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F I S C A L I M P A C T R E P O R T
SPONSOR Foley
ORIGINAL DATE
LAST UPDATED
02/20/07
HB 1267
SHORT TITLE Health Care Reform Initiatives
SB
ANALYST Hanika Ortiz
ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)
FY07
FY08
FY09 3 Year
Total Cost
Recurring
or Non-Rec
Fund
Affected
Total
$.1
recurring general
fund
(Parenthesis ( ) Indicate Expenditure Decreases)
SOURCES OF INFORMATION
LFC Files
Responses Received From
Public Education Department (PED)
Public Regulation Department/Insurance Division (PRC)
Department of Health (DOH)
SUMMARY
Synopsis of Bill
House Bill 1267 proposes various statutory changes as follows:
Amends Section 6-4-10 NMSA, the Tobacco Settlement Program Fund, to restrict the purposes
for which funds may be used and eliminates the use of funds for additional public school
programs; health or health care programs or services for prevention or treatment of disease or
illness; or, public health programs unless its for tobacco cessation programs.
Adds a new Section to the Income Tax Act to allow a deduction from net income for long- term
care insurance.
Amends Section 22-13-1.1 NMSA, requiring high school graduation requirements to include a
required unit in physical education with a major emphasis on the long-range benefits of proper
nutrition and exercise.
Adds a new section of Chapter 59A Article 2 NMSA, Electronic Submission of Claims and
Associated Data, to require electronic submission of health insurance related information.
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House Bill 1267 – Page
2
Amends Sections 59A-18-13.1, 59A-23B-6 and 59A-23C-5.1 NMSA, Adjusted Community
Rating, to allow insurers providing a qualified wellness program to use a rating factor that takes
into account the anticipated effect the program will have on utilization and claims costs.
FISCAL IMPLICATIONS
The balance in the Tobacco Settlement Permanent Fund for FY06 was $84.6 million. It is
estimated that for FY07 an additional estimated $18.1 million will be deposited from the
permanent fund into the program fund. To the extent that any Tobacco Settlement Program Fund
expenditures for state programs are discontinued, other sources of funding will be needed for
those programs. Most likely this will be through a general fund appropriation and will be
determined by the magnitude and current uses of the expenditures that are being eliminated.
It is unclear what the financial cost and benefit will be for the Tax Act for the long term care
insurance deduction proposed. The PRC notes premium payments for qualified long term care
insurance policies can be itemized on federal income tax returns and deducted from federal and
state net taxable income. Those individuals who do not itemize cannot deduct those premiums;
and, those who cannot afford long term care insurance will not benefit from any deduction.
However, individuals with long term care insurance policies are less likely to utilize Medicaid,
since they have private insurance allocated for that purpose.
The FY07 budget approved by the Legislature and signed by Governor Bill Richardson
appropriated $7.7 million from the tobacco settlement program fund for comprehensive tobacco
control programs, an increase in spending of $1.7 million from FY06. The increase included a
first-time, $500,000 set-aside for tobacco control programs specifically targeting the state's 22
distinct American Indian tribes.
SIGNIFICANT ISSUES
It has been argued that tobacco settlement fund money should be restricted to the study, cessation
and prevention of tobacco use. For FY07 NM tobacco control programs are funded at
approximately $9 million ($7.7 million from the tobacco settlement program fund, $1.3 million
from CDC), which is 64% of the CDC recommended minimum. The smoking rate among youth
in New Mexico still remains higher than the national average (25.7% versus 23%). In
comparison, states that spend at least the CDC recommended minimum have youth smoking
rates lower than the national average.
The bill will eliminate the tobacco settlement fund’s support of health or health care program
services for prevention or treatment of disease or illness. Currently there are prevention programs
in the DOH, such as chronic disease and diabetes programs, funded through the tobacco
settlement fund. (See table under other substantive issues).
PRC reports that premium payments for qualified long term care insurance policies can be
itemized on federal income tax returns and deducted from federal and state net taxable income.
However, those who don’t itemize cannot deduct those premiums. Provisions of the bill will
permit deduction from state net payable income. Persons with long term care insurance policies
are less likely to utilize Medicaid, since they have private insurance.
While high school graduation requirements include one unit of physical education, some argue
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House Bill 1267 – Page
3
that an increased emphasis on exercise and nutrition ought to be included as a part of this unit.
PED reports that both the PE Content Standards with Benchmarks and Performance Standards
and the Health Education Standards with Benchmarks and Performance Standards require
schools to teach about the long-range benefits of proper nutrition and exercise, track, identify and
draw conclusions about personal nutrition and physical activity and how it relates to their
personal health.
PRC notes that many believe there needs to be a requirement for uniform electronic filing related
to health insurance claim filings.
