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

SPONSOR Ortiz y Pino

ORIGINAL DATE

LAST UPDATED

2/27/07

3/15/07 HB

SHORT TITLE Medical Insurance Pool Administrators

SB 1180/aSFC

ANALYST Earnest

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

FY09

($7,700.0)

($12,400.0) Recurring General Fund

(Parenthesis ( ) Indicate Revenue Decreases)

Duplicates the tax credit in SB317 and duplicates HB1270, relates to SB565 and HB1164

SOURCES OF INFORMATION

LFC Files

NM Medical Insurance Pool

Responses Received From

Human Services Department (HSD)

SUMMARY

Synopsis of SFC Amendment

The Senate Finance Committee (SFC) amendment increases the premium tax credit to 50% of

the assessed amount for most members and 75% of the assessed amount 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 receive state funding or assistance. Currently, health insurers who pay these

assessments get a credit equal to 30% - 50% of the amount paid.

The amendment also adds Subsection E to allow the Pool’s board to adopt a credit or rebate for

the assessment to third party administrators who do not pay a premium tax.

Senate Bill 1180/aSFC – Page

2

The amendment adds Section 4, which specifies that the increased credit is available for

assessments made on or after July 1, 2007.

The amendment carries a significant fiscal impact. See revised Fiscal Implications section

below.

Synopsis of Original Bill

Senate Bill 1180 would amend the Medical Insurance Pool act to allow the NM Medical

Insurance Pool (NMMIP) to assess, among the other health insures, reinsurers and third party

administrators for its losses.

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 more than $50 million in 2009.

The increased premium tax credit proposed in the amendment is duplicated in Senate Bill 317. If

SB317, or a similar bill, and this bill pass, the fiscal impact will not be doubled.

Under current law, the 30% and 50% tax credits result in a $14.6 million revenue loss for the

general fund for FY08. Under projections provided by NMMIP, the 50% and 75% tax credits

proposed in the amendment result in a $22.3 million general fund revenue loss – a $7.7 million

difference in FY08.

Under current law, and assuming the same rate of growth in the 2008 assessment, the revenue

impact of the 30% and 50% credits for FY09 is $32.5 million. The 50% and 75% tax credits

proposed in this amendment result in a $44.9 million general fund revenue loss – a $12.4 million

difference.

The projections assume the same growth rate in the tax credit for the 2008 assessment as in the

2007 assessment. This near doubling rate of growth is not expected in future years as the Pool

reaches its saturation point.

As proposed in the original bill, more insurers, including third party administrators, would be

assessed for the Pool’s losses. This provision does not carry an additional impact to the state.

The amendment requires the Pool’s board to adopt a credit or rebate against the assessment for

those third party administrators that do not pay a premium tax. The credit or rebate should be

substantially equivalent to the 50% and 75% credits against the premium tax. Thus, the

amendment reduces the spread of the assessment proposed in the original bill.

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 of the Pool, and this shortfall is assessed to health insurance

industry. Assessed insurers then receive a 30 % premium tax credit for full premium plan losses

Senate Bill 1180/aSFC – Page

3

and a 50 % premium tax credit for reduced premium plan losses.

By adding reinsurers and third party administrators to the definition of health insurers, the bill

will reduce the amount of the assessment to each insurer. HSD notes that this reduction could

theoretically reduce costs to the small group insurance market, thus promoting insurance uptake

among this group, which is consistent with Insure New Mexico’s goals. On the other hand, and

not noted by HSD, the assessment will raise the cost of insurance for the self insured market.

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.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

Senate Bill 1180 is duplicated by House Bill 1270 and is related to Senate 565 and House Bill

1164, which increase the premium tax credit.

BE/mt:nt