N.M. Admin. Code § 11.4.8.8

Current through Register Vol. 35, No. 21, November 5, 2024

Section 11.4.8.8 - INDIVIDUAL SELF-INSURANCE

A. An employer seeking to be certified as a self-insurer under the Act shall make application on a form prescribed by the director.

B. The director shall notify the chairman of the guarantee board of the identity of any applicant for self-insurance within 15 days of the receipt of the application. The guarantee board shall respond in writing to the director within 30 days of receipt of the notification or be deemed to have expressed no objection to the applicant's membership in the commission. The administration's self-insurance audit staff shall take any written objections into account when making its final recommendation to the director.

C. The director may decline to approve an application for self-insurance if not satisfied that the employer will be able to meet all its obligations under the Act and these rules.

D. Eligibility: Applicants for self-insurance must demonstrate the following base eligibility criteria, each of which must be continuously maintained during the period of self-insurance to maintain eligibility:

(1) a current tangible net worth of at least two million, five hundred thousand dollars ($2,500,000);

(2) the employer has been in business for a period of not less than three years. This requirement may be waived by the director under circumstances where the form of business organization has changed within the three year period but the management and function of the business entity has substantially stayed the same;

(3) a strong trend of financial health and financial solvency;

(4) an acceptable risk management program;

(5) workers' compensation specific excess insurance from an approved excess insurer with retention of two hundred fifty thousand dollars ($250,000) or less per occurrence and statutory upper limits; an acceptable policy of excess insurance shall provide coverage for all provisions of the Act, contain no exclusion of such coverage, and include a current New Mexico amendatory endorsement;

(6) an approved security issued in favor of the New Mexico self-insurers' guarantee fund;

(7) a bona fide employment relationship exists between the employer and the employees which it proposes to self-insure; employees who receive wages from or are under the control of any other entity with respect to the day to day supervision and assignment of the work may not come under an individual self-insurance program; employee leasing companies are prohibited from receiving a certificate of self-insurance;

(8) if the employer is a subsidiary, a parental guarantee from the subsidiary's upper-most parent in a form acceptable to the director; a parent company may self-insure its subsidiaries under one certificate in the name of the parent provided the parent meets all eligibility criteria and provides parental guarantees for the subsidiaries and guarantees by each subsidiary for the other(s); and

(9) any other reasonable criteria deemed necessary by the director to guarantee payment of workers' compensation claims to injured workers.

E. Application: The employer's application for certificate of self-insurance shall be accompanied by documentation sufficient to demonstrate eligibility, including the following:

(1) a one hundred fifty dollar ($150) non-refundable filing fee made out to the workers' compensation administration;

(2) proof of valid workers' compensation insurance in force for the three years preceding the date of application and continuing in force up to the approved date of self-insurance;

(3) employer's audited financial statements for the most recent fiscal year, presented in accordance with generally accepted accounting principles (GAAP), and financial statements for the preceding two years;

(4) if the employer is a corporation, proof of a resolution adopted by employer's board of directors authorizing and directing the corporation to undertake to self-insure its risks and to comply with the provisions of the Act and the rules of the director; a similar official ratification is required from the governing body of any governmental entity;

(5) a detailed accounting of the employer's workers' compensation loss history for the last three years, and experience modifiers for the same period, which shall include all claims covered under a claims "buy-back" program and deductible programs;

(6) an explanation of the safety program, a copy of the safety manual, and resumes of all personnel responsible for the New Mexico safety program;

(7) proof of a proposed policy for workers' compensation excess insurance that complies with the eligibility requirements set forth in this rule, including the declaration page of such policy and all endorsements providing or limiting coverage in New Mexico.

(8) a letter of intent from an approved surety to issue an approved security in an amount and form to be specified by the director, but not less than two hundred thousand dollars ($200,000); and

(9) proof of compliance with Section 52-1-6.2 NMSA 1978 for the most recent year.

F. Certification.

(1) The director shall act upon a completed application for a certificate of self-insurance within 90 days.

(2) Upon approval, the director shall issue a certificate acknowledging the employer's status as a self-insured under the act; the certificate shall be effective continuously until terminated at the request of the self-insured or revoked by the director.

(3) Upon a merger or other combination by two self-insured employers, the employers may continue to be self-insured under one certificate provided that the administration is given adequate disclosure, and guarantees and subject to the approval of the director.

