44TH LEGISLATURE - STATE OF NEW MEXICO - FIRST SESSION, 1999

RELATING TO INSURANCE; AMENDING CERTAIN SECTIONS OF THE NEW MEXICO INSURANCE CODE.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

Section 1. Section 59A-5-21 NMSA 1978 (being Laws 1984, Chapter 127, Section 88) is amended to read:

"59A-5-21. APPLICATION FOR CERTIFICATE OF AUTHORITY.--

A. To apply for an original certificate of authority in this state the insurer shall file with the superintendent its written application therefor on forms as prescribed and furnished by the superintendent, accompanied by the applicable fees as specified or referred to in Section [101 (fee schedule) of the Insurance Code] 59A-6-1 NMSA 1978, stating under the oath of the president or vice president or other chief officer and the secretary of the insurer, or of the attorney-in-fact (if a reciprocal insurer or Lloyds insurer), the insurer's name, location of its home office, or principal office, in the United States (if an alien insurer), the kinds of insurance to be transacted, date of organization or incorporation, form of organization, state or country of domicile, and such additional or other information as the superintendent may reasonably require, together with the following documents:

(1) if a corporation, a copy of its charter or certificate or articles of incorporation, together with all amendments thereto, or as restated and amended under the laws of its state or country of domicile, currently certified by the public officer with whom the originals are on file in such state or country;

(2) if a domestic incorporated insurer of a mutual insurer, a copy of its bylaws, certified by its corporate secretary;

(3) if a reciprocal insurer or Lloyds insurer, a copy of the power of attorney of its attorney-in-fact, certified by the attorney-in-fact; and if a domestic reciprocal insurer or a Lloyds insurer, additional documentation showing that it has been properly formed and is lawfully existing under applicable laws;

(4) a complete copy of its financial statement as of not earlier than the December 3l next preceding, in form as customarily used in the United States by like insurers, sworn to by at least two [(2)] executive officers of the insurer or certified by the public insurance supervisory officer of the insurer's state of domicile, or of entry into the United States if an alien insurer;

(5) a copy of the report of last examination made of the insurer certified by the public insurance supervisory officer of its state of domicile, or of entry into the United States if an alien insurer;

(6) appointment of the superintendent pursuant to Section [98 of this article] 59A-5-31 NMSA 1978 as its attorney to receive service of legal process;

(7) if a foreign or alien insurer, a certificate of the public insurance supervisory officer of its state or country of domicile showing that it is authorized or qualified for authority to transact in such state or country the kinds of insurance proposed to be transacted in this state;

(8) if a foreign insurer, a certificate as to a deposit elsewhere if to be tendered pursuant to Section [85 (general deposit) or 87 (general deposit of alien insurer) of this article;

(9) if a life or health insurer, a copy of the insurer's rate book and of each form of policy currently proposed to be issued in this state, and of the form of application therefor] 59A-5-18 or 59A-5-20 NMSA 1978;

[(10)] (9) if an alien insurer, a copy of the appointment and authority of its United States manager, certified by its officer having custody of its records; and

[(11)] (10) designation by the insurer of its officer or representative authorized to appoint and remove its agents in this state.

B. If the superintendent so requests, the applicant insurer shall supplement the documents and information above required with true biographical information concerning the members of the insurer's board of directors or other governing body and its principal operating officers, together with proof of identity of each such individual."

Section 2. Section 59A-6-5 NMSA 1978 (being Laws 1984, Chapter 127, Section 105, as amended) is amended to read:

"59A-6-5. DISTRIBUTION OF INSURANCE DEPARTMENT

COLLECTIONS.--

A. All money received by the insurance department [or insurance board] for fees, licenses, penalties and taxes shall be paid daily by the superintendent to the state treasurer and by him credited to the "insurance department suspense fund" [heretofore created and now existing] except as provided by:

(1) the Law Enforcement Protection Fund Act; and

(2) Section 59A-6-1.1 NMSA 1978.

B. The superintendent [with approval of the corporation commission or insurance board, as the case may be related to the money involved] may authorize refund of money erroneously paid as fees, licenses, penalties or taxes from the insurance department suspense fund under request for refund made within three years after the erroneous payment.

