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(Parenthesis ( ) Indicate Expenditure Decreases)

(Parenthesis ( ) Indicate Revenue Decreases)

Duplicates/Conflicts with/Companion to/Relates to

SOURCES OF INFORMATION

Public School Insurance Authority

Commission on Higher Education

General Services Department

SUMMARY

Synopsis of Bill

House Bill 448 proposes to allow a public school district (public schools) or an institution of higher education (universities) employer to contribute up to 100 percent of the cost of group health insurance. The referenced employers are required to contribute the currently authorized amounts of 60 to 75 percent of the cost of group health insurance.

Significant Issues

The staffs of the General Services Department (GSD) and the Public School Insurance Authority (PSIA) have provided the following comments:

Under the proposed legislation, different public schools and universities could pay at different levels.

The cost of group benefits to public schools and universities are estimated to increase between 80 and 100 percent.

State employees would be the only large state employee group not legally allowed to have benefits paid for up to 100 percent of the cost of group health insurance by the employer.

Allowing school districts to contribute up to 100 percent of the cost of group insurance would presumably affect collective bargaining demands to provide 100 percent payment of both the single employee and dependent coverage.

Many school districts define "eligible employees" as those working 15 or more hours per week. As defined, all eligible employees (and their eligible family members) must be insured under a non contributory plan, schools districts may decide locally to limit their definition of eligible employees in the future to those working more than 20 or 25 or 30 hours per week. The potential exists then, that those employees (currently defined as "eligible employees") would not have easy affordable access to coverage.

School districts with Section 125 cafeteria plans would lose their FICA and FUTA savings if the district paid 100 percent of the cost. The state will then receive additional state withheld income taxes.

FISCAL IMPLICATIONS

Currently, educational entities contribute an average of 65 percent of the cost of employee and dependent coverages. Under a 100 percent scenario, assuming all districts chose to pay up to 100 percent of the cost, contributions would increase between $22,000.0 to $23,000.0 million annually. This estimate does not include the cost of paying for all eligible family members who are not currently enrolled. Non-contributory coverage language in insurance contracts requires that all those eligible must be enrolled, even if they have other coverage through another plan or program, including Medicaid. Additionally, new dependents added to the New Mexico Public School Insurance Authority plan with prior coverage would receive credit for prior coverage toward the pre-existing conditions limitations. These new family members may have an adverse impact on overall per member per month costs of medical.

The impact is spread to all funding sources (i.e, general fund, other state funds, federal funds, etc.). Amounts from each fund are not identified.

WJC/njw