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F I S C A L I M P A C T R E P O R T

SPONSOR Luna

DATE TYPED 2/17/05

HB 444/HBICS

SHORT TITLE Health Insurance Premium surtax

SB

ANALYST Wilson

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

($800.0)

Recurring

General Fund

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Aging & Long Term Care Department (ALTCD)

Health Policy Commission (HPC)

Human Services Department (HSD)

Public Regulation Commission (PRC)

Public School Insurance Authority (PSIA)

SUMMARY

Synopsis of Bill

The House Business and Industry Committee Substitute for House Bill 444 amends Section 59A-

6-2 NMSA 1978 to clarify that hospital or medical expense incurred insurance or contracts; non-

profit health care service plan contracts are included and dental or vision only contracts are ex-

cluded; and health maintenance organization subscriber contracts in the imposition of the pre-

mium tax.

This surtax is in the amount of one percent of the gross health insurance premiums and member-

ships and policy fees received by it on the above.

House Bill 444/HBICS -- Page 2

Significant Issues

The PRC provided the following:

There is, currently a premium surtax of 1% applied to health insurance premiums exclud-

ing disability income contracts. The intent of the law was to broadly tax health insurance

premiums to raise revenue to offset cuts in the Medicaid program. The broad tax was

aimed at comprehensive health insurance that reimburses for the cost of receiving health

care.

The broad language in the law affects many kinds of supplemental health insurance con-

tracts, which make up a small portion of premiums and resulting surtax. This bill clari-

fies the language in the law to broadly surtax hospital and medical reimbursement poli-

cies issued by HMO’s, non-profit health care plans and other insurers without taxing sup-

plemental health insurance policies.

FISCAL IMPLICATIONS

The PRC estimates that beginning in fiscal year 2006, there will be a $800 thousand loss of reve-

nues to the general fund as a result of not taxing supplemental insurance such as dental and vi-

sion contracts only.

DW/njw:yr