C. At the end of every month, the treasurer shall transfer to the "fire protection fund" the balance remaining in the insurance department suspense fund after applicable refunds made [therefrom under] pursuant to Subsection B of this section, and derived from property and vehicle insurance business, and transfer to the general fund the balance remaining in the insurance department suspense fund derived from all other kinds of insurance business."

Section 3. Section 59A-12-26 NMSA 1978 (being Laws 1984, Chapter 127, Section 227, as amended) is amended to read:

"59A-12-26. CONTINUED EDUCATION.--

A. For protection of the public and to preserve and improve competence of licensees, the superintendent may in his sole discretion require as a condition to continuation of license as agent, solicitor, nonresident agent or nonresident broker under this article that during the twelve months next preceding expiration of the current license period the licensee has enrolled in and attended not less than fifteen hours of formal class instruction, lectures or seminars approved by the superintendent covering the kinds of insurance for which licensed.

[B. If the licensee is licensed to transact or sells only one of the following lines of insurance:

(l) credit life insurance;

(2) credit health insurance;

(3) vendors' single interest insurance;

(4) title insurance; or

(5) insurance incidental to the transportation of persons or storage or transportation of baggage; then the superintendent may waive the requirements of Subsection A of this section or may require less than fifteen hours of instruction, lectures or seminars.

C.] B. Such instruction shall be designed to refresh the licensee's understanding of basic principles and coverages involved, recent and prospective changes therein, applicable laws and rules and regulations of the superintendent, proper conduct of the licensee's business and duties and responsibilities of the licensee.

[D.] C. The superintendent may permit licensees who because of remoteness of residence or business cannot with reasonable convenience attend such formal instruction sessions to take and successfully complete an equivalent course of study and instruction by mail.

[E.] D. The superintendent shall promulgate rules and regulations for effectuation of the purposes and requirements of this section.

[F.] E. For the purposes of this section, the superintendent shall charge, at the time of certifying each licensee's continuing education credits as a condition of continuation of license, a fee of five dollars ($5.00).

[G.] F. This section shall not apply to holders of limited license issued under Section 59A-12-18 NMSA 1978."

Section 4. Section 59A-12A-14 NMSA 1978 (being Laws 1989, Chapter 374, Section 14) is amended to read:

"59A-12A-14. CONFIDENTIALITY.--

A. An administrator shall provide for the confidentiality of personal data identifying an individual covered by a plan or insurance carrier or data concerning a person that self insures. An administrator shall not disclose records containing personal information that may be associated with an identifiable individual covered by a plan or insurance carrier or data relating to a person that self insures to a person other than the individual to whom the information pertains, except as necessary to comply with the superintendent's inquiry or a court order. Other than to comply with the [insurance board's] superintendent's inquiry or a court order, an administrator shall not disclose personal data without the prior consent of the covered individual or person that self insures.

B. Subsection A of this section does not apply to information disclosed for any of the following reasons or to an indicated entity:

(1) claims adjudication;

(2) claims verification;

(3) other proper plan or insurance carrier administration;

(4) an audit conducted pursuant to ERISA;

(5) an insurer or plan for the purchase of excess loss insurance and for claims under the excess loss insurance, provided, an insurer obtaining information under this paragraph shall be subject to the requirements of Subsection A of this section;

(6) the plan, insurance carrier, person that self insures or a fiduciary of the plan;

(7) the [insurance board] superintendent or [their] the superintendent's designees; provided the information obtained by the superintendent [or board] under this subsection is confidential, except that the superintendent [or insurance board] may use the information in any proceeding instituted against the administrator; or

(8) as required by law."

Section 5. Section 59A-16-13.1 NMSA 1978 (being Laws 1989, Chapter 304, Section 1) is amended to read:

"59A-16-13.1. CRANIOMANDIBULAR AND TEMPOROMANDIBULAR JOINT DISORDERS.--No insurer or other provider of health care benefits regulated under Articles 22, 23, [24] 24A, 44, 46, 47 or 54 of the Insurance Code shall, after July 1, 1989, issue, deliver or execute in this state any policy, plan, contract or certificate of health, medical, hospitalization, accident or sickness coverage unless the policy, plan, contract, certificate or other evidence of coverage provides for surgical and nonsurgical treatment of temporomandibular joint disorders and craniomandibular disorders, subject to the same conditions, limitations, prior review and referral procedures as are applicable to treatment of any other joint in the body and treatable by any practitioner of the healing arts as defined in Section 59A-22-32 NMSA 1978. The health care coverage for craniomandibular and temporomandibular joint disorders required by this section may be subject to reasonable copayments or coinsurance provisions and need not include coverage for orthodontic appliances and treatment, crowns, bridges and dentures unless the disorder is trauma related."

