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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(Parenthesis ( ) Indicate Expenditure Decreases)

Conflicts with SB718 and HB913

SOURCES OF INFORMATION

Attorney General's Office (AG)

Health Policy Commission (HPC)

Human Services Department (HSD)

Public Regulation Commission (PRC)

SUMMARY

     Synopsis of Bill

SB 679 clarifies existing law to explicitly exclude Medicaid payments made under Salud to managed care organizations as premiums subject to the Comprehensive Health Insurance Pool (CHIP) assessments.

Significant Issues

Current law is ambiguous and there is a pending administrative proceeding before the Public Regulation Commission on this matter. SB679 clarifies the law by explicitly excluding the Salud premiums when making CHIP assessments.

The Human Services Department and Attorney General's Office do not agree on how the federal law applies to Medicaid.

Three health insurance companies in the state run Medicaid Managed Care programs and receive premium income for those programs. Until now Lovelace has been including the Salud premiums in the calculation of its assessment. Cimarron and Presbyterian have not. SB679 clarifies the issue by requiring all three managed health care organizations to exclude Salud premiums when calculating assessments to CHIP so all calculations are handled uniformly.

FISCAL IMPLICATIONS

No direct cost to state agencies or to CHIP.

CONFLICT/DUPLICATION

Conflicts with SB718 and HB913 that includes Medicaid premium payments in the assessment formula.

OTHER SUBSTANTIVE ISSUES

HSD has submitted an analysis which states:

The direct imposition of part of the cost of the CHIP program on the Medicaid program would violate federal limitations on permissible Medicaid expenditures because it would directly subsidize health insurance for individuals not eligible for Medicaid.

Federal Funds can only be used to pay for expenditures made in accordance with an approved state plan.... The CHIP assessment is not approved in the state plan.

To impose CHIP assessments on Medicaid payments (or premiums to insure such payments), would constitute an impermissible healthcare-related tax because it is not broad-based...

The Attorney General's Office disagrees:

...(Federal law) only permits the imposition of broad-based health care related taxes in determining the amount of federal Medicaid funds to be paid to the State. However, (federal law) defines "broad-based health care related tax" to include a tax based on revenues when the tax is imposed at a uniform rate for all revenues relating to the services provided. In this context, the CHIP assessment is a "broad-based health care related tax" because it applies to all premium income of the managed care companies....

DW/ar:njw