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SPONSOR Komadina
2/1/08 HB
SHORT TITLE Health Insurance Exchange Act
SB 228/aSPAC
APPROPRIATION (dollars in thousands)
or Non-Rec
(Parenthesis ( ) Indicate Expenditure Decreases)
REVENUE (dollars in thousands)
Estimated Revenue
or Non-Rec
$7,000* Recurring General Fund
(Parenthesis ( ) Indicate Revenue Decreases)
*See revised fiscal implications section
FY10 3 Year
Total Cost
or Non-Rec
$1,700 Recurring Insurance
$0.1 Recurring General
$0.1 Recurring General
(Parenthesis ( ) Indicate Expenditure Decreases)
LFC Files
Responses Received From
Human Services Department (HSD)
Department of Finance and Administration (DFA)
Public Regulation Commission (PRC)
Senate Bill 228/aSPAC – Page
Public Education Department (PED)
Higher Education Department (HED)
Health Policy Commission
Synopsis of Senate Public Affairs Committee Amendment
The SPAC amendment adds a new item to the definition of “creditable coverage" to include “a
plan designated by the superintendent as creditable coverage that includes spiritual care benefits
for individuals that use prayer of spiritual means of healing."
Synopsis of Original Bill
Senate Bill 228 would create a non-profit public corporation, separate from the state, to provide
increased access, choice and portability of health insurance for New Mexicans. All eligible
individuals would be permitted to obtain health insurance benefits through the exchange in
accordance with provisions of this act, the New Mexico Insurance Code and other applicable
state and federal laws; The exchange would be governed by a board of directors, who would be
considered a governmental entity for purposes of the Tort Claims Act, but neither the board nor
the exchange would be considered a governmental entity for any other purpose.
This bill eliminates the existing Health Insurance Alliance (HIA); replaces some of its functions
by ensuring guaranteed coverage based on certain requirements; and expands HIA functions to
include consolidation of the individual and small group health insurance market through creation
of an entity called the exchange which certifies and allows the purchase of health insurance
benefit plans.
The bill includes a provision requiring individuals to carry health insurance or prove other means
of financial responsibility and establishes a mechanism for the state to retain money due to the
individual from the state for compliance.
Below is a section-by-section summary of the major provisions of the bill, adapted from a
summary provided by HSD:
Section 4
Governance: Board governed by 13 directors consisting of 2 elected by participating
carriers, 4 appointed by the governor; 1 director who is a licensed physician and is
elected by the NM Medical Society; 1 director that is elected by and represents the NM
Hospital Association; 1 director that is elected by the NM Association of Health
Underwriters; 1 director that represents the Indian nations, tribes and pueblos; and the
superintendent of insurance or designee, who is a non-voting member.
A director of the Exchange will be appointed by the board.
Section 5
Duties: Publicize existence of the Exchange and disseminate information on eligibility
and enrollment. Establish and administer operation functions: enrollment procedures;
election of coverage procedures including distribution of benefit information; and billing
Senate Bill 228/aSPAC – Page
and collection of premiums. Issue certification of creditable coverage as requested.
Establish all financial accounting processes and procedures involved in billing and
collection of premiums including distribution to carriers and other accompanying
operational and accounting functions. Submit annual financial audit. Submit by July
2010 to governor, legislature and superintendent of insurance a report on feasibility of
expanding Exchange to employers with greater than 50 employees.
Section 6
Powers: Contract with vendors to achieve functions specified in act; contract with
private or public entities to administer enrollment, eligibility and premium billing and
collections functions; contract with employers to act as plan administrator for
participating employer plans subject to ERISA. Assess each participating insurance plan
for administrative and operating expenses and collect fees to cover cost of administration.
Seek and receive grant funding. Establish operating procedures and service centers.
Assume legal responsibility for its actions. Enroll all eligible individuals through the
Section 7
Enrollment and Coverage: Any individual may apply to participate. Any public or
private employer may apply on behalf of those persons who may be eligible. Participation
is subject to open enrollment season with certain conditions for guaranteed coverage and
specific qualifying events. The Exchange shall verify eligibility for all applicants for
private coverage. The state shall verify eligibility for all applicants for state sponsored or
state-subsidized coverage unless the state enters into an agreement with the Exchange.
The Exchange shall not decline, refuse to offer or restrict an offering to any participating
individual of a participating plan that has been obtained in a timely fashion.