Section 6. Section 59A-17-5 NMSA 1978 (being Laws 1984, Chapter 127, Section 301) is amended to read:

"59A-17-5. ADMINISTRATION OF INSURANCE RATE REGULATORY LAW.--The provisions of [this article are under the jurisdiction of the insurance board, as defined in Section 6 of the Insurance Code and] Chapter 59A, Article 17 NMSA 1978 shall be administered by the superintendent [in his capacity of secretary of the insurance board. In such administration the superintendent shall have the same general powers as to rules and regulations, enforcement and otherwise as provided under the Insurance Code as to the superintendent's administration of the insurance department]."

Section 7. Section 59A-17-25 NMSA 1978 (being Laws 1984, Chapter 127, Section 320) is amended to read:

"59A-17-25. JOINT UNDERWRITING OR JOINT REINSURANCE ORGANIZATIONS.--

A. Every group, association or other organization of insurers which engages in joint underwriting or joint reinsurance through such group, association or organization or by standing agreement among the members thereof, shall file with the superintendent:

(1) a copy of its constitution, its articles of incorporation, agreement or association, and of its bylaws, rules and regulations governing its activities, all duly certified by the custodian of the originals thereof;

(2) a list of its members; and

(3) the name and address of a resident of this state upon whom notices or orders of the superintendent or process affecting such group, association or organization may be served.

B. Every such group, association or other organization shall notify the superintendent promptly in writing of every change in its constitution, its articles of incorporation, agreement or association, in its bylaws, rules and regulations governing conduct of its business, its list of members, or of the name and address of its process agent referred to in Paragraph (3) [above] of Subsection A of this section.

C. Every such group, association or organization shall be subject to regulation as herein provided, subject, however, as to joint underwriting to applicable provisions of [this article] Chapter 59A, Article 17 NMSA 1978, and as to joint reinsurance to Sections [309 (disapproval of rates other than workmen's compensation -substituted rates), 310 (disapproval of filings, workmen's compensation), 327 (examination), 329 (review of superintendent's action) and 330 (appeals from insurance board) of this article] 59A-17-13, 59A-17-14, 59A-17-32, 59A-17-34 and 59A-17-35 NMSA 1978.

D. No such group, association or organization shall engage in any unfair or unreasonable practice with respect to its activities. If, after a hearing, the superintendent finds that any activity or practice of any such group, association or organization is unfair or unreasonable or otherwise inconsistent with the provisions of [this article] Chapter 59A, Article 17 NMSA 1978, he may issue his order specifying the respects in which the activity or practice is unfair or unreasonable or otherwise inconsistent with the provisions of [this] that article, and requiring discontinuance of such activity or practice."

Section 8. Section 59A-17-34 NMSA 1978 (being Laws 1984, Chapter 127, Section 329, as amended) is amended to read:

"59A-17-34. HEARING AND REVIEW AS TO SUPERINTENDENT'S ACTIONS.--

A. Any person aggrieved by any action, threatened action, or failure to act of the superintendent or otherwise under Chapter 59A, Article 17 NMSA 1978 shall have the same right to a hearing before the superintendent with respect thereto as provided for in general under Section 59A-4-15 NMSA 1978. Notice of hearing shall be given, the hearing conducted, rights and powers exercised and the superintendent's order on hearing made and given as provided as to hearings in general under the applicable provisions of Chapter 59A, Article 4 NMSA 1978.

B. Any person aggrieved by the superintendent's order on such hearing or by the superintendent's refusal to hold the hearing may request a review [thereof by the insurance board] by the public regulation commission in the manner set forth by rule of the [insurance board] commission."

