0001| SENATE BILL 575
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0002| 42ND LEGISLATURE - STATE OF NEW MEXICO - SECOND SESSION,
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0003| 1996
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0004| INTRODUCED BY
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0005| GARY DON REAGAN
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0006|
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0007|
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0008|
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0009|
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0010|
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0011| AN ACT
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0012| RELATING TO INSURANCE; AMENDING SECTIONS OF THE INSURANCE CODE
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0013| PERTAINING TO HEALTH INSURANCE CONTRACTS AND GROUP HEALTH
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0014| INSURANCE; AMENDING THE SMALL GROUP RATE AND RENEWABILITY ACT;
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0015| REPEALING THE HEALTH INSURANCE ALLIANCE ACT AND CERTAIN SECTIONS
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0016| OF THE NMSA 1978.
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0017|
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0018| BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
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0019| Section 1. Section 59A-22-5 NMSA 1978 (being Laws 1984,
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0020| Chapter 127, Section 426, as amended) is amended to read:
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0021| "59A-22-5. TIME LIMIT ON CERTAIN DEFENSES.--There shall be
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0022| a provision as follows:
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0023| A. After two years from the date of issue of this
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0024| policy, no misstatements, except fraudulent misstatements, made
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0025| by the applicant in the application for such policy shall be
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0001| used to void the policy or to deny a claim for loss incurred or
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0002| disability (as defined in the policy) commencing after the
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0003| expiration of such two-year period.
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0004| (The foregoing policy provision shall not be so construed
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0005| as to affect any initial two-year period nor to limit the
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0006| application of Sections 59A-22-17 through 59A-22-19, 59A-22-21
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0007| and 59A-22-22 NMSA 1978 in the event of misstatement with
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0008| respect to age or occupation or other insurance.)
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0009| (A policy which the insured has the right to continue in
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0010| force subject to its terms by the timely payment of premium (1)
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0011| until at least age fifty or (2) in the case of a policy issued
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0012| after age forty-four, for at least five years from its date of
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0013| issue, may contain in lieu of the foregoing the following
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0014| provision (from which the clause in parentheses may be omitted
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0015| at the insurance company's option) under the caption
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0016| "Incontestable":
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0017| After this policy has been in force for a period of two
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0018| years during the lifetime of the insured (excluding any period
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0019| during which the insured is disabled), it shall become
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0020| incontestable as to the statements contained in the
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0021| application.)
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0022| B. [For individual policies that do not reimburse or
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0023| pay as a result of hospitalization, medical or surgical
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0024| expenses] No claim for loss incurred or disability (as defined
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0025| in the policy) shall be reduced or denied on the ground that a
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0001| disease or physical condition disclosed on the application and
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0002| not excluded from coverage by name or a specific description
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0003| effective on the date of loss had existed prior to the effective
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0004| date of coverage of this policy. [As an alternative, those
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0005| policies may contain provisions under which coverage may be
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0006| excluded for a period of six months following the effective date
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0007| of coverage as to a given covered insured for a preexisting
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0008| condition, provided that:
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0009| (1) the condition manifested itself within a
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0010| period of six months prior to the effective date of coverage in
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0011| such a manner as would cause a reasonably prudent person to seek
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0012| diagnosis, care or treatment; or
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0013| (2) medical advice or treatment relating to the
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0014| condition was recommended or received within a period of six
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0015| months prior to the effective date of coverage.]
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0016| C. An individual [policies that reimburse or pay
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0017| as a result of hospitalization, medical or surgical expenses]
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0018| policy may, in lieu of the provisions stated in Subsection B
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0019| of this section, contain provisions under which coverage is
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0020| excluded during a period of six months following the effective
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0021| date of coverage as to a given covered insured for a preexisting
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0022| condition, provided that:
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0023| (1) the condition manifested itself within a
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0024| period of six months prior to the effective date of coverage in
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0025| such a manner as would cause a reasonably prudent person to seek
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0001| diagnosis, care or treatment; or
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0002| (2) medical advice or treatment relating to the
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0003| condition was recommended or received within a period of six
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0004| months prior to the effective date of coverage.
