Obtaining Insurance

New Mexico employers who are required to obtain workers' compensation insurance have several options for finding coverage. The best option depends upon business needs. Having insurance coverage protects a business and protects the business's workers.

Finding Coverage

Businesses can purchase coverage from any insurance agency licensed to sell commercial lines.

There are three types of coverage:

Conventional coverage - the voluntary market;
Assigned risk pool - for high risk employers;
Self-insurance - for larger companies, businesses with similar activities, and governmental entities.

Private commercial insurance companies provide workers' compensation insurance in what is called the voluntary, commercial market. The insurance company must be licensed by the New Mexico Office of the Superintendent of Insurance (OSI), and its premium rates must be approved by that agency. Visit the OSI website for more information on risk pool law, dispute board regulation, and loss cost multipliers for workers' compensation insurers. Also, visit the A.M. Best Company to determine a company's financial strength, or ask an insurance agent to provide that information.

Some employers in the commercial market may be eligible for large or high-deductible policies. With these policies, the employer and insurer agree to a deductible. The insurance carrier is responsible for managing the claim and paying all benefits, just as if the policy had no deductible. The employer then reimburses the insurer for the agreed deductible. The high-deductible allows the employer to save money on premiums by assuming a greater degree of the risk. Employers do not have control of the claim, though. Employers report claims as if there were no deductible, and benefit payments come from the insurance carrier.

Businesses with poor safety records or in high-risk industries that cannot get coverage in the commercial or group self-insurance markets may get coverage from the state assigned risk pool. The pool also provides coverage for new, small businesses until they can obtain coverage in the commercial market. Coverage in this pool is more costly than the voluntary market. The OSI designates these insurers as servicing carriers. Any business unable to get coverage in the voluntary market should contact an insurance agent about coverage in this pool. Insurance costs are higher in the assigned risk pool than in the voluntary market. Businesses in the pool should have a long-term goal to get out of the pool by finding coverage in the voluntary market or in a self-insured group.

Large businesses and governmental entities are permitted to provide their own insurance coverage, called self-insurance. The rules for qualifying as a self-insurer are set by the WCA Director. Companies that want to self-insure must apply to the WCA. Find out more about self-insurance.

Employee Leasing

Employee leasing organizations and professional employment organizations (PEOs) provide workers to companies that need employees. In New Mexico, these types of companies are regulated by the New Mexico Regulation and Licensing Department. Employee leasing companies and PEOs usually purchase workers' compensation from a commercial carrier. Businesses that use these types of companies to hire workers should find out the name of the insurance carrier and obtain information on what to do and who will manage a claim in case of a work injury.

Insurance Premiums

A workers' compensation insurance policy matches the risk of claims against the policy and the likely cost of the claims, based upon state and national averages.

The premium is determined by three factors:

How much employees are paid, as expressed by actual payroll
The type of work employees do and how hazardous the work is, according to national averages
The claims and safety history of the company, expressed as an "experience modifier"

Businesses apply for insurance with the help of an insurance agent. The company's underwriter assigns ratings to the job classifications of the employees. Premium is billed at the beginning of a policy year, and is an estimate, based on the company's expected annual payroll, and may be altered if circumstances change within the policy year. A policy covers all employees working in the business, except for executive employees who opted out. If additional employees are hired during the policy year, they are automatically covered, and the final premium bill is adjusted at the end of the policy year.

Employers can expect to have their business' payroll audited annually. Insurers do this to ensure the premium they receive is enough to compensate for the insured risk.

Safety Results in Lower Premiums

Ensuring a safe workplace results in lower insurance costs. Because the experience modifier (based on the claims and safety history of the company) is a multiplier of the total premium, it provides an incentive for employers to develop a safety conscious workplace. Employers with good safety records may enjoy a significantly lower premium than an unsafe employer in the same industry. A good safety record becomes a competitive and financial advantage for the safety-conscious employer. Find out more about how to build a safety program.

Avoiding Error and Fraud

Insurers have the right to receive premium for the entire risk being covered. Failure to disclose payroll honestly, or deliberately trying to deceive an insurer about the number of employees in a business is fraud.

Artificially reducing the experience modifier by paying claims out of pocket is illegal. The practice does not prevent a worker from later filing a workers' compensation claim, and may deprive the injured employee of important benefits.