Higher health insurance surtax among New Mexico’s new laws

SANTA FE, N.M. (AP) – With the arrival of the new year, new laws are taking effect in New Mexico that aim to bolster access to health insurance and eliminate many court fines against juveniles that are viewed as counterproductive.

One bill approved by Gov. Michelle Lujan Grisham and the state’s Democrat-led Legislature adds a 2.75% surtax on health insurance premiums — the upfront payments made on behalf of an individual or family to keep insurance active — starting Jan. 1, 2022. The current surtax is set at 1% of premiums.

The tax increase will be used in large part to underwrite health-exchange insurance offerings for low- and moderate-income individuals, along with employees at small businesses, starting in 2023.

Insurance Superintendent Russell Toal says the surtax will provide a crucial subsidy when Medicaid coverage under special federal pandemic provisions expires for an estimated 85,000 residents. Many patients who leave Medicaid are likely to seek out policies on the state insurance exchange.

Separately, New Mexico is eliminating many fines and fees in the juvenile justice system that are viewed as potentially harmful and expensive to administer.

Under the legislation from Democratic state Reps. Roger Montoya of Velarde and Gail Chasey of Albuquerque, the state will no longer collect a $10 application fee for assignment of a public defender in delinquency cases. The new law also eliminates fines for possession of marijuana by a minor and limits community service requirements to 48 hours for minors caught with pot.

New Mexico in late June legalized nonmedical cannabis for adults 21 and older and authorized retail sales of recreational marijuana by April 1, 2022.

Regarding the state’s new surtax, several legislators — Republican and Democratic — have worried a tax increase on policies would be passed on to businesses and consumers by health insurance companies. Insurance officials say nearly 90% of the tax increase will fall on managed care organizations that provide Medicaid insurance.

State officials also hope to use a portion of the new tax proceeds to attract more federal matching funds for local Medicaid providers.

Toal says it is still up to the Legislature in 2022 to approve spending that reduces costs at the state health insurance exchange and helps small businesses. Lawmakers convene Jan. 18 for a 30-day session that focuses primarily on budgetary matters.