NOTE: As provided in LFC policy, this report is intended for use by the standing finance committees of the
legislature. The Legislative Finance Committee does not assume responsibility for the accuracy of the information
in this report when used in any other situation.
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attachments may be obtained from the LFC office in Suite 101 of the State Capitol Building North.
F I S C A L I M P A C T R E P O R T
SPONSOR: |
Gorham |
DATE TYPED: |
03/04/01 |
HB |
|
SHORT TITLE: |
Catastrophic Health Insurance |
SB |
478/aSPAC |
|
ANALYST: |
Wilson |
APPROPRIATION
Appropriation Contained
|
Estimated Additional Impact
|
Recurring
or Non-Rec |
Fund
Affected |
FY01 |
FY02 |
FY01 |
FY02 |
|
NFI |
|
|
|
|
(Parenthesis ( ) Indicate Expenditure Decreases)
SOURCES OF INFORMATION
Health Policy Commission (HPC)
Public Regulatory Commission (PRC)
General Services Department (GSD)
Attorney General's Office (AG)
SUMMARY
Synopsis of SPAC Amendment
SB 478/aSPAC (Senate Public Affairs Committee) changes the word "catastrophic" to "basic"
when referring to the health insurance policies that the bill allows insurers to sell to individuals
and small employer groups. The new word more accurately reflects the nature of the policies
under consideration in SB 478.
Synopsis of Original Bill
SB 478 amends the insurance code to permit the sale of a catastrophic plan to individuals and
small employer groups. This catastrophic plan would not offer certain mandated benefits and
would have at least a $600 individual calendar year deductible ($1200 per family).
Significant Issues
The intent of the bill is to provide a lower cost health insurance option for individuals and small
employers.
The PRC notes that proponents believe that mandated benefits unnecessarily increase the cost of
health insurance to individuals and small employers. Those who oppose this legislation believe
this plan's stripped down benefits will leave insureds without necessary coverage in certain key
areas.
ADMINISTRATIVE IMPLICATIONS
The PRC does not need additional FTEs to process the filings that may result from the provision
of SB 478.
CONFLICT/DUPLICATION/COMPANIONSHIP/RELATIONSHIP
Relates to:
HB 275, Small Employer Catastrophic Group Health
SB 209, Self-insured Health Care Act
OTHER SUBSTANTIVE ISSUES
The HPC has provided the following:
- SB478 extends the opportunity for catastrophic coverage to individuals as is done with
groups in the proposed HB275 (2001). This is important because there is a very limited
insurance individual insurance market in New Mexico.
- Mandatory benefits may be associated with increased insurance premium costs. However,
New Mexico employer premiums are among the lowest in the nation; although employees
pay one of the largest shares of premium cost in the US proportionate to their incomes.
- Approximately 26 percent of New Mexicans are uninsured and 29 percent of non-elderly
adults, most of whom are working, are uninsured. Affordability was the primary reason
cited for lack of insurance coverage by adults followed by not being offered by employer.
To the extent that a plan as proposed in SB478 lowered premium costs, more individuals
and employers may opt for coverage, particularly uninsured young adults.
- SB 478 appears as an opportunity for small employer groups to be more equitable with
self-insured groups (ERISA). Self-insured, ERISA plans are exempted from state
regulation and as such state imposed mandatory benefits do not have to be provided. The
new law would provide small employers with a health insurance policy option in lieu of
small group health insurance policies containing those provisions currently mandated by
the Insurance Code, which may actually increase the number of small employers that offer
health insurance to their employees.
- There are a large number of group insurance plans available in the marketplace with
annual deductibles between $600 and $1,500, which means these plans could all be re-categorized by the insurance companies as "catastrophic group health insurance policies"
and avoid mandatory benefits. With such a low deductible requirement, benefits and
dependent coverage in many group health insurance plans could be scaled back to meet the
minimum guideline requirements of "catastrophic group health insurance policies."
- Because of Health Insurance Portability and Accountability Act (HIPAA), diabetes and
pregnancies can not be categorized as pre-existing conditions for small employer groups (2
- 50 employees) so the exclusion of diabetes related services and placing limits on
maternity benefits could conflict with current federal law.
- Mandatory benefits were enacted to provide protection for individuals, because they are
cost-effective, and for public good. There may be a tendency for insurers to drop these
benefits, resulting in a longer term health care costs for the health system as a whole.
There may also be a tendency to transfer these services and associated costs to government, for example: immunizations through public health offices, PAP smears and
mammograms through the Department of Health breast and cervical cancer screening
program.
- The exclusion of so many mandated benefits covered under the individual and group health
insurance code could restrict access to health care services for a fairly large population in
New Mexico who consider themselves protected by law and unknowingly purchase a
catastrophic plan with reduced services. Additionally, many individuals and small
employers lack technical understanding of what are 'standard' benefits and what are not
being covered under the plan. HB 478 does not provide for informed purchase and full
disclosure of what is being omitted prior to purchase.
- Could open liability for insurance companies, health insurance agents and other related
entities because they may also presume that current health insurance code applies to all
health insurance.
DW/ar