Eligibility: Resident of state and continued domicile; or employed at least 20 hours per
week in state and employer does not offer health insurance coverage or individual is not
eligible to participate; individual is not a resident but is eligible to participate in an
employer plan; self employed individual who resides in another state but has principal
place of business in state; full time student in state; dependant of state resident. Open
enrollment period and qualifying events are defined.
Section 8
Health benefit plans: Health benefit plans offered through the Exchange must be
certified for up to a year by the superintendent of insurance as to good standing and
licensure by offering plan and compliance with applicable state health insurance laws
including this act. No competitive bidding process will be required except as pursuant to
the Health Care Purchasing Act. Superintendent shall establish and administer
regulations and procedures for certification.
Plan Design: Health benefit plans which are eligible for certification must include:
Inpatient hospital and medical benefits, surgical benefits, ambulatory patient benefits,
prescription drug benefits and mental health benefits.
Rates: Carriers shall offer participating insurance plans at rates developed pursuant to
59A.18.13.1 NMSA 1978 and include provision for adjustment in subsequent years based
on experience and modification to benefit design as long as the subsequent adjustments
are consistent with general practice in the determination of the superintendent.
Senate Bill 228/aSPAC – Page
Section 9
Underwriting: During designated open season: a participating individual who switches
plans shall not be subject to any pre-existing condition provision and shall be charged the
standard rate; a new participating individual with creditable coverage of eighteen months
or more may enroll and shall not be subject to any pre-existing condition period and shall
be charged the standard rates; a new participating individual with less than eighteen
months of creditable coverage may enroll but may be subject to pre-existing condition
periods not to exceed twelve months or charged a premium not to exceed an amount
pursuant to Section 59A-18-13.1 NMSA 1978. New enrollees without creditable
coverage are subject to carrier election to impose waivers or impose pre-existing
condition periods or extend the surcharge for beyond the first year of coverage.
Section 10
Continuation of Coverage: Any individual may continue to participate as long as they
remain eligible subject to specific provisions regarding premium payment and shall not
be canceled or non-renewed based on employer or employment status or other conditions
as defined.
Section 11
Dispute Resolution: Superintendent of Insurance shall establish procedures for
resolving disputes with respect to eligibility, coverage surcharge, imposition of pre-
existing conditions and other issues as defined.
Section 12
Participating Employer Plans: Any employer may apply to participate and if
participating must enter into a binding agreement with the Exchange which designates
certain specific requirements for coverage, benefits, administration and other
circumstances as defined including provisions regarding record keeping, compliance and
sponsorship of a “cafeteria plan".
Employer Responsibility: Employers (and self employed individuals) must annually
file a form for each employee (including dependants) employed within the state which
indicates health insurance coverage status and other specific information. HSD must file
on behalf of all individuals receiving benefits under Medicaid or State Children’s Health
Insurance program or any other state coverage program. This reporting will be used in
conjunction with individual reporting to establish compliance with personal responsibility
requirements (see below).
Section 13
Brokers: Commissions may be paid to licensed producers for individual or group
enrollments as set by board. Provisions for membership organizations to obtain
commission as specified. Brokers are not liable for actions associated with offerings for
state funded programs which they receive training for through the Exchange as long as
they are acting in good faith.
Section 14
Market Consolidation: Carrier may not issue or renew individual health benefit plan
other than through the Exchange after first regular open season conducted by the
Exchange. Carrier may not issue or renew small group (50 or fewer employees) other
than through the Exchange after first regular open season conducted by the Exchange.
Senate Bill 228/aSPAC – Page
Section 15
Personal Responsibility: State residents over 18 and under 65 must offer proof of
ability to pay for medical care for themselves and dependents by indicating coverage
under any Exchange health benefit, their election to be considered under a state subsidy
program or by demonstrating proof of financial security by posting a $10,000 bond as
prescribed. Penalties for failure to comply include establishing an escrow account for
that individual which will accrue all funds owed to that individual by the state including
tax overpayment to be disbursed in the event of medical claims.
Sections 16 and 17
Mandatory Consolidated Purchasing: The publicly funded health care agencies will
enter into a cooperative consolidated purchasing effort to provide health benefit plans for
the benefit of agency eligible participants though an RFP process through participating
insurance plans in the Exchange.
Section 18
Collection and Use of Enrollment Data: Superintendent of Insurance shall compile
quarterly enrollment information as follows: all individuals currently enrolled though the
Exchange; list from human services department of all individuals currently enrolled in
health coverage programs though the department; individuals enrolled in each benefit
plan they provide though insurance or administrative services. The information shall be
used in order to ensure compliance with provisions of the act.