Wellness programs are believed to be a proactive way to deal with health care and lower the
costs of health insurance programs. Employers and others would like to receive consideration in
the pricing of their health insurance if they have active wellness programs. Current New Mexico
law restricts factors that can be employed in the rating of health insurance. PRC believes that
amending the law to permit rating factors for wellness programs will address this issue.
PERFORMANCE IMPLICATIONS
New Mexico's tobacco settlement funds are governed by a 2000 law passed by the Legislature
and signed by then-Governor Gary E. Johnson that placed 50 percent of the state's tobacco
settlement payments in a permanent trust fund, and allowed the other half to be placed into a
tobacco settlement program fund to be spent on a variety of health-related programs appropriated
through the state's annual budget process. However, legislation passed in 2003 diverted all
settlement payments for a four-year period (FY03-06) into the state's General Fund.
ADMINISTRATIVE IMPLICATIONS
There is a clear link between health and academic achievement. By eliminating the ability of the
tobacco settlement fund to support prevention and intervention program as well as
extracurricular and after-school programs there could be a negative impact on both the PED and
DOH performance measures
.
The PRC’s insurance division believes that any rule making can be accomplished with existing
staff and resources and will have no fiscal or performance implications for the Department.
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
Conflicts with: HB584 and SB561, which proposes changes to the graduation requirements.
Duplicates: SB 1173
Relates to:
•
HB 89, which appropriates $150,000 annually to the Indian Affairs Department for
programming in southwestern Cibola County.
•
HB 90, which appropriates $100,000 annually to the Indian Affairs Department to
promote tobacco cessation in southwestern Cibola County.
•
HB 283, which prohibits smoking in indoor work areas.
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House Bill 1267 – Page
4
•
HB 335, which establishes a $25 million maximum bond amount while appeals are
pending in a civil action by signatories of the Tobacco Master Settlement Agreement
(MSA).
•
HB 353, which appropriates $1.3 million to the Veterans Affairs Department to study
early detection of lung cancer.
TECHNICAL ISSUES
PRC further reports that Section 4 requires that the superintendent of insurance conduct a rule
making to establish requirements for insurers, HMOs, nonprofit health care plans, TPAs,
individual and institutional health care providers. The superintendent has substantial authority
over its licensees; however, has no authority over individual and institutional providers. This
lack of authority through licensure will make it hard for the superintendent to enforce these rules
on providers. These providers are licensed by other agencies and their inclusion in a joint
rulemaking could eliminate this problem.
OTHER SUBSTANTIVE ISSUES
Tobacco Settlement Program Fund Distribution
(dollars in thousands)
FY04
FY05 FY06 FY07 Final DFA Rec. FY08
LFC Rec.
Appropriations
General Fund General Fund General Fund
609 IAD Tobacco Cessation Programs
0
0
0
500
500
500
630 HSD Breast and cervical cancer
1,300
1,300
1,300
1,300
1,500
1,500
630 HSD Medicaid expansion
0
0
3,515
665 DOH Tobacco cessation and prevention
6,000
6,000
6,000
7,216
10,800
9,115
665 DOH Diabetes prevention and control
1,000
1,000
1,000
1,000
1,000
1,000
665 DOH HIV/AIDS services
470
470
470
470
470
470
665 DOH Breast and cervical cancer screening
0
200
200
952 UNM/HSC Research and clinical care programs in
lung and tobacco-related illness
1,000
1,000
1,000
0
1,500
1,000
952 UNM/ HSC Instruction and General Purposes
0
0
0
1,000
0
1,000
952 UNM/HSC Research in genomics and
environmental health
1,500
1,500
1,500
1,500
2,000
1,500
952 UNM/HSC Poison control center
450
450
450
450
450
450
952 UNM/HSC Pediatric oncology program
400
400
400
400
800
400
952 UNM/HSC Tele medicine program
150
150
150
150
300
150
952 UNM/HSC Los Pasos program
50
50
50
50
50
50
952 UNM/HSC Area health education centers
50
50
50
50
50
50
952 UNM/HSC Specialty education in trauma
400
400
400
400
400
400
952 UNM/HSC Specialty education in pediatrics
400
400
400
400
400
400
Total Appropriations/Recommendation
13,170
13,170
13,170
14,886
20,420 21,700
ALTERNATIVES
Allow for the tobacco settlement fund to continue to providing funding for school programs as
well as health programs; but, include a requirement that tobacco use prevention information and
tobacco cessation strategies be incorporated into existing programs that target middle and high
school students.
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House Bill 1267 – Page
5
WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL
•
Proceeds from the tobacco settlement program fund will continue as is.
•
An income tax deduction for the purchase of long-term insurance may not exist.
•
Submission of health care claims and associated data may continue in its present form.
•
An insurance rating factor for qualified wellness programs may not be established.
AMENDMENTS
On Page 1, line 13, after “research and cessation" insert “and prevention" before “programs".
AHO/nt