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

SPONSOR SPAC

DATE TYPED 2/21/05

HB

SHORT TITLE Health Facility & Care Provider Insurance

SB 427/SPACS

ANALYST Wilson

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

See Narrative

Relates to SB 292 & SB 427

SOURCES OF INFORMATION

LFC Files

Responses Received From

Department of Health (DOH)

Health Policy Commission (HPC)

Human Services Department (HSD)

Public Regulation Commission (PRC)

Public School Insurance Authority (PSIA)

Retiree Health Care Authority (RHCA)

No Response from

General Services Department (GSD)

SUMMARY

Synopsis of Bill

The Senate Public Affairs Committee Substitute for Senate Bill 427 amends the Risk Manage-

ment Act, Chapter 15, Article 7, NMSA (1978) by adding a new section permitting a health care

provider to voluntarily purchase risk insurance coverage presently offered to state agencies. A

separate account must be set up for each participating provider.

The provisions in this bill apply to the following health care providers: a licensed physician, hos-

pital, outpatient health care facility, nursing home, intermediate care facility, post-acute health

care facility, osteopathic physician, chiropractic physician, podiatrist, nurse anesthetist, physician

assistant, dentist, psychologist, doctor of oriental medicine, certified nurse practitioner, regis-

tered lay midwife or certified nurse-midwife.

Senate Bill 427/SPACS -- Page 2

The bill provides for the health care provider to be treated like a state agency for purposes of de-

termining its contributions based upon assessment of risk, and for purposes of handling such

contributions. The Secretary of the DOH will need to deem such coverage necessary for the

provider for the public health, as a prerequisite to inclusion in the proposed program.

Significant Issues

The mission of the RMD is to provide risk management and insurance-related services to the

various agencies of state government. This bill will in essence widen that mission to include

providing insurance to certain non-governmental persons and entities that have difficulty finding

liability insurance in the voluntary marketplace. It is worth noting that the door to allowing non-

government entities to enjoy access to insurance coverages procured by the RMD has already

been opened by Subsection B of §15-7-3 which requires the RMD to provide liability coverage

to certain nonprofit corporations under certain circumstances.

The mission of the RMD is to provide risk management and insurance-related services to the

various agencies of state government. This bill will in essence widen that mission to include

providing insurance to certain non-governmental persons and entities that have difficulty finding

liability insurance in the voluntary marketplace. It is worth noting that the door to allowing non-

government entities to enjoy access to insurance coverages procured by the RMD has already

been opened by Subsection B of §15-7-3 which requires the RMD to provide liability coverage

to certain nonprofit corporations under certain circumstances.

This bill attempts to remedy restrictions in the availability of medical malpractice coverage to

New Mexico health care providers by using the Risk Management Division (RMD) of GSD as

an alternative source of professional liability coverage other than the Medical Malpractice Act.

The Medical Malpractice Act provides tort limitations and access to the New Mexico Patients

Compensation Fund to physicians and certain other health care providers if these providers suc-

ceed in obtaining underlying coverage from an authorized insurance company as well as pay the

required surcharges to the Patients Compensation Fund. The Medical Malpractice Act excludes

nurses, midwives, dentists and psychologists and also requires that the underlying insurance cov-

erage be provided on a somewhat obsolete type of policy form.

Obtaining affordable malpractice insurance is a problem for many groups of practitioners.

Medicaid, through its fee-for-service program and its managed care contracts, requires malprac-

tice insurance for its providers

The providers with whom DOH contracts to provide health care services, especially individuals

or small entities, have difficulty in meeting requirements for carrying insurance. This bill will

permit these providers to carry health insurance through the state's risk management functions.

FISCAL IMPLICATIONS

RMD will need to do an actuarial study to determine premiums for health care providers. The

premiums to be charged should reflect RMD’s cost of administering the program.

Senate Bill 427/SPACS -- Page 3

RMD should avoid any cross-subsidization of new insureds by existing insureds including state

employees. HSD notes any discounted premiums offered to health care providers may be consid-

ered a violation of the anti-donation clause.

The provisions of this his bill should be revenue neutral.

ADMINISTRATIVE IMPLICATIONS

RMD should be able to recover administrative costs through premiums.

RELATIONSHIP

This bill relates to SB 292 and SB 427 which provides similar coverages, but only to midwives.

OTHER SUBSTANTIVE ISSUES

The HPC provided the following:

In 1975, Travelers Insurance Company, New Mexico’s liability carrier, announced that it

would no longer provide medical malpractice insurance to the state’s physicians citing

the lack of tort reform and the small book of business available in the state. The state al-

most became the insurer of last resort to avoid a crisis in access to physician services if

there was no entity underwriting liability insurance.

This bill appears to allow the state to become another insurer and places health care pro-

viders in the enviable position of having another insurer of last resort option with the

state being that procurement vehicle to procure vision, dental, any group or individual

health, life, accidental death, dismemberment or disability insurance. The bill positions

the state and providers favorably in the event that insurance is unavailable or too expen-

sive to obtain.

Whether or not having this option available to providers’ influences the private insurance

market’s rating approaches and any segmenting of health care providers is not known.

The state’s intervention back in 1975 and 1976 did moderate the malpractice rate in-

creases and allowed for the creation of a new mutual company to underwrite physician

professional liability risk. New Mexico’s experience under that approach has been posi-

tive. While physician liability rates in other states have soared - in some places to 500%,

New Mexico’s average rate increase last year was less than 10%.

DW/njw:lg