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0005| [D. The preexisting condition exclusions authorized
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0006| in Subsections B and C of this section shall be waived to the
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0007| extent that similar conditions have been satisfied under any
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0008| prior health insurance coverage if the application for new
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0009| coverage is made not later than thirty-one days following the
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0010| termination of prior coverage. In that case, the new coverage
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0011| shall be effective from the date on which the prior coverage
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0012| terminated.
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0013| E. Nothing in this section shall be construed to
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0014| require the use of preexisting conditions or prohibit the use of
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0015| preexisting conditions that are more favorable to the insured
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0016| than those specified in this section]
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0017| D. The provisions in Subsection C of this section
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0018| shall not be construed to prohibit preexisting condition
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0019| provisions that are more favorable to the insured."
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0020| Section 2. Section 59A-23-3 NMSA 1978 (being Laws 1984,
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0021| Chapter 127, Section 462, as amended) is amended to read:
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0022| "59A-23-3. GROUP HEALTH INSURANCE.--
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0023| A. Group health insurance is that form of health
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0024| insurance covering groups of persons, with or without their
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0025| dependents, and issued upon the following basis:
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0001| (1) under a policy issued to an employer, who
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0002| shall be deemed the policyholder, insuring at least one employee
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0003| of such employer for the benefit of persons other than the
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0004| employer. The term "employees", as used in this section,
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0005| includes the officers, managers and employees of the employer,
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0006| the partners, if the employer is a partnership, the officers,
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0007| managers and employees of subsidiary or affiliated corporations
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0008| of a corporation employer, and the individual proprietors,
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0009| partners and employees of individuals and firms the business of
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0010| which is controlled by the insured employer through stock
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0011| ownership, contract or otherwise. The term "employer", as used
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0012| in this section, includes any municipal or governmental
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0013| corporation, unit, agency or department thereof and the proper
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0014| officers, as such, or any unincorporated municipality or
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0015| department thereof, as well as private individuals, partnerships
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0016| and corporations. A small employer shall also be subject to the
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0017| Small Group Rate and Renewability Act. A "small employer" means
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0018| any person, firm, corporation, partnership or association
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0019| actively engaged in business who, on at least fifty percent of
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0020| its working days during the preceding year, employed no more
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0021| than [fifty] twenty-five eligible employees. In determining
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0022| the number of eligible employees, companies that are affiliated
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0023| companies or that are eligible to file a combined tax return for
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0024| purposes of state taxation shall be considered one employer;
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0025| (2) under a policy issued to an association,
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0001| including a labor union and an agricultural association, which
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0002| shall have a constitution and bylaws and which has been
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0003| organized and is maintained in good faith for purposes other
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0004| than that of obtaining insurance, insuring at least twenty-five
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0005| members of the association for the benefit of persons other than
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0006| the association or its officers or trustees, as such; or
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0007| (3) under a policy issued to any other
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0008| substantially similar group which, in the discretion of the
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0009| superintendent, may be subject to the issuance of a group
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0010| sickness and accident policy or contract.
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0011| B. Each policy, as provided by this section, shall
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0012| contain in substance the following provisions:
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0013| (1) a provision that the policy, the
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0014| application of the policyholder, if such application or copy
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0015| thereof is attached to such policy, and the individual
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0016| applications, if any, submitted in connection with such policy
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0017| by the employees or members shall constitute the entire contract
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0018| between the parties, and that all statements, in the absence of
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0019| fraud, made by any applicant or applicants shall be deemed
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0020| representations and not warranties, and that no such statement
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0021| shall void the insurance or reduce benefits thereunder unless
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0022| contained in a written application for such insurance;
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0023| (2) a provision that the insurer will furnish
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0024| to the policyholder, for delivery to each employee or member of
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0025| the insured group, an individual certificate setting forth in
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0001| summary form a statement of the essential features of the
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0002| insurance coverage of such employee or member and to whom
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0003| benefits thereunder are payable. If dependents are included in
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0004| the coverage, only one certificate need be issued for each
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0005| family unit; and
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0006| (3) a provision that to the group originally
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0007| insured may be added from time to time eligible new employees or
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0008| members or dependents, as the case may be, in accordance with
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0009| the terms of the policy.
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0010| C. For purposes of this section only, the directors
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0011| of a corporation shall be deemed to be employees of the
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0012| corporation."