Section 9. Section 59A-17-35 NMSA 1978 (being Laws 1984, Chapter 127, Section 330, as amended) is amended to read:

"59A-17-35. APPEALS FROM [INSURANCE BOARD] COMMISSION.--Any order made by the [insurance board] public regulation commission pursuant to Section 59A-17-34 NMSA 1978 shall be subject to review by appeal to the district court pursuant to the provisions of Section [12-8A-1] 39-3-1.1 NMSA 1978. Upon institution of the appeal and for good cause shown upon motion and hearing, the court may, in the following cases, stay operation of the [insurance board's] commission's order:

A. where, pursuant to Chapter 59A, Article 17 NMSA 1978, a rate service organization has been refused a license or an insurer has been refused a certificate of authority or had its license or certificate of authority suspended, it may, with leave of court, be allowed to continue to engage in business, subject to the provisions of that article, pending final disposition of its application for review; or

B. where any order of the [insurance board] commission shall provide for, or sustain the superintendent's order for, a change in any rate or rating system that results in an increase or decrease in rates, any insurer affected may, with leave of court pending final disposition of the proceedings in the district court, continue to charge rates that existed prior to such order, on condition that the difference in the rates be deposited in a special escrow or trust account with a reputable financial institution by the insurer affected, to be held in trust by such insurer and to be retained by the insurer or paid to the holders of policies issued after the order of the court, as the court may determine."

Section 10. Section 10. Section 59A-30-14 NMSA 1978 (being Laws 1985, Chapter 28, Section 14) is amended to read:

"59A-30-14. OTHER PROVISIONS APPLICABLE.--To the extent not in conflict with the New Mexico Title Insurance Law, the following articles and provisions of the Insurance Code shall also apply to title insurers, title insurance agents and the business of title insurance:

Article 1. Scope of Code; Initial Definitions; General Penalty.

Article 2. Department of Insurance.

[Article 3. State Insurance Board.]

Article 4. Examinations, Hearings and Appeals.

Article 5. Authorization of Insurers and General Requirements.

Article 6. Fees and Taxes.

Article 7. Kinds of Insurance; Limits of Risk; Reinsurance.

Article 8. Assets and Liabilities.

Article 9. Investments.

Article 10. Administration of Deposits; Trusteed Assets of Alien Insurer.

Article 11. Licensing Procedures, Agents, Solicitors, Brokers, Adjusters and Others.

Article 12. Insurance Agents, Brokers and Solicitors.

Article 15. Unauthorized Insurers.

Article 16. Trade Practices and Frauds."

Section 11. Section 59A-35-12 NMSA 1978 (being Laws 1984, Chapter 127, Section 601) is amended to read:

"59A-35-12. PERMIT AS INDUCEMENT.--

A. The granting of a securities permit is permissive only, and shall not constitute an endorsement or approval by the superintendent, [corporation commission, state insurance board] public regulation commission or any other agency or department of the state of New Mexico of any person or thing related to the offering of securities, or constitute evidence of the completeness or accuracy of information presented in any prospectus or other sales publicity or literature, or a recommendation of purchase of any securities offered. The existence of the permit shall not be advertised or used as an inducement in any solicitation.

B. Each permit issued by the superintendent shall state conspicuously in boldface type the substance of [the above] Subsection A of this section in terminology prescribed by the superintendent."

Section 12. Section 59A-37-2 NMSA 1978 (being Laws 1984, Chapter 127, Section 617, as amended) is amended to read:

"59A-37-2. DEFINITIONS.--As used in Chapter 59A, Article 37 NMSA 1978:

A. "acquire" means to come into possession or control of, and "acquisition" means any agreement, arrangement or activity the consummation of which results in a person acquiring directly or indirectly the control of another person and includes the acquisition of voting securities or assets, bulk reinsurance and mergers;

B. "affiliate" means a person that directly or indirectly is controlled by, is under common control with or controls another person;

C. "control" means the possession of the power to direct or cause the direction of the management and policies of a person, whether directly or indirectly, through the ownership of voting securities, through licensing or franchise agreements, by contract other than a commercial contract for goods or nonmanagement services, or otherwise, unless the power is the result of an official position with or corporate office held by an individual. Control shall be presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote or holds ten or more percent of the voting securities of any other person. This presumption may be rebutted by a showing, in the manner provided by Section 59A-37-19 NMSA 1978, that control does not in fact exist. The superintendent may determine, after furnishing all persons in interest notice and an opportunity to be heard, that control exists in fact, notwithstanding the absence of a presumption to that effect, provided [that] the determination is based on specific findings of fact in its support;