Section 19
Premium Rate Restrictions: Certain restrictions are enacted regarding premium rates
for health benefit plans.
The bill allows the exchange to receive grants and establish fees sufficient to cover operating
expenses. While the bill contains no appropriation to establish the exchange, there may
significant administrative impact on several state agencies.
Additionally, in a revised report on January 30, PRC estimated because the Health Insurance
Alliance would be moved into the exchange, premium tax offsets could be reduced beginning in
FY10. Assessments paid under the Alliance reduce general fund revenues by the amount of the
offsets. These offsets are estimated to be $7 million for FY10.
The bill requires the Human Services (HSD) to report status of recipients of Medicaid, State
Children’s Health Insurance Program and other state coverage programs to the superintendent of
insurance. HSD does not provide an estimate of costs. According to HSD, HSD would have to
develop the functionality to generate reports for the status of recipients of State Children’s
Health Insurance Program and other state coverage programs and this could have a moderate
fiscal impact.
The secretary of finance and administration is charged with collecting proof of financial security
by individuals who elect to do so through a $10,000 bond and establishing an escrow account in
the name of the individual and/or retaining and depositing all funds owed to the individual by the
state in that account. Money for health claims will also be disbursed through that account. This
may have a significant impact on the Department of Finance and Administration.
Senate Bill 228/aSPAC – Page
SB 228 requires under section 18 that the superintendent prepare and distribute forms for
individual coverage for each of the state’s residents and each non-resident employed in New
Mexico. Employers and other individuals would be required to complete these forms and return
them to the Superintendent. The cost of this process is not currently included in PRC Insurance
Division budget requests. The cost would be a recurring cost and would come from the Insurance
Operating Fund. PRC estimates the cost for postage and preparation of these forms could
approach $1.7 million annually.
This bill proposes significant changes to the health insurance market and consolidates the
individual and small group markets under the exchange. It imposes a personal responsibility
mandate and an employer reporting function to ensure that requirement is fulfilled.
According to HSD
The Legislative Health and Human Services Committee (LHHS) was charged with
completing a health care costs study to determine the amount of public and private money
expended on health care in the state, as well as the economic impact and the effect of
health care reform efforts. The study was mandated by House Bill 955 (HB 955) during
the 2003 regular legislative session (Laws 2003, Chapter 380).
In 2002, the estimated cost of providing health care to New Mexicans was $7.9 billion.
Approximately 75 percent of health care expenditures were publicly financed ($5.9
billion). Of the $6 billion that comes from public sources, the federal government pays
for 64 percent ($5 billion) compared to 10 percent contributed by state government ($820
million). Counties cover about one percent of health care costs ($94 million) and only
$3.4 million comes from out-of-state sources. Spending for hospital services, for medical
and other professional services and supplies account for 28 percent of health care dollars,
and spending on long-term care services accounts for another 12 percent. While
categories were created based on comparable types of services utilized by the National
Health Accounts (CMS, 1960-2002), some sources do not tend to collect or report data by
types of services.
It is difficult to analyze how the implementation of the Health Insurance Exchange Act
would change this picture of the health care marketplace performed by the LHHS or
contribute to getting more New Mexicans insured.
Significant federal issues arise from a section of the SB 228 proposal that a new section
of the Public Assistance Act is enacted to read: “The department shall contract with
participating insurance plans through the health insurance Exchange created pursuant to
the Health Insurance Exchange Act to purchase health coverage for individuals eligible
for programs that are funded in whole or in part by the state…." Health benefit
programs under Title 19 and 21 of the Social Security Act are tightly regulated especially
in regard to contracting insurance plans. These plans receive significant federal matching
dollars which may be jeopardized if federal regulatory process is not followed.
There are significant privacy and confidentiality issues involved in requiring that the
human services department provide enrollment information to a non-state agency or any
other entity for purposes of enforcing the personal responsibility aspect of the Health
Exchange Act. Again federal regulation for programs funded with federal dollars has
authority over this type of information.
Senate Bill 228/aSPAC – Page
The personal responsibly mandate section of SB 228 has language regarding failure to
comply and penalty with the requirements of that section but contains no grievance or
appeal process affording an individual the right to due process.
As noted in the Fiscal Implications section above, the bill would require several administrative
changes at the Department of Finance and Administration, Human Services Department and the
Insurance Division of the Public Regulation Commission.
Senate bill 228 duplicates House Bill 205; relates to House Bill 62.