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

SPONSOR Beffort

ORIGINAL DATE

LAST UPDATED

2/14/07

HB

SHORT TITLE Health Insurance Purchase Tax Credit

SB 871

ANALYST Francis

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

FY09

($4,200.0)

Recurring General Fund

(Parenthesis ( ) Indicate Revenue Decreases)

Relates to SB723, SB869

SOURCES OF INFORMATION

LFC Files

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

Senate Bill 871 provides a credit to low-income individuals for health insurance premiums. The

credit is refundable meaning if the credit exceeds the taxpayer’s liability, the excess is refunded

to the taxpayer. The credit cannot be claimed by an individual who claimed the health insurance

premium in their federal itemized deductions or on their state personal income tax return. The

credit also cannot be claimed for premiums related to Medicaid or SCHIP.

For New Mexicans who can get insurance through work and live in a household that is below

100 percent of the poverty level, the credit is $2,500 or 50 percent of the premium whichever is

greater. If there employer-provided coverage is not an option and the household is below 200

percent of the poverty level, the credit is equal to the greater of $2,500 or 50 percent of the

premium.

There is no effective date so by default the effective date is June 15, 2007.

Senate Bill 871 – Page

2

FISCAL IMPLICATIONS

This analysis was done without the benefit of Taxation and Revenue analysis. Their input

may change the fiscal impact upward or downward.

There are approximately 113,000 employees not currently covered by health insurance provided

through work and, according to 2005 tax return data, 19 percent, or 10,900 households, would be

from households at or below 100 percent of the poverty level and another 10 percent or 11,600

between 100 and 200 percent. If 5 percent of those eligible were able to get insurance through

this credit, the credit would cost 4.2 million. It’s assumed that all of the tax filers will receive the

full $2,500 credit.

SIGNIFICANT ISSUES

Nationally, health insurance premiums grew tremendously over the last decade and though the

rate of growth has slowed in the last two years, it remains near 10 percent. That compares with

inflation at approximately 3 percent and the economy which is also growing at about 3 percent.

As the premiums increase, the number of employers offering health insurance decreases.

According to the Kaiser Family Foundation, which tracks a host of health related issues, the

percentage of employers offering health insurance has dropped from 69 percent to 60 percent in

the last few years.

In NM, 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, particularly for

children whose parents cannot get health insurance at work. 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. However, the cost of health insurance is still an insurmountable obstacle for

many smaller businesses and if they provide it they have to pass on a significant share of the

premium to the employee.

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.

Senate Bill 871 – Page

3

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

Senate Bill 723 offers a similar credit but the credit is between 35 and 50 percent and the firm

size threshold is 50 employees. Senate Bill 871 provides a credit for the purchase of health

insurance by an individual.

NF/nt