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0013| Section 3. Section 59A-23C-3 NMSA 1978 (being Laws 1991,
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0014| Chapter 153, Section 3, as amended) is amended to read:
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0015| "59A-23C-3. DEFINITIONS.--As used in the Small Group Rate
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0016| and Renewability Act:
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0017| A. "actuarial certification" means a written
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0018| statement by a member of the American academy of actuaries or
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0019| another individual acceptable to the superintendent that a small
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0020| employer carrier is in compliance with the provisions of Section
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0021| 59A-23C-5 NMSA 1978, based upon the person's examination,
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0022| including a review of the appropriate records and of the
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0023| actuarial assumptions and methods [utilized] used by the
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0024| carrier in establishing premium rates for applicable health
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0025| benefit plans;
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0001| B. "base premium rate" means, for each class of
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0002| business as to a rating period, the lowest premium rate charged
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0003| under a rating system for that class of business by the small
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0004| employer carrier to small employers with similar case
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0005| characteristics for health benefit plans with the same or
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0006| similar coverage;
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0007| C. "carrier" means any person who provides health
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0008| insurance in this state. For the purposes of the Small Group
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0009| Rate and Renewability Act, "carrier" or "insurer" includes a
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0010| licensed insurance company, a licensed fraternal benefit
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0011| society, a prepaid hospital or medical service plan, a health
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0012| maintenance organization, a nonprofit health care organization,
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0013| a multiple employer welfare arrangement or any other person
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0014| providing a plan of health insurance subject to state insurance
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0015| regulation;
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0016| D. "case characteristics" means demographic or other
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0017| relevant characteristics of a small employer, as determined by a
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0018| small employer carrier, that are considered by the carrier in
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0019| the determination of premium rates for the small employer, but
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0020| ["case characteristics" does not include] claim experience,
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0021| health status and duration of coverage since issue are not
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0022| "case characteristics" for the purpose of the law;
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0023| E. "class of business" means all or a distinct
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0024| grouping of small employers as shown on the records of the
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0025| small employer carrier. A [separate class of business may]
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0001| distinct grouping may only be established by the small
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0002| employer carrier on the basis that the applicable health benefit
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0003| plans [have been acquired from another small employer carrier
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0004| as a distinct grouping of plans]:
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0005| (1) are marketed and sold through individuals
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0006| and organizations that are not participating in the marketing or
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0007| sale of other distinct grouping of small employers for such
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0008| small employer carrier;
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0009| (2) have been acquired from another small
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0010| employer carrier as a distinct grouping of plans;
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0011| (3) are provided through an association with
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0012| membership of not fewer than three small employers that has been
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0013| formed for purposes other than obtaining insurance; or
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0014| (4) are in a class of business that meets the
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0015| requirements for exception to the restrictions related to
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0016| premium rates provided in Subparagraph (a) of Paragraph (1) of
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0017| Subsection A of Section 59A-23C-5 NMSA 1978;
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0018| F. "department" means the department of insurance;
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0019| G. "health benefit plan" or "plan" means any
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0020| hospital or medical expense incurred policy or certificate,
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0021| hospital or medical service plan contract or health maintenance
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0022| organization subscriber contract. "Health benefit plan" does
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0023| not include accident-only, credit, dental or disability income
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0024| insurance, medicare supplement coverage, coverage issued as a
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0025| supplement to liability insurance, workers' compensation or
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0001| similar insurance or automobile medical-payment insurance;
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0002| H. "index rate" means, for each class of business
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0003| for small employers with similar case characteristics, the
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0004| arithmetic average of the applicable base premium rate and the
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0005| corresponding highest premium rate;
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0006| I. "new business premium rate" means, for each class
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0007| of business as to a rating period, the premium rate charged or
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0008| offered by the small employer carrier to small employers with
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0009| similar case characteristics for newly issued health benefit
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0010| plans with the same or similar coverage;
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0011| J. "rating period" means the calendar period for
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0012| which premium rates established by a small employer carrier are
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0013| assumed to be in effect, as determined by the small employer
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0014| carrier;
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0015| K. "small employer" means any person, firm,
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0016| corporation, partnership or association actively engaged in
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0017| business who, on at least fifty percent of its working days
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0018| during the preceding year, employed no less than two and no more
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0019| than [fifty] twenty-five eligible employees. [provided
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0020| that:
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0021| (1)] In determining the number of eligible
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0022| employees, [the spouse or dependent of an employee may, at the
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0023| employer's discretion, be counted as a separate employee; and (2)] companies that are affiliated companies
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0024| or that are eligible to file a combined tax return for purposes
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0025| of state [income] taxation shall be considered one employer;
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0001| L. "small employer carrier" means any insurer that
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0002| offers health benefit plans covering the employees of a small
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0003| employer; and
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0004| M. "superintendent" means the superintendent of
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0005| insurance."
