New Mexico establishes baseline spending for insurers

The New Mexico Legislature has passed a bill requiring most health insurers to spend 85 percent of every premium dollar on direct healthcare services, with the remaining 15% going for administrative costs and profits. (Insurers selling in the individual insurance market will have to meet a more relaxed 75 percent/25 percent ratio.)

The new law spells out what constitutes direct healthcare. Specifically, direct services include case and disease management, health education and promotion, preventive services and quality incentive payments to providers, but they do not include care coordination, utilization review or management, or other activities that involve managing utilization or services, according to the legislation.

Industry opposition to the measure was limited. "The folks at our Insurance Division [of the Public Regulation Commission] told me that 85 percent is the average number for what goes into actual health care services in the state," says State Rep. John Heaton, the bill's sponsor. "Some are at 80, 84 and 83, and so the average is about 85 percent."

For more:
- see the New Mexico Business Weekly article