HIT

Less than one year ago, in February 2020, I wrote a lengthy post about a great idea that New Mexico was attempting to put through which, had it succeeded, would have generated up to $125 million per year to be used primarily for reducing individual market premiums:

New Mexico would raise a state health-insurance tax and dedicate the new revenue to programs intended to make health care more affordable under a proposal that passed the state House on Sunday.

Rep. Deborah Armstrong, D-Albuquerque, described the legislation as an unusual opportunity to generate more revenue for health care without increasing the total amount consumers now pay.

The increased state tax would partially replace a federal tax that’s being repealed, she said, meaning health insurance carriers would actually be charged less in taxes than they are now, even after the state increase.

The legislation, House Bill 278, would raise about $125 million in annual revenue when fully phased in — the bulk of it dedicated to a new fund for health care affordability, according to legislative analysts.

A lifetime ago (well, mid-February of this year, anyway), I wrote about New Mexico's Health Care Affordability Fund (HB 278), a bill which easily passed through the state House...only to be inexplicably stopped in its tracks in the state Senate a few days later.

The bill in question wasn't terribly complicated; it essentially just placed a new fee on health insurance carriers to finance a new fund which would in turn be used to reduce healthcare coverage costs for low- and middle-income New Mexicans. Furthermore, since some of the fees would be imposed on managed Medicaid programs which are mostly federally funded, it would have leveraged tens of millions of dollars in federal funding as opposed to all of the fees coming from state residents. Had it gone into effect, HB 278 was expected to generate around $125 million in revenue for the state to use to reduce premiums and cost sharing for enrollees.

Yesterday I posted a long, wonky explainer about the fallout of the ACA's Health Insurer Tax (HIT) being repealed in December 2019.

As I explained, the HIT is one of a several taxes/fees which were originally included in the Affordable Care Act which have either never actaully been enforced or whcih have only been enforced sporadically, and which have now been completely eliminated going forward.

The impact of repealing these taxes on the federal deficit/federal debt is obviously not good...this will collectively increase the already-runaway national debt by several hundred billion dollars over the next decade. That's a whole separate discussion.

In the short term, however, this raises a fascinating one-time opportunity for states to step in and generate some much-needed revenue to be used to reduce healthcare costs for tens of thousands of their residents.