Fiscal impact
reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for
standing finance committees of the NM Legislature. The LFC does not assume
responsibility for the accuracy of these reports if they are used for other
purposes.
Current FIRs (in
HTML & Adobe PDF formats) are available on the NM Legislative Website (legis.state.nm.us). Adobe PDF versions include all attachments,
whereas HTML versions may not.
Previously issued FIRs and attachments may be obtained from the LFC in
|
SPONSOR |
HBIC |
DATE TYPED |
|
HB |
394/HBICS |
||
|
SHORT
TITLE |
Health Insurance Premium Surtax |
SB |
|
||||
|
|
ANALYST |
|
|||||
REVENUE
|
Estimated Revenue |
Subsequent Years Impact |
Recurring or
Non-Rec |
Fund Affected |
|
|
FY04 |
FY05 |
|
|
|
|
(7,100.0) |
|
|
Non-Recurring |
General
Fund |
|
|
20,000.0 |
24,300.0 |
Recurring |
General
Fund |
(Parenthesis ( ) Indicate Revenue Decreases)
LFC Files
Public Regulation Commission (PRC)
SUMMARY
House Business and Industry Committee substitute
for House Bill 394 imposes the health insurance premium surtax. All revenue raised from the surcharge would
be directed to the general fund. The
surtax would be equal to one percent of gross health insurance premiums and membership
fees received from health insurance or contracts covering health risks within
the state during the preceding calendar year less all return health insurance
premiums.
The bill also makes a
slight modification to the existing premium tax rate, which is raised from
three percent to three and three-thousandths percent. This change was included to reconcile conflicting
amendments to the Voters Action Tax enacted last session. It deleted sections providing exceptions to
what constitute premiums subject to the tax as they were no longer applicable.
The bill amends the
applicability sections to Laws 2003, Chapter 58, Section 1. This relates to the bill last session which
eliminated the insurance premium tax exemption provided for all government
contracts in 2003, and thereby applied the tax to premiums received by managed care organizations from
the SALUD program. The proposed
applicability excepts premiums received prior to
The provisions of the
bill imposing the surtax are applicable on
The effective date of
the bill is
FISCAL IMPLICATIONS
The provision changing
the effective date for the premium tax owed on managed care contracts to March
20th has the effect of reducing FY04 general fund revenues from the
insurance premium tax by $7.1 million, according to the Insurance Division. The revenue decrease is non-recurring.
The health insurance premium surtax is estimated
to raise $24.3 million for the general fund in FY05. Subsequent year impacts are also shown to be
$24.3 million. However, since the value
of health insurance premiums are likely to grow with prices and the number of
premiums written, subsequent year revenues might be expected to grow by 5 to 10
percent.
The
PRC reported to LFC staff that estimated premium insurance tax revenues
attributable to health insurance premiums are $66 million in FY04 and $73
million in FY05. The FY04 estimate is
consistent with year-to-date collections and the FY05 estimate assumes revenues
from health insurance premiums will grow by 6 percent. The current tax rate is 3 percent, implying
that $24.3 million is attributable to each percent. Thus, increasing the rate by 1 percent is estimated
to increase insurance premium tax revenues by $24.3 million on a full-year
basis. However since the bill will be
applicable to some premiums for only the quarters of the year, the fiscal
impact estimate needs to be reduced.
Discussions with Insurance Division staff suggest that $17 to $20
million is likely to be realized in FY 05.
ADMINISTRATIVE IMPLICATIONS
The PRC currently
collects and distribute this tax. They
report that the proposed changes have no administrative impact.
BT/yr:lg