Remarkable Gains in Health Insurance Affordability are Within Reach in New Mexico

On Monday, February 17, 2020, the New Mexico House of Representatives passed, by an overwhelming 41 to 25 margin, legislation that would claim expiring federal revenue and use it to significantly lower the cost of coverage state residents buy on their own, without help from an employer. This landmark legislation, House Bill 278, now moves to the New Mexico State Senate for approval.

New Mexico’s bold action illustrates an extraordinary opportunity that is now available to states across the country. They can claim a total of $14 billion a year in expiring federal funds without increasing assessments on state insurers — but only if they pass legislation this year.

Congress recently phased out a federal health insurance assessment, effective on January 1, 2021. The New Mexico proposal would immediately replace it with a lower state assessment. Under House Bill 278, more than $120 million in annual revenue that New Mexico insurers now send to Washington, D.C., would come back to New Mexico and be used to lower residents’ health care costs.

For years, New Mexico insurers have paid a 1% state insurance fee. In addition, they now pay the federal assessment, which averages 3% of premiums. House Bill 278 would replace this combined 4% state and federal charge with a single state health insurance assessment set at 3.25% of premiums. The bill thus reduces what health insurance companies must pay while still capturing significant revenue to lower health insurance costs for New Mexico residents.

Under the bill, revenue will go to a “health care affordability fund,” to “provide initiatives to reduce the cost of health care coverage for New Mexico residents, such as costs of premiums and cost-sharing.” At least 60% of these funds must be used to help low-wage workers and their families who qualify for federal premium tax credits. The Human Services Department will send the Legislature final recommendations for such affordability initiatives by December 1, 2020.

New Mexico’s legislative session ends on February 20, 2020. This makes the progress achieved with House Bill 278 even more remarkable. In states with brief legislative sessions, it is critically important to craft legislation that ensures the revenue raised through the assessment is used for its intended purpose while leaving room for trusted leaders to structure crucial details after the bill is signed into law.

New Mexico’s legislation builds on previous work done in other states. When the federal health insurance assessment was temporarily suspended for 2019, Maryland and Delaware enacted state assessments that took the federal assessment’s place. Both initiatives used the revenue to finance reinsurance payments to insurance companies. Maryland lawmakers have since introduced legislation that would let some of the money be used to provide consumers with affordability assistance. New Mexico’s bill is the first in the nation that captures the ongoing revenue offered by the federal government’s permanent phase-out of the health insurance assessment and that focuses the resulting resources to help state residents in need.

In the coming weeks, the National Center for Coverage Innovation (NCCI) at Families USA will release issue briefs exploring how states across the country can follow the trail New Mexico legislators are now blazing. NCCI will also hold a nationwide webinar so state advocates, stakeholders, and policymakers can learn more about this exciting opportunity.

For more information, please contact Stan Dorn, NCCI’s director, at sdorn@familiesusa.org.