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

SPONSOR HTRC

DATE TYPED 03/22/05 HB 610/HTRCS

SHORT TITLE Insurance Tax Credit & Eligibility

SB

ANALYST Wilson/Padilla-Jackson

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

$0.1 Recurring

General Fund

SOURCES OF INFORMATION

LFC Files

Responses Received From

Public Regulation Commission (PRC)

SUMMARY

Synopsis of Bill

The House Taxation and Revenue Committee Substitute provides for small group coverage in

the Medical Insurance Pool (Pool). The substitute gives the Pool board the authority to issue a

policy of insurance for a small group that is formed voluntarily through an employer, association,

cooperative, mutual alliance or other organization; provided, however, that an employer group

may not have more than fifty persons.

The group must be uninsurable as defined in the Medical Insurance Pool Act

Significant Issues

Currently the Pool cannot take high risk groups, but the Alliance can. The Pool insurance is more

comprehensive for groups with disabled member or persons with high prescription drug usage.

FISCAL IMPLICATIONS

According to the PRC, the fiscal impact of this bill is positive, but indeterminate as it is based on

the amount of increased enrollment due to the bill’s provisions. They note that the Medical In-

House Bill 610/HTRCS-- Page 2

surance Pool is funded by premiums paid by those enrolled in the program and, to the extent that

these premiums are insufficient, assessments from the health insurance industry. The PRC notes

that since the premiums are set at standard rates + 10 percent, they are not adequate to fund the

operations and pay claims. The health insurance industry pays approximately $6 million in as-

sessments to cover the shortfall for the 1400 enrollees. The General Fund covers 30 percent of

this cost or approximately $1.8 million as a credit against the insurers premium tax liability.

The PRC notes that the group coverage contemplated by House Bill 610 could cause enrollment

in the Medical Insurance Pool to increase, especially if the program is successful, though no es-

timates have been made. If enrollment grows the industry assessments will grow as will the Gen-

eral Fund credit against premium taxes. For example, if membership doubles in Fiscal Year

2006, an additional $6 million assessment to the industry could be made in FY06 and 30 percent

or $1.8 million taken as a credit against General Fund revenues in FY07.

OTHER SUBSTANTIVE ISSUES

•

The Pool was created in 1987 by the legislature to offer insurance coverage to individuals

who are unable to purchase coverage due to their health status in either the private or

public markets. These individuals have health conditions such as heart disease, cancer,

diabetes, disabilities, asthma, obesity or arthritis.

•

The Pool actuarially calculates premiums based on the private individual market. The

Pool is able to charge up to 150% of what a policy would cost if sold by an insurance

company. The Pool currently charges 10% over what the policy would cost in the private

market.

•

Only 1400 people in New Mexico are currently enrolled in the Pool.

DW/sb:yr:lg