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

SPONSOR Rawson

ORIGINAL DATE

LAST UPDATED

02/08/08

HB

SHORT TITLE Require Pooled Health Insurance Coverage

SB 514

ANALYST Hanika-Ortiz

ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)

FY08

FY09

FY10 3 Year

Total Cost

Recurring

or Non-Rec

Fund

Affected

Total

Indeterminate

Recurring Various

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Human Services Department (HSD)

Health Policy Commission (HPC)

General Services Department/Risk Management Division (GSD/RMD)

No Response Received From

Public Regulation Commission (PRC)

SUMMARY

Synopsis of Bill

Senate Bill 514 adds a new section to the New Mexico Insurance Code, Chapter 59A, Article 23,

Group and Blanket Health Insurance and Article 46, Health Maintenance Organization NMSA

1978, which will require health insurance carriers to offer pooled health insurance coverage to

employees of multiple employers.

FISCAL IMPLICATIONS

This bill attempts to have an insurance carrier risk equalize groups that apply for group health

insurance by pooling certain groups, upon request, with other groups thereby creating a larger

risk pool. It is not clear how groups will choose this option. Carriers will need to establish

underwriting guidelines to protect the integrity of the newly created pool. It is difficult to know

what costs savings will be realized over time.

It is difficult to analyze specifically how the implementation of the Require Pooled Health

Insurance Coverage bill will change the health coverage marketplace or contribute significantly

Senate Bill 514 – Page

2

to getting more New Mexicans insured. Any statute that increases consumer protections will

likely incur costs in general.

New Mexico has a high rate of uninsured at 21.1% or an estimated 401,000 individuals. 88% of

small employers in New Mexico employ less than 20 employees with 41% not offering health

insurance. 81% of the small employers that do not currently provide coverage cite cost as the

primary reason and 67% of uninsured individuals say it is affordability. The cost of health

insurance is still an insurmountable obstacle for many smaller businesses and if they provide it,

they generally pass on a significant share of the premium to the employee.

SIGNIFICANT ISSUES

This bill proposes a significant change in the manner in which small groups are insured by

allowing them to pool, upon request, with other employer groups of that insurance carrier in an

attempt to achieve risk equalization and potential cost savings though use of large pools. This

provision will not apply to short term travel insurance, accident-only insurance, limited, or

disease specific policies.

PERFORMANCE IMPLICATIONS

There are current New Mexico Insurance Code provisions that allow small employers to band

together for risk purposes in a similar fashion under Article 15. It is not clear if this bill

conflicts.

There is federal regulation under ERISA which may be in conflict with the provisions of the

proposed bill.

Employers who request to be part of a larger pool will need to be educated on the potential of

experiencing both rate decreases and increases based on factors outside of their specific

employee group. HSD notes that attempts made to amalgamate small groups to lower premium

costs have not been successful in achieving the desired rated decrease and in fact many times

have resulted in cost increases.

ADMINISTRATIVE IMPLICATIONS

SB 514 amends the Insurance Code. The Insurance Code does not apply to existing pools within

the General Services Department (GSD), Risk Management Division.

Defer to Public Regulation Commission/Division of Insurance for administrative issues.

OTHER SUBSTANTIVE ISSUES

In New Mexico, affordable health insurance is more of a problem than nationally. The burden of

providing health care access has shifted from the employer to the government. States have

recently been trying to reverse that and one way is to offer tax incentives that encourage

employers to provide access to health insurance, as well as, states insurance pools to fill this

need.

Senate Bill 514 – Page

3

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

HPC notes that the State of New Mexico may continue to pay for the uninsured; and, higher

health insurance premiums by not pooling and spreading the risk.

AMENDMENTS

Clarification as to what is meant by “blanket or group health insurance policy" on page 1, lines

20 and 21.

AHO/bb