By: HUB’s EB Compliance Team

Since 1935 New Mexico has been known as the Land of Enchantment (at first informally and later formally starting in 1999). While most benefits regulations come from federal law, in 2024, the Land of Enchantment will join a growing number of states that have added their own benefits regulations that can complicate the landscape for employers.

Background

In 2019, New Mexico enacted the Short-Term Health Plan and Excepted Benefit Act (the “Act”). The Act is designed to establish regulations of both short-term and limited benefits (formally referred to as excepted benefits). Just as the federal Affordable Care Act has standardized certain components of major medical plans (such as preventive care and out of pocket maximums), the Act aims to do the same in New Mexico for non-major medical plans. The Act is effective starting January 1, 2024.

Impacted Plans and Exceptions

The Act applies to certain listed “excepted benefits” which generally either do not provide medical care, or only provided limited, allowable medical care. The specific benefits included in the Act are accident plans, plans providing coverage for a specific disease or illness, hospital and other fixed indemnity plans, disability, and supplemental plans.

Certain plans that are otherwise subject to the Act may be exempt if certain conditions are met. First, the Act only applies to fully-insured plans as self-insured plans are governed by ERISA rather than state law. While these lines of coverage typically are insured, self-funding such an arrangement would provide an exemption under the Act.

The Act does apply even to plans issued in another state (and thus written under the laws of the issuing state) if any covered individual resides in New Mexico. However, if an out of state employer employs 100 or fewer New Mexico residents it is exempt. Additionally, if New Mexico determines that the state where the policy is issued provides equivalent or better protections, then the policy does not have to comply. Employers will need to carefully monitor their New Mexico employee counts as crossing the 100 threshold subjects the plan to the Act.

Finally, employer plans issued before January 1, 2024, continuously issued thereafter, offered only to employees and dependents, and not experiencing material changes in the substantive provisions of the plan are referred to as Grandfathered Plans, and are also exempt. Notably, for purposes of the Act, annual rate changes not exceeding 10% (unless a rate guarantee was in place), and changes in fixed dollar coverage amounts or benefit limitations consistent with inflation, and changes in plan enrollment are not considered material changes.

Generally Applicable Provisions

The Act includes many general provisions that apply to all applicable plans, as well as specific provisions that apply only to those specific lines of coverage. Both the general and specific provisions are too numerous to summarize individually, but some highlights are:

  • Probationary periods where an eligible individual is paying premiums and coverage is effective, yet benefits are not payable (except for elimination periods under a disability plan or eligibility waiting periods that some employers may impose) are prohibited.
  • Preexisting conditions exclusions, where a plan excludes coverage for a loss due to a preexisting condition are prohibited unless the application or enrollment form includes a conspicuous notice about the scope and applicability of any such exclusion that will apply in the coverage, and that notice also appears in the plan document. 
  • Only certain exclusions are permitted under the plan, including:
    • Participation in an illegal activity
    • Voluntary intoxication
    • Specifically named high risk activities
    • Acts of war
    • Occupational injuries

Coverage Specific Provisions

While far too numerous to name here, certain coverages, including disability, hospital indemnity, accident, and specific disease plans (among others) have specific requirements under the Act. These requirements are consistent with the general requirements and the Act in that they aim to standardize certain provisions and add consumer protections. Examples include:

  • Limiting disability plan benefits reductions to up to 50% for individuals over 62 years of age.
  • Requiring accident policies to provide both full and partial fracture and dislocation benefits if they provide any fracture or dislocation benefits.
  • Setting plan minimums of $1,500 for lump sums payable under hospital indemnity policies for the initial confinement.
  • Prohibiting specified disease policies from reducing or eliminating benefits upon the occurrence of specific events or reaching a certain age.

Takeaways

Depending on each employer’s own circumstances, the Act may or may not apply to their plan offerings to New Mexico residents. This is not a one-time analysis, and employers will need to revisit their plan offerings and number of New Mexico residents employed to determine their plan requirements.

  • Employers based in New Mexico.
    • Understand if current plan offerings comply with the Act or meet the requirements to be considered Grandfathered and thus exempt.
    • Evaluate Grandfathered plans each year to ensure no material changes in the substantive provisions of the plan have been made, which would cause the plan to lose Grandfathered status.
  • Employers who are based outside of New Mexico (and whose plans are written outside New Mexico as well).
    • Understand whether 100 or more residents of New Mexico are employed, requiring compliance with the Act.
    • Monitor the number of New Mexico residents employed and understand that compliance with the Act is required if 100 or more residents are employed during any point in the calendar year.
    • If necessary, understand whether current plan offerings are Grandfathered and ensure Grandfathered plans remain so, offer plans that comply with the Act.

Employers should work closely with their HUB Advisor and insurance carriers to ensure their plans meet any applicable requirements.

Conclusion

This Act is just the latest foray into state regulation of employee benefits. Employers without employees (and even many with employees) do not need to be concerned with the specifics of the Act. However, states often like to follow the lead of other states (such as with the rapid expansion of state paid leave requirements) and other states could follow the lead of New Mexico in regulating these benefits.

If you have any questions, please contact your HUB Advisor. View more compliance articles in our Compliance Directory.

NOTICE OF DISCLAIMER

Neither Hub International Limited nor any of its affiliated companies is a law or accounting firm, and therefore they cannot provide legal or tax advice. The information herein is provided for general information only and is not intended to constitute legal or tax advice as to an organization’s or individual's specific circumstances. It is based on Hub International's understanding of the law as it exists on the date of this publication. Subsequent developments may result in this information becoming outdated or incorrect and Hub International does not have an obligation to update this information. You should consult an attorney, accountant, or other legal or tax professional regarding the application of the general information provided here to your organization’s specific situation in light of your or your organization’s particular needs.