(4) The director may issue a provisional certificate, good for not more than one year, to a self-insurer if the director is convinced that any defects are minor in nature and can be corrected within the one year period.

G. Continuing eligibility requirements: Following certification by the director, a self-insured employer shall:

(1) notify the director prior to liquidation, sale, or transfer of ownership and prior to any material change in the employer's financial condition or in New Mexico operations;

(2) obtain the director's approval prior to making any material change in any excess insurance policy or approved security;

(3) notify the director prior to any change in the provider or scope of risk management program;

(4) have at least one claims representative licensed and located within New Mexico to pay workers' compensation claims of claimants residing or located in New Mexico, and to ensure that all adjusters and third party administrators are licensed in New Mexico, regardless of their physical location, and to promptly pay all claims from accounts in financial institutions located within New Mexico;

(5) be subject to sanctions for any act or omission by its agents;

(6) provide proof of coverage for excess insurance policies within 30 days of effective date or renewal and to provide the complete policy within 60 days of effective date or renewal; unauthorized changes appearing in any policy will require immediate remediation by way of reinstatement of approved terms or other measures deemed appropriate by the director; and

(7) comply with all conditions required as stated in the employer's self-insurance certificate.

H. Financial responsibility and payment of claims:

(1) The employer shall pay claims for which it becomes obligated in accordance with the act and these rules.

(2) The payment of claims shall continue without regard to the self-insurance status of the employer and without regard to any amount of security posted, whether or not the security is called. An approved security shall be maintained until all claims have expired, subject to determination of the director.

(3) The employer shall maintain a level of reserves at the full undiscounted value of each claim, including indemnity and medical only claims, sufficient to pay all claims and associated expenses.

(4) The employer shall promptly pay guarantee fund assessments, provide documentation supporting assessment calculations, and maintain in good standing membership in the guarantee fund.

(5) The employer shall report loss runs, regardless of type or cost, to the administration in the format prescribed by the director on a semi-annual basis not later than January 31 and July 31 of each year.

(6) Failure to maintain minimum financial criteria and an approved risk management program may result in increased security requirements, termination of self-insurance status, or any other measure deemed necessary by the director for the protection of benefits of injured workers and the guarantee fund.

(7) Upon voluntary or involuntary termination of employer's self-insurance status, the employer shall:

(a) provide any information requested by the director for the purpose of establishing claims liability and financial condition;

(b) comply with any requirement by the director to increase security;

(c) make claims files available to the director for the performance of any audit, examination or review, or for administration of claims in the event of a default;

(d) notify the administration of any changes in address/location, pertinent personnel, claims administration services, location of claims files and related claims personnel, and financial condition; and

(e) promptly notify the director of the employer's current ownership, organizational structure and the employer's ability to pay workers' compensation obligations;

(8) All government entities must have a pre-funded system. All past, present, and future liabilities existing at any time shall be fully accounted for by liquid assets or other assets agreeable to the director. No government entity shall be required to post security.

(9) A self-insurer shall maintain compliance with the requirements of Workers' Compensation Act, WCA rules and the conditions set forth in its certificate of self-insurance.

I. Audits and examinations:

(1) An applicant or self-insured employer is subject to initial or periodic examination or audit by the administration to determine initial or continued eligibility for self-insurance. The applicant or self-insured agrees to bear the costs of any reviews or evaluations and to provide a reasonably private space to conduct the audit and all records required for such audits and examinations.

(2) Audits or examinations under these rules may include, but are not limited to:

(a) audits or reviews of the applicant's or self-insured's records regarding any representation made on its financial statement or application for self-insurance;

(b) audits or reviews of the applicant's or self-insured's records pertaining to its loss history, claims administration, reserves and claimant files;

(c) audits or reviews of safety programs;

(d) interviewing or taking the testimony of the applicant or self-insured, or any of its agents or employees, regarding any matter pertaining to the obligations of the applicant or self-insured under the act or the director's rules; and

(e) audits or examinations the director deems necessary to ensure a self-insured's continued compliance with these rules.

(3) An applicant or self-insured employer shall cooperate fully with administration representatives in any examination or audit and to attempt in good faith to resolve any issues raised in those examinations or audits.

(4) A self-insured employer shall provide its annual audited financial statements to the administration within 90 days of the end of each fiscal year.

