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.
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F I S C A L I M P A C T R E P O R T
SPONSOR Cisneros
ORIGINAL DATE
LAST UPDATED
02/12/07
02/18/07 HB
SHORT TITLE
Health Security Act
SB 720
ANALYST Hanika Ortiz
REVENUE (dollars in thousands)
Estimated Revenue
Recurring
or Non-Rec
Fund
Affected
FY07
FY08
FY09
$0.1 (see narrative)
Recurring Health Security
Plan Fund
(Parenthesis ( ) Indicate Revenue Decreases)
ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)
FY07
FY08
FY09 3 Year
Total Cost
Recurring
or Non-Rec
Fund
Affected
Total
$0.1
(see
narrative)
Recurring General
Fund
(Parenthesis ( ) Indicate Expenditure Decreases)
Companion to SB 721
SOURCES OF INFORMATION
LFC Files
Responses Received From
Health Policy Commission (HPC)
Human Services Department (HSD)
Department of Health (DOH)
Attorney General’s Office (AGO)
Corrections Department (CD)
Public Education Department (PED)
Public Regulation Commission (PRC)
Health Security for New Mexicans Campaign
pg_0002
Senate Bill 720 – Page
2
SUMMARY
Synopsis of Bill
Senate Bill 720 enacts the Health Security Act to provide a mandatory comprehensive statewide
health care plan through a combination of public and private financing; control of health care
costs; and, by providing preventative health care for all New Mexicans. The Act outlines
procedures for the implementation of a citizens’ commission of 15 members reflecting the
geographic diversity of the state tasked with establishing the entity for the Health Security Act
by 11/01/08. The commission will have a two-year development period to work with state
agencies and the public; and, collect, review and analyze pertinent health care data to see
whether the plan is financially feasible. The bill requires financing recommendations made by
the LFC be approved by the legislature in 2008 before this plan goes into effect.
The bill excludes military, military retirees, TRICARE recipients and federal retirees. Nothing in
the Act is to affect coverage pursuant to the federal Employee Retirement Act. Tribes and plans
covered under ERISA may opt to join.
Specific provisions of the bill include:
1.
A twelve member Health Care Commission and its employees;
2.
The adoption of a five year plan by the new commission which will:
a.
implement the provisions of the act;
b.
establish compensation for health care providers;
c.
establish capital budgets for health care facilities;
d.
negotiate reciprocity agreements with other states;
e.
develop claims procedures;
f.
health care data collection;
g.
adopt rules and appoint a committee governing prescription drugs and medical
devices;
h.
study health care in New Mexico;
i.
provide for coverage of most health care services (with the exception of cosmetic
surgery, life insurance and litigation medical examinations and reports, and
orthodontic and cosmetic dental services);
j.
provide for phasing in of beneficiaries;
k.
provide for long-term care;
l.
provide for mental and behavioral health coverage; and
m.
become effective contingent upon approval by the 48
th
legislature, and if so
approved, be implemented by July 1, 2010.
3.
Granting the commission the authority to:
a.
appoint advisory boards;
b.
adopt rules;
c.
establish health care delivery regions
d.
establish a comprehensive claims review procedure;
e.
establish a quality review program;
f.
develop an annual budget;
g.
develop payment plans for providers;
h.
disqualify health care providers from receiving payments under the health care
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Senate Bill 720 – Page
3
plan;
i.
establish budgets for health care providers and health care facilities;
j.
regulate major capital expenditures by health care providers and health care
facilities (with certain exemptions);
k.
perform unannounced and announced audits of health care providers and health
care facilities;
l.
develop standard claims forms;
m.
require health care providers and health care facilities to participate in its
computerized system;
n.
require health care providers and health care facilities to submit certain reports;
establish a consumer complaint system;
o.
apply for waivers and federal law changes and exemptions allowing the maximum
contribution of federal money to the “Health Security Plan Fund";
4.
Providing that beneficiaries may obtain health care covered by the plan out-of-state, but
providing that the services will be paid at the same rate as if provided in New Mexico
unless the commission has negotiated a reciprocity or other agreement with the out-of-
state health care provider;
5.
Providing for subrogation rights;
6.
Prohibiting the sale of private health care insurance in New Mexico to any eligible
beneficiary after the date the health care plan is operating, except for supplemental
benefits and certain retiree health care plans;
7.
Establishing a “Health Security Plan Fund" and giving the commission the responsibility
for the collection of premiums from eligible beneficiaries, employers, state and federal
agencies and other entities;
8.
