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F I S C A L I M P A C T R E P O R T
SPONSOR Carraro
ORIGINAL DATE
LAST UPDATED
1/30/08
HB
SHORT TITLE Small Employer Health Insurance Tax Credits
SB 296
ANALYST Francis
REVENUE (dollars in thousands)
Estimated Revenue
Recurring
or Non-Rec
Fund
Affected
FY08
FY09
FY10
(7,272.0)
(5,406.0) Recurring General Fund
(Parenthesis ( ) Indicate Revenue Decreases)
Conflicts with SB115
SOURCES OF INFORMATION
LFC Files
Responses Received From
Taxation and Revenue Department (TRD)
SUMMARY
Synopsis of Bill
Senate Bill 296 creates a credit against personal or corporate income tax liability for the costs of
health insurance borne by small employers. The credit is equal to five percent of the employer’s
cost of providing health insurance for an employer who employs fewer than 10. The taxpayer
could qualify for an additional five percent credit if the employer has not provided health
insurance in the last 12 months. The credit is refundable so the amount in excess of the
taxpayer’s liability is refunded.
The credit is effective for tax years beginning on or after January 1, 2008.
FISCAL IMPLICATIONS
According to TRD, the impacts were estimated using information from the Medical Expenditure
Panel Survey for New Mexico. According to the data the employers contribute about 80% of
health insurance premiums. The average premium per employee is estimated to be approximately
$4,600 for FY 2005. We assume a premium growth rate of 8% to estimate the premiums for the
subsequent years.
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Senate Bill 296 – Page
2
Year
2,008
2,009
2,010
2,011
2,012
Premium / employee
5,810
6,275
6,777
7,319
7,904
Number of Establishments
27,413
27879
28325
28750
29037
Number of Establishments
offering Health Insurance
8,114
8,252
8,384
8,510
8,595
Number of Establishments not
offering Health Insurance
19,299
19,627
19,941
20,240
20,442
Percent of employees that enroll
in Health Insurance
77.50%
77.50%
77.50%
77.50%
77.50%
Average number of employees
per employer
3.79
3.79
3.79
3.79
3.79
Credit Allowed
9,388
10,311
11,315
12,403
13,529
Credit Taken
4,694
5,156
5,657
6,201
6,765
Fiscal Year Estimates
(thousands)
7,272
5,406
5,929
6,483
Source: TRD
TRD:
The data indicates that out of the 22,337 firms that have 10 or less employees in 2005,
29.6% provide health insurance. Out of the employees in these firms, 77.5% enroll in
health insurance. Bureau of Business and Economic Research (BBER) at UNM forecasts
the growth rates of employment used to calculate the fiscal impact. The average number
of employees per firm with 10 employees or less was 3.79 in 2005. Credit allowed for
currently participating employers is assumed to be at 5% rate and credit allowed for the
employer uptake is assumed to be at 10% rate in order to estimate the calendar year
impact shown in table below. To calculate the Fiscal Year impacts, the tax year 2008
liability changes were assumed to affect only FY2009 revenues. Tax year 2009 and
subsequent year changes in liabilities were assumed to be evenly split across the two
fiscal years included in the calendar year.
SIGNIFICANT ISSUES
The importance of health care coverage in New Mexico cannot be understated. Other than
Texas, no other state has a higher percentage of uninsured than New Mexico. The chart below
shows the state rankings.
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Senate Bill 296 – Page
3
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
SB115 creates a credit of 50 percent of health insurance premiums for the first five years of
coverage and 35 percent afterward for employers with 50 or fewer employees.
NF/bb