D. "insurance holding company" is a person that controls an insurer; "insurance holding company system" means a combination of two or more affiliated persons, at least one of which is an insurer;

E. "insurer" means a person that undertakes, under contract, to indemnify a person against loss, damage or liability arising from an unknown or contingent future event. The term does not include agencies, authorities or instrumentalities of the United States, its possessions or territories, the commonwealth of Puerto Rico, the District of Columbia, a state or any of its political subdivisions or a fraternal benefit society [or a nonprofit medical and hospital service association];

F. "person" means an individual, corporation, association, partnership, joint stock company, trust, unincorporated organization or any similar entity or combination of entities;

G. "securityholder" means the owner of any security of a person, including common stock, preferred stock, debt obligations and any other security convertible into or evidencing the right to acquire any of the foregoing;

H. "subsidiary" means an affiliate of a person controlled by the person either directly or indirectly through one or more intermediaries;

I. "voting security" means a certificate evidencing the ownership or indebtedness of a person, to which is attached a right to vote on the management or policymaking of that person and includes any security convertible into or evidencing a right to acquire such a voting security; and

J. "health maintenance organization" means any person that undertakes to provide or arrange for the delivery of basic health care services to enrollees on a prepaid basis, except for enrollee responsibility for co-payments or deductibles."

Section 13. Section 59A-44-41 NMSA 1978 (being Laws 1989, Chapter 388, Section 41) is amended to read:

"59A-44-41. APPLICABILITY OF INSURANCE CODE.--To the extent not in conflict with the express provisions of Chapter 59A, Article 44 NMSA 1978 and the reasonable implications thereof, the following provisions of the Insurance Code shall also apply as to fraternal benefit societies, and for such purpose a society may therein be referred to as an "insurer":

A. Chapter 59A, Article 1 NMSA 1978;

B. Chapter 59A, Article 2 NMSA 1978;

C. Chapter 59A, Article 4 NMSA 1978;

D. Sections 59A-8-1 and 59A-8-2 NMSA 1978;

E. Section 59A-12-22 NMSA 1978;

F. Chapter 59A, Article 18 NMSA 1978;

G. Chapter 59A, Article 19 NMSA 1978;

H. Chapter 59A, Article [24] 24A NMSA 1978;

I. Chapter 59A, Articles 20 and 22 NMSA 1978; and

J. Chapter 59A, Article 41 NMSA 1978."

Section 14. Section 59A-46-30 NMSA 1978 (being Laws 1993, Chapter 266, Section 29, as amended) is amended to read:

"59A-46-30. STATUTORY CONSTRUCTION AND RELATIONSHIP TO OTHER LAWS.--

A. The provisions of the Insurance Code other than Chapter 59A, Article 46 NMSA 1978 shall not apply to health maintenance organizations except as expressly provided in the Insurance Code and that article. To the extent reasonable and not inconsistent with the provisions of that article, the following articles and provisions of the Insurance Code shall also apply to health maintenance organizations and their promoters, sponsors, directors, officers, employees, agents, solicitors and other representatives. For the purposes of such applicability, a health maintenance organization may therein be referred to as an "insurer":

(1) Chapter 59A, Article 1 NMSA 1978;

(2) Chapter 59A, Article 2 NMSA 1978;

[(3) Chapter 59A, Article 3 NMSA 1978;

(4)] (3) Chapter 59A, Article 4 NMSA 1978;

[(5)] (4) Subsection C of Section 59A-5-22 NMSA 1978;

[(6)] (5) Sections 59A-6-2 through 59A-6-4 and 59A-6-6 NMSA 1978;

[(7)] (6) Chapter 59A, Article 8 NMSA 1978;

[(8)] (7) Chapter 59A, Article 10 NMSA 1978;

[(9)] (8) Section 59A-12-22 NMSA 1978;

[(10)] (9) Chapter 59A, Article 16 NMSA 1978;

[(11)] (10) Chapter 59A, Article 18 NMSA 1978;

