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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

2/2/08

HB

SHORT TITLE Health Insurance Rulemaking and Disclosures

SB 474/aSFL#1

ANALYST Earnest

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY08

FY09

FY10

NFI

NFI

NFI

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Public Regulation Commission (PRC)

Human Services Department (HSD)

Health Policy Commission (HPC)

SUMMARY

Synopsis of Senate Floor Amendment

The Senate Floor Amendment to Senate Bill 474 removes the enactment language on Page 1,

Line 15.

Synopsis of Original Bill

Senate Bill 474 would add a new section to the Insurance Code to require the insurance division

to promulgate rules

that require health insurers to make certain disclosures relating to health

insurance policies to purchasers who request quotes for comprehensive major medical insurance.

Under this bill, health insurers would be required to disclose

•

commissions and other compensation that a broker or agent will receive contingent upon

the policy being issued;

•

the history of rate changes over the preceding 5 years for the type of policy being

considered; and

•

for each of the 5 preceding years, the medical loss ratio for a policy with a substantially

similar experience rating as the policy offered to the purchaser.

Senate Bill 474/aSFL#1 – Page

2

FISCAL IMPLICATIONS

None identified.

SIGNIFICANT ISSUES

HPC notes that insurers in New Mexico currently have reporting requirements to the Insurance

Division of the Public Regulation Commission. One of the reporting requirements is an annual

statement to the Division of the financial position of the health plan. This is a public document.

Insurers are also required under state law to generate reasonable profits rates and maintain

adequate reserves, and adequate net worth.

HSD reports that SB474 defines “comprehensive major medical insurance" as any hospital or

medical-expense-incurred policy, nonprofit health care plan service contract or coverage of

services; or health maintenance organization subscriber contract or coverage of services. A

“health insurer" means a person duly authorized to transact health insurance business. And a

“purchaser" is a consumer, employer or other payer for health insurance or health care financing.

The Medical Assistance Division administers the Salud managed care contracts for the Medicaid

program. However, the Division of Insurance of the Public Regulation Commission does not

have regulatory authority over the Salud contracts in the areas of sales and marketing.

ADMINISTRATIVE IMPLICATIONS

If enacted, the insurance division would be required to promulgate rules in accordance with the

proposed legislation. This is a normal function of the division, and it is not expected that the

requirements would increase needed personnel or expense.

The bill requires that the superintendent define what is meant by "a policy with a substantially

similar experience rating," while the definition section includes what is meant by "medical loss

ratio" and "health insurer" for purposes of this new Insurance Code section.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

Relates to several heath insurance bills, including:

HOUSE

HB 37 Electronic Medical Records Act

HB147 Health Care Authority Act

SENATE

SB3 HEALTH SECURITY ACT

SB39 HEALTH INSURANCE TAX CREDIT

SB129 Healthy New Mexico Task Force

SB185 STATEWIDE TEEN PREGNANCY PREVENTION

TECHNICAL ISSUES

PRC notes the following technical issues:

1.

Section 1, paragraph A directs the "insurance division" to promulgate rules. Under the

Insurance Code, NMSA 1978, §59A-2-9, it is the "superintendent" who has the authority

Senate Bill 474/aSFL#1 – Page

3

to promulgate rules, so a direction to the "superintendent" would be more consistent with

current law.

2.

Section a (B)(1), line 8, defines "comprehensive major medical insurance", in part, as

"any hospital - or medical-expense-incurred policy," whereas insurers often define this

form of coverage as a "form of heath insurance that provides, in one policy, protection for

both basic hospital expense and major medical expense coverages," which may better

capture that type of coverage to which this bill is intended to cover.

OTHER SUBSTANTIVE ISSUES

According to HPC:

New Mexico insurance rules differ by group versus individual and group size. For

example, the applicability of SB474 may differ for a small group (greater than 2 and less

than 50 eligible employees). For a small group, the group can be charged higher

premiums, within limits, based on the health status of those in the group. Premiums also

can vary, within limits, based on age, gender, geography, occupation, and smoking status.

Consequently, a small group can be charged more depending on the group’s health status.

It is important to ensure that any disclosure done for very small groups not compromise

the identity or any medical information of an individual. The bill is silent on this issue.

New Mexico currently has limits regarding how much small group health plan policy

premiums can be increased at renewal because of claims experiences. .

For groups with

more than 50 workers, New Mexico does not limit premium variation or increases.

BE/nt:bb