Audit Finds Health Insurers Owe New Mexico $65M In Back Taxes

Oct. 25--Seventeen insurance companies doing business in New Mexico still owe the state $65 million in taxes going back more than a decade, according to an audit released Tuesday.

The audit comes after years of controversy over whether the 3 percent tax on the premiums of health, auto, life and other insurance products was properly collected, and if companies took advantage of credits and deductions as they self-reported the payments going back to 2003.

The state Office of the Superintendent of Insurance, which was a part of the Public Regulation Commission until 2013, is responsible for collecting the tax. It totaled $230 million for the last fiscal year. The money goes to the state general fund that pays for education and day-to-day government operations.

"This audit brings much needed clarity to decades of longstanding disagreements about amounts collected and owed when it comes to premium taxes," said State Auditor Tim Keller, a Democrat.

State lawmakers, the Department of Finance and Administration, and Keller at one time thought uncollected premium taxes might top $350 million. Insurance Superintendent John Franchini pegged the amount closer to $100 million. The dispute led to a special appropriation by the Legislature for a sampling of the payments, and then a full review by the Atlanta-based Examination Resources, which performed the audit released Tuesday.

"Make no mistake, $65 million is a lot of money for New Mexico. The amount could have filled most of the gap during the last budget crisis," said Keller, who is running for mayor of Albuquerque.

Franchini issued a statement saying he was encouraged by the results of the audit. He also said New Mexico is just one of five states where the insurance regulators have to collect a tax on the regulated companies, and that can present conflicts. He would support moving tax auditing and collection to the state Taxation and Revenue Department.

As suspected for years, the bulk of uncollected tax money comes from health insurance companies that are entitled to claim a complex series of credits and deductions for indigent care to offset expenses. The audit concludes that $29.9 million is due from the largest health care company in the state, Presbyterian Health Plan, a subsidiary of the nonprofit Presbyterian Healthcare Services.

The audit also concludes that almost $38 million of the total uncollected money stems from improper application by health insurers of a credit for high-risk patients.

Presbyterian also is facing litigation from Attorney General Hector Balderas, who claims it intentionally evaded paying about $14 million the taxes and used its influence with the insurance office to reduce liabilities. The claim was originally brought by employee whistleblowers in Franchini's office.

Presbyterian has denied that, and both sides said last week they were in negotiations to resolve the dispute.

Related documents released by Keller also list the other health insurers and audit findings about what they owe:

--Healthcare Service Co. (Blue Cross Mutual): $8.48 million

--Molina of New Mexico: $8.2 million

--Amerigroup: $6.9 million

--United Healthcare: $3.8 million

--Lovelace: $3.7 million

--Blue Cross Blue Shield: $1.3 million

--Met Life: $1.1 million

Other insurance firms that are cited in the audit for back taxes include Allstate for $359,685 and State Farm for $205,618. Those owing less than $100,000 each are Progressive, John Hancock Allianz, Lincoln National, Delta Dental and Jackson National

Dale Maxwell, chief executive officer of Presbyterian Healthcare Services, has maintained that his nonprofit has paid all the taxes it owes New Mexico. He said previously that his organization would work to resolve any discrepancy found by the audit and pay its fair share.

In a statement Tuesday, Presbyterian said the audit focused on two areas where there has been disagreement: credits insurers are allowed to take for helping high-risk patients and premiums paid on Medicaid patients in 2003 and 2004.

Presbyterian, through spokeswoman Melanie Mozes, declined to comment on whether the company would pay the full $29.9 million if sent a collection notice from the state.

More details of the audit are to be discussed Wednesday at a meeting of the Legislative Finance Committee, which is eager to use the money in an updated revenue forecast to set spending levels for the next budget.

The audit also covered several points the state needs to change in its collection of the tax, primarily improving oversight and auditing of the payments and changing the law to eliminate the ambiguity of many credits and deductions.

Contact Bruce Krasnow at brucek@sfnewmexican.com

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