[(12)] (11) Chapter 59A, Article 19 NMSA 1978;

[(13)] (12) Section 59A-22-14 NMSA 1978;

[(14)] (13) Chapter 59A, Article 23B NMSA 1978;

[(15)] (14) Sections [59A-34-9] 59A-34-2, 59A-34-3, 59A-34-7 through 59A-34-13, 59A-34-17, 59A-34-23, 59A-34-33, 59A-34-36, [and] 59A-34-37, 59A-34-40 through 59A-34-42 and 59A-34-44 through 59A-34-46 NMSA 1978;

[(16)] (15) Chapter 59A, Article 37 NMSA 1978; and

[(17)] (16) the Patient Protection Act.

B. Solicitation of enrollees by a health maintenance organization granted a certificate of authority, or its representatives, shall not be construed as violating any provision of law relating to solicitation or advertising by health professionals, but health professionals shall be individually subject to the laws, rules, regulations and ethical provisions governing their individual professions.

C. Any health maintenance organization authorized under the provisions of the Health Maintenance Organization Law shall not be deemed to be practicing medicine and shall be exempt from the provisions of laws relating to the practice of medicine."

Section 15. Section 59A-47-33 NMSA 1978 (being Laws 1984, Chapter 127, Section 879.32, as amended) is amended to read:

"59A-47-33. OTHER PROVISIONS APPLICABLE.--The provisions of the Insurance Code other than Chapter 59A, Article 47 NMSA 1978 shall not apply to health care plans except as expressly provided in the Insurance Code and that article. To the extent reasonable and not inconsistent with the provisions of that article, the following articles and provisions of the Insurance Code shall also apply to health care plans, their promoters, sponsors, directors, officers, employees, agents, solicitors and other representatives; and, for the purposes of such applicability, a health care plan may therein be referred to as an "insurer":

A. Chapter 59A, Article 1 NMSA 1978;

B. Chapter 59A, Article 2 NMSA 1978;

C. Chapter 59A, Article 4 NMSA 1978;

D. Subsection C of Section 59A-5-22 NMSA 1978;

E. Sections 59A-6-2 through 59A-6-4 and

59A-6-6 NMSA 1978;

F. Section 59A-7-11 NMSA 1978;

G. Chapter 59A, Article 8 NMSA 1978;

H. Chapter 59A, Article 10 NMSA 1978;

I. Section 59A-12-22 NMSA 1978;

J. Chapter 59A, Article 16 NMSA 1978;

K. Chapter 59A, Article 18 NMSA 1978;

L. Chapter 59A, Article 19 NMSA 1978;

M. Subsections B through E of Section

59A-22-5 NMSA 1978;

N. Section 59A-22-14 NMSA 1978;

O. Section 59A-22-34.1 NMSA 1978;

P. Section 59A-22-39 NMSA 1978;

Q. Section 59A-22-40 NMSA 1978;

R. Section 59A-22-41 NMSA 1978;

S. Sections [59A-34-9] 59A-34-3, 59A-34-7 through 59A-34-13, [and] 59A-34-17, 59A-34-23, 59A-34-33, 59A-34-40 through 59A-34-42 and 59A-34-44 through 59A-34-46 NMSA 1978;

T. Chapter 59A, Article 37 NMSA 1978, except Section 59A-37-7 NMSA 1978;

U. Section 59A-46-15 NMSA 1978; and

V. the Patient Protection Act."

Section 16. Section 59A-55-20 NMSA 1978 (being Laws 1988, Chapter 125, Section 20) is amended to read:

"59A-55-20. RESTRICTIONS ON INSURANCE PURCHASED BY PURCHASING GROUPS.--

A. A purchasing group may not purchase insurance from a risk retention group that is not chartered in a state or from an insurer not admitted in the state in which the purchasing group is located, unless the purchase is effected through a licensed agent or broker acting pursuant to the surplus lines laws and regulations of the state.

B. A purchasing group may purchase insurance for its members in this state or covering its members' risks resident or located in this state only from insurers admitted in this state, from insurers that are eligible surplus lines insurers in this state or from risk retention groups that have registered in this state.

