February 11, 2021

House committee OKs health insurance premium tax hike

The state House of Representatives is set to consider legislation that would create a fund to help offset the costs of health insurance premiums for lower-income people who purchase individual policies through New Mexico’s Obama-era insurance exchange.

Proponents of House Bill 122 — which passed the House Taxation and Revenue Committee on a 7-2 vote Wednesday — say it will widen access to coverage for self-employed workers and others who earn too much to qualify for Medicaid but struggle to pay premiums on their own.

Opponents argue, however, the measure ultimately would shift the costs to small businesses and their employees, who would see their own health insurance rates rise to cover a higher tax on their provider.

HB 122, sponsored by Reps. Deborah Armstrong and Javier Martinez, both Democrats from Albuquerque, would increase a current 1 percent surtax on health insurance premiums to 2.75 percent.

“We want to get more people insured,” Armstrong said at the hearing. 

A fiscal impact report estimates the measure would raise about $153 million per year; 45 percent would go into the state’s general fund, while 55 percent would go into the new health insurance fund.

A December 2019 report by the Urban Institute, a Washington, D.C.-based think tank, said 187,000 New Mexico residents under 65 — 10.5 percent of the state’s population — are uninsured. That’s lower than the national rate of 11.2 percent, the report said. 

According to the report, 23,000 New Mexicans without health insurance could afford it if the state reduced out-of-pocket costs of policies offered through the exchange. 

Russell Toal, head of the state Office of the Superintendent of Insurance, told lawmakers on the committee an estimated 50,000 uninsured residents could benefit from the bill if it became law.

Medical professionals who work with uninsured patients, advocates for low-income people and other proponents spoke in favor of the bill, saying it would increase the health and well-being of many New Mexicans.

Lindsey Cutler, an attorney with the New Mexico Center on Law and Poverty, told the committee the bill would encourage more people to enroll in health insurance coverage because “costs would go down for everyone.”

But critics said the tax increase imposed on insurance providers that offer group policies through employers will be borne by consumers. 

“Somebody will end up footing the bill for these costs,” said Jason Espinoza, director of the New Mexico Small Business Association. “The tax will be passed on to their customers. … It will land at the feet of our small-business owners.”

Lobbyists speaking on behalf of health insurance companies, including Blue Cross Blue Shield of New Mexico, echoed that concern. 

Armstrong proposed a similar bill last year. Though the House supported it during the 2020 session, the measure died in the Senate Finance Committee.