Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance
committees of the NM Legislature. The LFC does not assume responsibility for the accuracy of these reports
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F I S C A L I M P A C T R E P O R T
SPONSOR Picraux
ORIGINAL DATE
LAST UPDATED
1/20/08
1/31/08 HB 148
SHORT TITLE Employee Wellness Program Tax Credit
SB
ANALYST Francis
REVENUE (dollars in thousands)
Estimated Revenue
Recurring
or Non-Rec
Fund
Affected
FY08
FY09
FY10
($218.7)
($1,531.0) Recurring General Fund
(Parenthesis ( ) Indicate Revenue Decreases)
Duplicates SB148
Relates to SB225, HB62 and HB147
ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)
FY08 FY09 FY10 3 Year
Total Cost
Recurring or
Non-Rec
Fund
Affected
Total
$162.85 $162.85
$315.7
Recurring General
Fund
(Parenthesis ( ) Indicate Expenditure Decreases)
SOURCES OF INFORMATION
LFC Files
Responses Received From
Department of Health (DOH)
Health Policy Commission (HPC)
Taxation and Revenue Department (TRD)
New Mexico First
SUMMARY
Synopsis of Bill
House Bill 148 creates a new credit against personal and corporate income tax liability for
employers who have a qualified “wellness" program in place. The credit cannot exceed the
product of $200 and the number of up to 200 NM resident employees plus the product of $100
and the number of employees for over 200 NM resident employees. So a company with 100
employees would be eligible for a credit of $20,000 (100 employees x $200) while a company
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House Bill 148 – Page
2
with 300 employees would be eligible for a credit of $50,000 (200 employees x $200 + 100
employees x $100).
DOH, in consultation with HPC, TRD and the Workforce Solutions Department, is charged with
certifying a company’s wellness program which must contain at least three of the following:
Health awareness: dissemination of health information and screening for employees
Employee engagement: a committee to engage employees and employee tracking
Behavioral change: programs that provide counseling, seminars, on-line programs or self-
help materials to address behavioral health issues such as smoking, obesity, stress, fitness,
nutrition, substance abuse, depression and mental health promotion
Supportive environment: policies and services that promote healthy lifestyles including
tobacco use policies, availability of nutritious food, stress management and the
encouragement of physical activity
The credit will be available for tax years 2008 to 2017 and will only apply to current tax year
liability.
FISCAL IMPLICATIONS
The fiscal impact has been determined by using information from Indiana’s experience with a
similar wellness credit. Indiana saw that it took about six months to get the certification
procedures and criteria up and running and then the take-up of employers was about twenty per
month. Following the Indiana experience, the assumed take-up rate is 5 per month and it is also
assumed that 75 percent of the companies that take advantage of the credit are companies with
more than 100 employees and 25 percent are companies with 50 to 99 employees. This is a
revised impact from the previous FIR pursuant to more information about the ability of
companies to retool existing wellness programs to become certified. Wellness programs,
particularly given the criteria laid out in HB148, are more attractive to larger employers due to
the fixed costs associated with it. The average cost of the credit per employee is based on the
attached document from the Texas Department of State Health Services.
FISCAL IMPACT OF WELLNESS CREDIT
months
50-99
employees
Greater than
100
employees
Total
Employees
Average
Benefit =
$100 per
employee
Fiscal Year
of Impact
Average Employment
68
269
2008
2
3
8
2,188
218,750
FY09
2009
12
18
53
15,313
1,531,250
FY10
2010
12
33
98
28,438
2,843,750
FY11
2011
12
48
143
41,563
4,156,250
FY12
Company Size
It should be noted that TRD has estimated a much higher impact based on a different
methodology. The impact here shows a much slower rate of adoption than the TRD analysis and
is largely based on the Indiana experience. However, the different estimates point to significant
upside risk in this estimate and that if the credit is adopted much faster than shown here, the
credit becomes significantly more expensive.