[B.] C. A purchasing group which obtains liability insurance from an insurer not admitted in this state or a risk retention group shall inform each of the members of such group that have a risk resident or located in this state that such risk is not protected by an insurance insolvency guaranty fund in this state and that such risk retention group or such insurer may not be subject to all insurance laws and regulations of this state.

[C.] D. No purchasing group may purchase insurance providing for a deductible or self-insured retention unless the deductible or self-insured retention is the sole responsibility of each individual member of the purchasing group."

Section 17. Section 59A-56-11 NMSA 1978 (being Laws 1994, Chapter 75, Section 11, as amended) is amended to read:

"59A-56-11. ASSESSMENTS.--

A. After the completion of each calendar year, the alliance shall assess all its members for the net reinsurance loss in the previous calendar year and for the net administrative loss that occurred in the previous calendar year, taking into account investment income for the period and other appropriate gains and losses using the following definitions:

(1) net reinsurance losses shall be the amount determined for the previous calendar year in accordance with Subsection A of Section 59A-56-9 NMSA 1978 for all members offering an approved health plan reduced by reinsurance premiums charged by the alliance in the previous calendar year. Net reinsurance losses shall be calculated separately for group and individual coverage. If the reinsurance premiums for either category of coverage exceed the amount calculated in accordance with Subsection A of Section 59A-56-9 NMSA 1978, the premiums shall be applied first to offset the net reinsurance losses incurred in the other category of coverage and second to offset administrative losses; and

(2) net administrative losses shall be the administrative expenses incurred by the alliance in the previous calendar year and projected for the current calendar year less the sum of administrative allowances received by the alliance, but in the event of an administrative gain, net administrative losses for the purpose of assessments shall be considered zero and the gain shall be carried forward to the administrative fund for the next calendar year as an additional allowance.

B. The assessment for each member shall be determined by multiplying the total losses of the alliance's operation, as defined in Subsection A of this section, by a fraction, the numerator of which is an amount equal to that member's total premiums, or the equivalent, exclusive of premiums received by the member for an approved health plan for health insurance written in the state during the preceding calendar year and the denominator of which equals the total premiums of all health insurance written in the state during the preceding calendar year exclusive of premiums for approved health plans; provided that total premiums shall not include payments by the secretary of human services pursuant to a contract issued under Section 1876 of the federal Social Security Act, total premiums exempted by the federal Employee Retirement Income Security Act of 1974 or federal government programs.

C. If assessments exceed actual reinsurance losses and administrative losses of the alliance, the excess shall be held at interest by the board to offset future losses.

D. To enable the board to properly determine the net reinsurance amount and its responsibility for reinsurance to each member:

(1) by April 15 of each year, each member offering an approved health plan shall submit a listing of all incurred claims for the previous year; and

(2) by April 15 of each year, each member shall submit a report that includes the total earned premiums received during the prior year less the total earned premiums exempted by federal government programs.

E. The alliance shall notify each member of the amount of its assessment due by May 15 of each year. The assessment shall be paid by the member by June 15 of each year.

F. The proportion of participation of each member in the alliance shall be determined annually by the board, based on annual statements filed by each member and other reports deemed necessary by the board. Any deficit incurred by the alliance shall be recouped by assessments apportioned among the members pursuant to the formula provided in Subsection B of this section; provided that thirty percent of the assessment paid for any member shall be allowed as a credit on the [future] following annual premium tax return for that member [with the credit limited to fifty percent of the premium tax due the first year the assessment is imposed, forty percent the second year and thirty percent the third and all subsequent years].

G. The board may defer, in whole or in part, the payment of an assessment of a member if, in the opinion of the board, after approval of the superintendent, payment of the assessment would endanger the ability of the member to fulfill its contractual obligations. In the event payment of an assessment against a member is deferred, the amount deferred may be assessed against the other members in a manner consistent with the basis for assessments set forth in Subsection A of this section. The member receiving the deferment shall pay the assessment in full plus interest at the prevailing rate as determined by regulation of the superintendent within four years from the date payment is deferred. After four years but within five years of the date of the deferment, the board may sue to recover the amount of the deferred payment plus interest and costs. Board actions to recover deferred payments brought after five years of the date of deferment are barred. Any amount received shall be deducted from future assessments or reimbursed pro rata to the members paying the deferred assessment."