Requiring the Superintendent of Insurance to ensure that workers' compensation and
automobile insurance premiums on insurance policies written in New Mexico reflect a
lower rate to account for the medical payment component to be assumed by the health
security plan;
9.
Requiring educational institutions to provide coverage under the plan for nonresident
students;
10.
Requiring the Legislative Finance Committee (LFC) to determine financing options for
the health security plan; and
11.
Providing for a transition period for those covered by existing health plans.
FISCAL IMPLICATIONS
The plan attempts to put most New Mexicans under one risk pool as a way to leverage
purchasing power and simplify the multiple payor system of health insurance coverage; realize
cost savings from the elimination of duplicative administration; and, protect the State and
consumer from rising health care costs. Health care spending in the United States has grown
rapidly since the l960’s at an average rate of 10% per year.
The bill requires the LFC develop financing recommendations for the plan and provide such to
the legislature for approval or modification before 12/15/07 for consideration by the 2008
Legislature. The LFC is to be guided by the costs of health care coverage afforded state
employees; and, options may set beneficiary income based premium payments, sliding scale
premium payments and Medicare credits and employer contributions. The financing
recommendations are expected before the commission’s plan for coverage is known.
pg_0004
Senate Bill 720 – Page
4
If the Legislature approves implementation and financing of the health security plan, the health
security plan shall be operational by July 1, 2010; however, if the legislature fails to approve of
it, the health security plan shall not become effective. There is an appropriation of $500 thousand
contained in companion SB 721 directed to the LFC for this effort.
PRC reports the plan will begin July 1, 2010 if approved, and during the fiscal year preceding
that date, the commission will become operational with support of appropriations from the
general fund during FY10. Beginning in FY11 private insurance will be replaced by the health
security plan for those covered by the plan. The private health insurance industry currently pays
premium taxes and premium tax surcharges which are revenues for the general fund. Those
insurers who collect over $2.5 billion dollars in premiums pay approximately $90 million in
premium taxes and premium tax surcharges. A substantial portion of those premium taxes could
be eliminated.
This bill creates a new Health Security Plan Fund to receive all premiums from eligible
beneficiaries, employers, state and federal agencies, and other state appropriations and mandates
maintenance of the Fund in an actuarially sound manner. However, the LFC has concerns with
including continuing appropriation language in the statutory provisions for newly created funds,
as earmarking reduces the ability of the legislature to establish spending priorities.
SIGNIFICANT ISSUE
The bill will effectively subject all existing health care facilities and health care providers in
New Mexico to state control. It will require mandatory participation in the health care plan by
most state residents other than persons covered by federal health plans, military personnel, and
members of Indian tribes covered by federal health plans. It will prohibit the sale of health
insurance in New Mexico for health care that is covered by the health security plan except for
retiree health insurance plans that do not enter into contracts with the health security plan. The
bill will effectively require most, if not all, health care providers and facilities in New Mexico to
comply with the rules of the commission and provisions of the health care plan.
ADMINISTRATIVE IMPLICATIONS
Agencies report redistribution on an administrative and staffing level will occur as roles and
responsibilities are repositioned to support the Act.
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
Companion to Senate Bill 721
OTHER SUBSTANTIVE ISSUES
The commission may find it difficult to bring in certain insured persons or groups accustomed to
a certain level of benefit coverage if the state’s coverage provided is less.
Socioeconomic disparities exist with respect to access to health care. In 2005, 20.4% of New
Mexicans were without health insurance, compared to 15.9% for the US.
24 counties and cities have passed resolutions requesting the legislature pass the Health Security
pg_0005
Senate Bill 720 – Page
5
Act.
ALTERNATIVES
The Health Coverage for New Mexicans Committee (HCNMC) was created by the Legislature
and the Governor to study three models of universal health coverage. The HCNMC has charged
a consulting firm with costing out three different approaches to universal coverage in New
Mexico. The Health Security Act is currently one of the models that are part of the cost study
being conducted. The Health Security Act provides for freedom of choice of provider, a
comprehensive benefit package, and contains cost containment/quality of care provisions. Other
approaches currently being considered include expansion of the current private and government
health insurance system with a series of tax incentives and subsidies to those who cannot afford
health insurance. Still other approaches suggest mandating individual coverage and establishing
connectors or exchanges to assist individuals in purchasing health insurance. The HCNMC
report is due June 2007.
WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL
There will be no new statewide Health Care Commission to oversee a new health care system.
QUESTIONS
How will the proposed plan affect supplemental coverage for Medicare participants.
How will the proposed plan affect reimbursement for small rural providers.
AHO/nt