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 a vailable 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 Suite 101 of the State Capitol Building North.
F I S C A L I M P A C T R E P O R T
SPONSOR Altamirano
ORIGINAL DATE
LAST UPDATED
2/14/07
2/21/07 HB
SHORT TITLE Tax Incentives for Certain Health Insurers
SB 565/aSPAC
ANALYST Earnest
REVENUE (dollars in thousands)
Estimated Revenue
Recurring
or Non-Rec
Fund
Affected
FY07
FY08
FY09
($17,700.0)*
($32,500.0)* Recurring General Fund
(Parenthesis ( ) Indicate Revenue Decreases)
*Revised from original analysis with information from the NMMIP and assumptions of a similar
rate of growth for FY09.
Duplicates House Bill 1164
SOURCES OF INFORMATION
LFC Files
Public Regulation Commission (PRC)
Responses Received From
Public Regulation Commission (PRC)
Department of Finance and Administration (DFA)
Human Services Department (HSD)
SUMMARY
Synopsis of Senate Public Affairs Committee Amendment
The Senate Public Affairs Committee (SPAC) amendment specifies that members may take a
100 percent tax credit for the assessments attributable to Pool policy holders that receive
premiums through the federal Ryan White CARE Act, the Ted R. Montoya hemophilia program
at the University of New Mexico health sciences center, the Children's Medical Services bureau
of the Public Health Division of the Department of Health or other programs that receive state
funding or assistance.
pg_0002
Senate Bill 565/aSPAC – Page
2
Synopsis of Original Bill
Senate Bill 565 amends sections of the Insurance Code to provide an increased premium tax
credit for health insurers who pay assessments to the New Mexico Medical Insurance Pool
(NMMIP). Currently, health insurers who pay these assessments get a credit equal to 30% - 50%
of the amount paid. SB 565 increases those credits to 75% - 100% of the amount paid.
FISCAL IMPLICATIONS
Insurance premium taxes are collected by the Public Regulation Commission for the benefit of
the general fund. Thus, premium tax credits reduce the amount of premium tax revenue to the
general fund. NMMIP has projected future assessments to grow from more than $20 million in
2006 to $50 million in 2009.
Under current law, the 30 and 50 percent tax credits result in a $14.6 million revenue loss for the
general fund for FY08. Under projections provided by NMMIP, the 75 and 100 percent tax
credits proposed in this bill result in a $32.3 million general fund revenue loss – a $17.7 million
difference. Assuming the same rate of growth in the assessment for FY09, the increased credit
would result in a $32.5 million loss in that year. This near doubling rate of growth is not
expected in future years as the Pool reaches its saturation point.
SIGNIFICANT ISSUES
The Medical Insurance Pool, established by Chapter 54 of the Insurance Code, is a non-profit
corporation operating a high-risk health insurance pool. The premiums charged to members are
not sufficient to cover the costs, and this shortfall is assessed to health insurance industry.
Assessed insurers then receive a 30 percent premium tax credit for full premium plan losses and
a 50 percent premium tax credit for reduced premium plan losses.
The Pool is projecting increases in the assessments that are being levied on the health insurance
industry. The growth in these assessments is primarily the result of increased membership in the
pool and expansion of the reduced premium plan, which is available to persons with low
incomes. The projected growth is also from the executive’s Insure New Mexico initiatives.
Since the growth in assessments is primarily coming from the low-income subsidy and Insure
New Mexico, this bill proposes that the cost be shifted to government away from the commercial
insurance industry who otherwise would bear the brunt of the increase in assessments.
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
Senate Bill 565 duplicates House Bill 1164.
ALTERNATIVES
Several alternatives related to the administration of the Pool have been raised by board members
and addressed by Pool staff. These include:
1. Benefit changes
•
Changing the benefit design to increase cost controls—network restrictions
•
Introduction of annual or lifetime benefit maximums
pg_0003
Senate Bill 565/aSPAC – Page
3
•
Implementation of a formulary
2. Financial changes
•
Reduce provider reimbursement from commercial to Medicare rates
•
Increase member cost sharing
•
Indexing of member premiums to program costs
•
More aggressive screening for LIPP participation
3. Other changes
•
Tightening eligibility requirements
•
Enhancing medical/case/disease management
•
Expanding the “carrier base" assessments to include self-insured payers—currently self-
insured employers do not contribute toward assessment for covering pool losses.
The Executive Director of the Pool has responded to each of these suggestions. Several of these
would require statutory changes or are already being addressed. According to Pool staff:
1. Benefit changes
•
Network restrictions would reduce access to centers of excellence and may cause interruption
for coverage as members have to change plans or providers.
•
Introduction of annual or lifetime benefit maximums would require a change in statute,
which requires the Pool mirror the small group market.
•
The implementation of a formulary would cost 10 to 15 percent above what the Pool pays for
drugs.
2. Financial changes
•
The Pool is not a Medicare/Medicaid provider and cannot adopt those rates
•
Statute requires the Pool to mirror small group market design, including 30 percent co-pay on
drugs and 80-20 PPO plan.
•
The Pool sets premium rates above the standard healthy rates, up to 50 percent
•
The Pool is addressing the screening for LIPP participation
3. Other changes
•
The Pool cannot tightening eligibility requirements because they are established by law
•
The Pool continues to aggressively enhance medical/case/disease management
•
Legislation has been addressed this session to Expand the “carrier base" assessments to
include self-insured payers
This bill carries a significant general fund impact. Other alternatives for reducing the loss of
general fund revenue include:
•
Place a cap, for example $10 million, on the total premium tax credit allowable each year.
This would require the Superintendent to pro-rate the credit submitted by insurance
companies.
•
Increase the premium tax credit but at lower increments than proposed in the bill
o
One premium tax credit of 50 percent for all programs would reduce revenue by
about $5.4 million in FY08.
o
Raising the credit to 50 percent for most programs and 75 percent for members
pg_0004
Senate Bill 565/aSPAC – Page
4
with state funded programs would reduce revenue by $7.7 million in FY08.
BE/csd