Audit reveals unpaid New Mexico taxes by insurance companies
By MORGAN LEE
Oct. 24, 2017
SANTA FE, N.M. (AP) — A long list of insurance companies failed to pay taxes on insurance premiums of nearly $65 million to the state of New Mexico since 2003, according to an independent audit released Tuesday that could weigh in ongoing legal proceedings against a major health insurance provider.
The independent, state-commissioned audit by Atlanta-based Examination Resources delved into tax collections efforts at the Office of the Superintendent of Insurance for 30 insurance companies.
It found unpaid taxes at 17 of the companies — led by Presbyterian Health Plan with an estimated $28.9 million in underpayments.
The audit also catalogued extensive oversight difficulties at the New Mexico Office of the Superintendent of Insurance, where three employees have filed a whistleblower lawsuit highlighting uncollected insurance premium taxes from Presbyterian — a case now being pursued by state prosecutors.
State Auditor Tim Keller said the new audit provides the groundwork for the state to move forward with collecting overdue taxes and prevent future underpayments.
"With this audit, we've pinpointed the precise amount that the state can seek from insurance companies," Keller said.
Keller suggested that responsibility for collecting premium taxes may need to be transferred from the Office of the Superintendent of Insurance overseen by John Franchini to another agency.
Franchini reiterated his support Tuesday for transferring insurance tax collection responsibilities to the Department of Taxation and Revenue, noting that New Mexico is one of only five states where insurance regulators double as tax collectors.
The audit could support efforts by New Mexico Attorney General Hector Balderas to recover millions of dollars in alleged unpaid taxes from Presbyterian Health Plan, a for-profit subsidiary of Presbyterian Healthcare Services.
The attorney general's lawsuit against Presbyterian involves about $14 million — roughly half the underpaid taxes documented in the audit, said James Hallinan, a spokesman for the attorney general.
Settlement discussions are underway between the attorney general's office and Presbyterian, which has denied in court filings that it owes the state additional premium taxes. The attorney general contends that Presbyterian used an illegal accounting procedure to avoid taxes and surcharges.
Dale Maxwell, CEO of Presbyterian Healthcare Services, said in a statement that the company has cooperated with the audit and wants resolve issues with state authorities.
"We place a high priority on honoring our obligations to the state," Maxwell said.
Other insurance companies with large estimated tax underpayments include Health Care Service Corporation, which oversees BlueCross BlueShield of New Mexico, Molina Healthcare, Amerigroup and Lovelace.
The audit surveyed tax obligations at a dozen health insurance companies, as well as nine life insurers and nine property and casualty insurers.
It linked multimillion-dollar tax debts to erroneous overpayment credits. Health insurance companies improperly applied credits for support of the state's high-risk insurance pool for people who are denied insurance or considered uninsurable.
New Mexico collects a 3 percent tax on insurance premiums that is a major source of state government revenue.
Last year, a less comprehensive examination of underpaid premium taxes at five major companies from 2010-2015 estimated that New Mexico was owed $193 million, but authors of that report did not have access to company records.
Keller, a Democratic candidate for mayor of Albuquerque in a November runoff election, emphasized that the $65 million in unpaid taxes would have been enough to bridge a state budget gap earlier this year, without resorting to special legislative session in May.