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 also be obtained from the LFC
in
|
SPONSOR |
Beffort |
DATE TYPED |
|
HB |
|
||
|
SHORT
TITLE |
Public Employee Benefit Contributions |
SB |
305/aSPAC |
||||
|
|
ANALYST |
Geisler |
|||||
APPROPRIATION
|
Appropriation
Contained |
Estimated
Additional Impact |
Recurring or
Non-Rec |
Fund Affected |
||
|
FY04 |
FY05 |
FY04 |
FY05 |
||
|
|
|
|
Unknown |
|
|
|
|
|
|
|
|
|
(Parenthesis
( ) Indicate Expenditure Decreases)
Conflicts with:
SB 373, HB 283, HB 451
General Services Department (GSD)
Public Schools Insurance Authority (PSIA)
Human
Services Department (HSD)
LFC
files
SUMMARY
Synopsis of SPAC
Amendment
The Senate Public Affairs Committee amendment to
the bill strikes on page 3, line 13 the
sentence that reads: “Annual inflation adjustments shall not be
less than the increase in the consumer price index for the state contribution”
and replaces it with “The legislature shall annually determine and appropriate
the amount available for group insurance benefits and contributions.”
Synopsis of Original Bill
Senate Bill 305, Group
Insurance Contributions, proposes to amend Section
|
Employer |
Current Employer Contribution Structure |
Proposed Employer Contribution
Structure |
|
State
Departments Less than $15,000 Less than $20,000 Less than $25,000 $25,000 or More |
75%
of the total premium 70%
of the total premium 65%
of the total premium 60%
of the total premium |
(1) A fixed dollar amount for employees
whose annual salary is $20,000 or more (2) A higher fixed dollar amount for
employees whose annual salary is less than $20,000 The
annual inflation adjustment shall not be les than the increase in the
Consumer Price Index (CPI) for the employer contribution. |
|
Higher
Education Institutions Less than $15,000 Less than $20,000 Less than $25,000 $25,000 or More |
75%
of the total premium 70%
of the total premium 65%
of the total premium 60%
of the total premium |
No
Change. |
|
Public
School Less than $15,000 Less than $20,000 Less than $25,000 $25,000 or More |
75%
of the total premium 70%
of the total premium 65%
of the total premium 60%
of the total premium |
No
Change. |
The initial dollar amount would be determined by
legislative appropriation at a fixed dollar amount and annual inflation
adjustments in the employer contribution dollar amount would at least equal the
increase in the consumer price index.
Significant Issues
GSD provides that by identifying a fixed dollar
amount for employees, each employee would determine the health insurance
coverage that suits their needs, and any coverage costs above the specified
amount could be covered by the employee.
A basic premise of this approach is that a minimum health and dental
care plan (or “best value plan”) would be offered to all participants at a
lower premium, and expanded benefits could be purchased at the employee’s
choice and employee’s cost.
PSIA
provides that the defined contribution approach reduces the rate of increase of
the employer’s cost for health care. It
is budgetable and predictable because it fixes the employer contribution and is
not tied to claim trends. Cost shifting
occurs to employees if the employer contribution does not keep up with medical
claim trends.
However,
if healthcare costs continue at the current double-digit rate, and adjustments
to the employer share are limited to CPI, a higher percentage of the premium
cost is passed onto the employee. This
could result in employees dropping coverage as it becomes unaffordable, thus increasing
the uninsured numbers. This approach
encourages employees to pick their plan based on the cost, but may not encourage
employees to be wise consumers of health care.
FISCAL IMPLICATIONS
GSD states that it is
unclear how the legislature would initially determine the “fixed dollar” amount
specified in the Section C of SB 305. It
is possible that SB 305 intends that the initial “fixed dollar amounts” to be
the current contribution levels set forth in Section
ALTERNATIVES
PSIA provides that in 2002, the IRS issued two
Revenue Rulings (2002-41 and 2002-45), which provide favorable tax treatment to
Health Reimbursement Accounts (HRAs). A
more employee-oriented approach is to redesign the plan offerings to a high
deductible with an employer contribution to an employee’s Health Reimbursement
account. These types of plans encourage
employees to spend their first dollars of health care costs wisely, yet also
provide catastrophic coverage through the high deductible plan. The employer funded HRA unused account
balances may be carried over from year to year.
CONFLICTS
Conflicts with SB 373, HB 283, and HB 451, all
which propose changing the employer contribution for employee health benefits.
WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL?
The predictability of
budgeting insurance increases for state employees will be more difficult.
AMENDMENTS
Currently the bill’s
effective date is
PSIA suggests amending the bill to provide more flexibility in program
design. On page three, line 19, insert
new Section “D” (and renumber remaining sections accordingly): “The medical plans offered may include
high-deductible plans, consumer directed health plans including a health
reimbursement account, or traditional plans.”
GSD suggests adding
language to specify the fixed dollar amount for the employer contribution, and
to clarify if the overall consumer price index or a health specific price index
would be used to determine the annual inflation adjustment.
GGG/dm:yr