J. Denials, revocation and probationary certificates:

(1) The denial, revocation, or probation of a certificate of self-insurance shall be made by an order signed by the director. Every such order shall state its effective date and shall concisely state what is ordered, the grounds on which the order is based, and the provisions of the act or rules pursuant to which the action is taken.

(2) The director shall deny an application for self-insurance if the employer has failed to demonstrate to the director's satisfaction that the employer meets all requirements of the Act and these rules or has failed to demonstrate its ability to meet all its obligations under the act.

(3) A certificate of self-insurance may be revoked or placed on probationary status if the director, with good cause, ceases to be satisfied that the employer is able to meet all its obligations under the act and these rules. The occurrence of any of the following events shall constitute good cause to revoke or place on probationary status a certificate of self-insurance:

(a) failure of the employer to comply with any provisions or requirements of the act, these rules, or any lawful order or communication of the director;

(b) failure of the approved surety to remain financially solvent, or any other impairment of any aspect of the employer's financial responsibility requirements;

(c) failure to comply with any other statutes, laws, rules, or regulations of the state of New Mexico;

(d) failure to cooperate with the administration to mitigate adverse consequences for injured workers caused by the employer filing for protection under the federal bankruptcy laws; or

(e) failure to maintain membership in the New Mexico self-insurers' guarantee fund commission in good standing.

(4) An employer that has been decertified or placed on probation must still comply with the financial responsibilities set forth in these rules and the following additional requirements:

(a) The security amount set after decertification shall account for both known claims and associated expenses, as well as claims incurred but not reported (IBNR) and associated expenses.

(b) If the employer is subject to Section 52-1-6 NMSA 1978, proof of coverage must be provided.

(c) No adjustments to the security will be allowed for three years from the date of the decertification. If after three years, the director has determined that adequate time has passed to reasonably determine the expected long-term liabilities and that there is no risk to benefits of injured workers or the guarantee fund, reduction in security may be approved. At that time, the director may, in his discretion, reduce or return some or all of the security.

(5) Probationary certifications:

(a) A probationary certificate means the temporary revocation of the self-insured's existing self-insurance certificate.

(b) Failure to comply with the Act or these rules may result in the issuance of a probationary certificate of individual self-insurance.

(c) During a probationary period, the employer must comply with all terms specified as conditions of probation within the probationary certificate or in any other lawful order of the director.

(d) The duration of the probationary period shall be within the director's discretion, but shall not extend for a period greater than one year.

(e) The probationary certificate may be withdrawn and the original certificate of self-insurance reinstated, if the self-insured comes into full compliance with the Act, these rules, and all probationary conditions. The reinstatement of the original certificate is subject to the sole discretion of the director.

(f) If the self-insured fails to come into compliance with the Act and the rules by the end of the probationary period, the self-insured's status as a self-insured will be revoked.

K. Recertification:

(1) Any employer formerly certified as a self-insurer who ceases to be certified may not apply for recertification until three years after revocation.

(2) An employer who seeks to reinstate its certificate of self-insurance shall reapply to the director on the form prescribed pursuant to these rules. A non-refundable filing fee of one hundred fifty dollars ($150) must accompany the application for recertification.

(3) If there is a change of ownership whereby the controlling interest of a self-insured changes, the new ownership shall submit a new application to the director for a certificate of self-insurance. A non-refundable filing fee of one hundred fifty dollars ($150) must accompany the new application.

L. Hearings: Any person aggrieved by a decision of the director under these rules may request in writing a hearing before the director. The request shall briefly state the respects in which the party is aggrieved, the relief sought, and the grounds relied upon as the basis of relief.

M. Penalty: In addition to any other sanctions provided herein, failure to comply with any of the provisions of the Act or these rules renders the applicant or self-insured employer subject to penalties as provided in Section 52-1-61 NMSA 1978.

N. Waiver: Any requirement contained in these rules may be waived by specific written authorization of the director. Any interested person may request such a variance or waiver in writing.

N.M. Admin. Code § 11.4.8.8

8/1/96, 10/1/98; 11.4.8.8 NMAC - Rn & A, 11 NMAC 4.8.8, 1/14/05; A, 12/29/06, Adopted by New Mexico Register, Volume XXVI, Issue 18, September 29, 2015, eff. 10/1/2015, Amended by New Mexico Register, Volume XXVII, Issue 18, September 30, 2016, eff. 9/30/2016