitive. Insurance companies can charge different premiums and compete with each other for business.
But all premiums are approved and regulated by the New Mexico Workers’ Compensation Administration and base rates must remain within the NCCI’s guidelines for the state. If you purchase New Mexico workmans’ comp insurance from the assigned risk pool, your premiums will be higher than if you purchase it on the open market.
New Mexico Workers’ Compensation Recent Base Rate Examples
New Mexico workers’ compensation insurance premiums are higher than the national average and continue to increase. Insurance company premiums are filed with and approved by the New Mexico Workers’ Compensation Administration. The NCCI sets a low rate and a high rate for each New Mexico class code. Insurance companies can offer certain discounts and credits to eligible policies.
Here are some sample base rates (rate per $100 of employer payroll) for New Mexico as of recent years:
- 0042 Landscaping: $5.81
- 5183 Plumbing: $3.32
- 5427 Carpentry: $6.00
- 8017 Retail Store: $2.03
- 8810 Clerical: $0.30
- 9082 Restaurant: $1.36
What Is Experience Rating and How Does it Affect Your Premium?
An experience modification factor, or experience mod, is a factor that may be applied to your New Mexico workers’ compensation premium calculation. It increases or decreases your workers’ compensation premium for a given year, and can significantly impact your workmans’ comp costs over time. An experience mod is a numerical representation of an employer’s actual losses as compared to the expected losses for similarly sized businesses in the same industry. The mod is applied to the New Mexico workers’ compensation premium as a debit or a credit.
- A mod of 1.0 is considered to be average and does not impact premium. All employers start out with a mod of 1.0.
- A mod greater than 1.0 is a debit mod. Losses were worse than expected, and the premium goes up.
- A mod less than 1.0 is a credit mod. Losses were better than expected, and the premium goes down.
Experience rated workers’ compensation premiums are determined using the following formula:
- Base Rate X Payroll X Mod = Premium
Here are some examples of how debit and credit mods are applied to the premium:
- Premium: $100,000
- Mod: 0.75 (25% premium credit)
- Premium with mod credit applied: $75,000
- Premium: $100,000
- Mod: 1.0
- Premium is not adjusted
- Premium: $100,000
- Mod: 1.25 (25% premium surcharge/debit)
- Premium with mod debit applied: $125,000
New Mexico employers are eligible for experience rating when they meet one of the following requirements:
- $9,000 in policy premium generated during the last year or last two years, or
- $4,500 average policy premium generated for more than two years
How to Find New Mexico Workers’ Compensation Insurance
This article provides highly simplified examples and calculations of very complex workers’ compensation coverage. Most employers can obtain quotes and learn more about New Mexico’s workers’ compensation requirements by working with an experienced independent insurance agent. An independent insurance agent can help guide you through the process of purchasing New Mexico workers’ compensation insurance, so you get the coverage you need to protect your employees and your business.
Start your search for a local agent now.