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0006| Section 4. Section 59A-23C-5 NMSA 1978 (being Laws 1991,
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0007| Chapter 153, Section 5, as amended) is amended to read:
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0008| "59A-23C-5. RESTRICTIONS RELATING TO PREMIUM RATES.--
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0009| A. Premium rates for health benefit plans subject to
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0010| the Small Group Rate and Renewability Act shall be subject to
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0011| the following provisions:
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0012| (1) the index rate for a rating period for any
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0013| class of business shall not exceed the index rate for any other
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0014| class of business by more than twenty percent, provided that
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0015| the provisions of this paragraph shall not apply to a class of
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0016| business if:
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0017| (a) the class of business is one for
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0018| which the carrier does not reject, and never has rejected, small
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0019| employers included within the definition of employers eligible
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0020| for the class of business or otherwise eligible employees and
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0021| dependents who enroll on a timely basis, based upon their claim
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0022| experience or health status;
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0023| (b) the carrier does not involuntarily
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0024| transfer, and never has involuntarily transferred, a health
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0025| benefit plan into or out of the class of business; and
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0001| (c) the class of business is currently
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0002| available for purchase;
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0003| (2) for a class of business, the premium rates
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0004| charged during a rating period to small employers with similar
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0005| case characteristics for the same or similar coverage, or the
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0006| rates that could be charged to those employers under the rating
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0007| system for that class of business, shall not vary from the index
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0008| rate by more than [twenty] twenty-five percent of the index
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0009| rate;
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0010| (3) the percentage increase in the premium rate
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0011| charged to a small employer for a new rating period may not
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0012| exceed the sum of the following:
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0013| (a) the percentage change in the new
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0014| business premium rate measured from the first day of the prior
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0015| rating period to the first day of the new rating period. In the
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0016| case of a class of business for which the small employer carrier
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0017| is not issuing new policies, the carrier shall use the
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0018| percentage change in the base premium rate;
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0019| (b) an adjustment, not to exceed ten
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0020| percent annually and adjusted pro rata for rating periods of
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0021| less than one year due to the claim experience, health status or
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0022| duration of coverage of the employees or dependents of the small
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0023| employer as determined from the carrier's rate manual for the
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0024| class of business; and
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0025| (c) any adjustment due to change in
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0001| coverage or change in the case characteristics of the small
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0002| employer as determined from the carrier's rate manual for the
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0003| class of business; and
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0004| (4) in the case of health benefit plans issued
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0005| prior to the effective date of the Small Group Rate and
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0006| Renewability Act, a premium rate for a rating period may exceed
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0007| the ranges described in Paragraph (1) or (2) of this subsection
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0008| for a period of five years following the effective date of the
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0009| Small Group Rate and Renewability Act. In that case, the
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0010| percentage increase in the premium rate charged to a small
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0011| employer in that class of business for a new rating period may
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0012| not exceed the sum of the following:
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0013| (a) the percentage change in the new
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0014| business premium rate measured from the first day of the prior
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0015| rating period to the first day of the new rating period. In the
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0016| case of a class of business for which the small employer carrier
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0017| is not issuing new policies, the carrier shall use the
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0018| percentage change in the base premium rate; and
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0019| (b) any adjustment due to change in
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0020| coverage or change in the case characteristics of the small
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0021| employer as determined from the carrier's rate manual for the
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0022| class of business.
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0023| B. Nothing in this section is intended to affect the
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0024| use by a small employer carrier of legitimate rating factors
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0025| other than claim experience, health status or duration of
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0001| coverage in the determination of premium rates. Small employer
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0002| carriers shall apply rating factors, including case
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0003| characteristics, consistently with respect to all small
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0004| employers in a class of business.