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House Bill 148 – Page
3
SIGNIFICANT ISSUES
DOH:
Nearly 890,000 cases of seven common chronic diseases — cancers, diabetes, heart
disease, hypertension, stroke, mental disorders, and pulmonary conditions — were
reported in New Mexico in 2003. (The Milken Institute. An Unhealthy America: The
Economic Burden of Chronic Disease. October 2007.
http://www.chronicdiseaseimpact.com/ebcd.taf.cat=state&state=NM)
These conditions shorten lives, reduce quality of life, and create considerable burden for
caregivers. The Milken Institute has estimated that between 2003 and 2023, NM could
potentially save $6.3 billion (or 26.4%) in direct medical expenditures and lost
productivity due to chronic diseases if moderate changes were made toward prevention
and screening. The leading causes of preventable disease and death are tobacco use, lack
of adequate physical activity, and poor nutritional practices.
Lack of physical activity and poor nutritional habits are believed to be the biggest
contributors to overweight and obesity. Overweight and obesity in adults increase the
risk of diabetes, cardiovascular disease, asthma, arthritis, some cancers, and poor
functional health status. Chronic diseases such as these are responsible for six out of
every ten deaths in New Mexico.
The worksite is an ideal setting for health education and disease prevention programs
because employees spend significant hours at work.
Individuals with lower incomes and educational attainment tend to have poorer health
status when compared to people earning more money and with higher education. By
reaching New Mexico residents at their worksites, HB148 could positively impact non-
professional populations that have been identified to have higher rates of obesity, tobacco
use, substance abuse, depression, and poor nutrition and physical activity behaviors.
The February 2007 issue of State Legislatures, a National Conference of State Legislatures
publication, reported on wellness programs and found at the time seven states had tax credits
including Hawaii, Iowa, Mississippi, New Jersey, New York, Rhode Island and Wisconsin. “The
idea is to provide employers—especially smaller businesses—with income, franchise or
corporate tax credits for wellness programs such as nutrition, weight management, smoking
cessation or substance abuse counseling, or purchasing or maintaining fitness equipment."
According to NCSL:
Investing in employee health also pays off. Healthy workers are more productive. An
analysis of 32 studies of workplace wellness initiatives found 28 with an average return
on investment of $3.48 per $1 in program costs, as reported in 2001 in the American
Journal of Public Health. Citibank saved $8.9 million over two years after investing $1.9
million for wellness initiatives, translating into a return of $4.70 for each dollar spent on
the wellness program. Motorola saw a return of $3.93 for every dollar spent on its
wellness program, and saved nearly $10.5 million annually in disability expenses for
program participants compared to non-participants.
Corroborating NCSL, HPC cites research that indicates that workplaces with employee health
programs demonstrate a 2% to 5% increase in productivity and that those with health promotion
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House Bill 148 – Page
4
programs save an average of $3.50 for every dollar spent, as measured by reduced absenteeism
and health care costs. Workplaces with wellness programs also report fewer work-related injuries
and lower stress levels.
PERFORMANCE IMPLICATIONS
DOH reports that the certification of wellness programs may be better handled by TRD.
However, TRD does not have the clinical experience to effectively evaluate a wellness program.
HPC may be an alternative entity to certify wellness programs.
ADMINISTRATIVE IMPLICATIONS
According to DOH, the agency is identified as a lead agency to implement key components of
HB148: reviewing, issuing, or declining certification of eligibility to all New Mexico employers
that apply, and promoting the wellness tax credit program. These duties would require 2 new
FTE, at an estimated recurring cost of $132,850.
According to TRD, one FTE would be needed by RPD, at a cost of $30,000, to manage a manual
process of tracking and reviewing the credits. A claim form and instructions would be needed at
a cost of approximately $1,000 to develop. Current publications would need to be changed.
Coordination would be required between the various agencies to administer the credit and to
establish the rules and guidelines.
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
SB148 is a duplicate of HB148.
There are many health related bills this session. SB225, HB147 and HB62 have proposed
creating a health coverage authority that would be charged with developing wellness programs
and if created this authority may be a better entity to certify credits than DOH.
TECHNICAL ISSUES
There may be confusion about “NM resident" employees and border communities like Santa
Teresa or Gallup where employees may come from other states.
NF/mt
Attachment