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0005| C. A small employer carrier shall not involuntarily
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0006| transfer a small employer into or out of a class of business. A
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0007| small employer carrier shall not offer to transfer a small
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0008| employer into or out of a class of business unless the offer
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0009| is made to transfer all small employers in the class of business
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0010| without regard to case characteristics, claim experience, health
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0011| status or duration since issue.
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0012| D. Prior to usage and [the effective date of the
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0013| Small Group Rate and Renewability Act] June 14, 1991, each
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0014| carrier [shall] must file with the superintendent the rate
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0015| manuals and any updates thereto for each class of business. A
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0016| rate filing fee is payable under Subsection U of Section 59A-6-1
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0017| NMSA 1978 for the filing of each update. The superintendent
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0018| shall disapprove within sixty days of receipt of a complete
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0019| filing or the filing is deemed approved. If the superintendent
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0020| disapproves any such form during the sixty-day review period, he
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0021| shall give the carrier written notice of the disapproval stating
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0022| the ground thereof. At any time, the superintendent, after a
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0023| hearing thereof, may disapprove a form or withdraw a previous
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0024| approval. The superintendent's order on such hearing shall
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0025| state the grounds for disapproval or withdrawal of a previous
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0001| approval and the date not less than twenty days later when
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0002| disapproval or withdrawal becomes effective."
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0003| Section 5. Section 59A-47-33 NMSA 1978 (being Laws 1984,
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0004| Chapter 127, Section 879.32, as amended by Laws 1994, Chapter
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0005| 64, Section 10 and also by Laws 1994, Chapter 75, Section 34) is
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0006| amended to read:
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0007| "59A-47-33. OTHER PROVISIONS APPLICABLE.--The provisions
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0008| of the Insurance Code other than Chapter 59A, Article 47 NMSA
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0009| 1978 shall not apply to health care plans except as expressly
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0010| provided in the Insurance Code and that article. To the extent
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0011| reasonable and not inconsistent with the provisions of that
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0012| article, the following articles and provisions of the Insurance
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0013| Code shall also apply to health care plans, their promoters,
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0014| sponsors, directors, officers, employees, agents, solicitors and
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0015| other representatives; and, for the purposes of such
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0016| applicability, a health care plan may therein be referred to as
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0017| an "insurer":
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0018| A. Chapter 59A, Article 1 NMSA 1978;
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0019| B. Chapter 59A, Article 2 NMSA 1978;
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0020| C. Chapter 59A, Article 4 NMSA 1978;
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0021| D. Subsection C of Section 59A-5-22 NMSA 1978;
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0022| E. Sections 59A-6-2 through 59A-6-4 and
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0023| 59A-6-6 NMSA 1978;
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0024| F. Section 59A-7-11 NMSA 1978;
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0025| G. Chapter 59A, Article 8 NMSA 1978;
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0001| H. Chapter 59A, Article 10 NMSA 1978;
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0002| I. Section 59A-12-22 NMSA 1978;
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0003| J. Chapter 59A, Article 16 NMSA 1978;
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0004| K. Chapter 59A, Article 18 NMSA 1978;
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0005| L. Chapter 59A, Article 19 NMSA 1978;
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0006| [M. Subsections B through E of Section
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0007| 59A-22-5 NMSA 1978;
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0008| N.] M. Section 59A-22-34.1 NMSA 1978;
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0009| [O.] N. Section 59A-22-39 NMSA 1978;
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0010| [P.] O. Section 59A-22-40 NMSA 1978;
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0011| [Q.] P. Sections 59A-34-9 through 59A-34-13
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0012| [NMSA 1978] and [Section] 59A-34-23 NMSA 1978;
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0013| [R.] Q. Chapter 59A, Article 37 NMSA 1978,
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0014| except Section 59A-37-7 NMSA 1978; and
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0015| [S.] R. Section 59A-46-15 NMSA 1978."
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0016| Section 6. REPEAL.--Sections 59A-18-13.1, 59A-23C-5.1,
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0017| 59A-23C-7.1 and 59A-56-1 through 59A-56-25 NMSA 1978 (being Laws
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0018| 1994, Chapter 75, Sections 26, 33, 32 and 1 through 25) are
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0019| repealed.
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0020|
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