New Mexico Senators criticized vetoes made today by Gov. Susana Martinez. Today is the last day for Martinez to act on bills passed by the legislature otherwise they are pocket vetoed.

Sens. Dede Feldman, D-Albuquerque, and George Munoz, D-Gallup, said a veto of a bill to create a health insurance exchange may mean more federal control of the insurance marketplace in New Mexico.

“It’s going to mean federal — and not state — control of health care,” said Munoz in a statement.

Feldman noted that New Mexico has already received $1 million in federal funding to begin planning state exchange.

“But further funding is dependent on the legislature setting up a governance structure, which SB 38 would have done,” Feldman said.

Sen. Tim Keller, D-Albuquerque, criticized Martinez for vetoing transparency and accountability bills.

The two pieces of legislation that received the most attention were bills that would make changes to the State Investment Council, including taking the governor off the council, and creating a tax expenditure budget to track tax deductions, incentives and carve-outs given by the state.

“All of these bills were bipartisan and overwhelmingly supported,” Keller said in a statement. “The legislature is elected and charged by our constitution to make laws. That should mean something.”

The health care exchange legislation in question, SB 38 and SB 370, would have helped create health insurance exchanges to implement the health insurance reform passed last year by Congress.

This is something that has been going on throughout the nation. Politico reported last week that tea party activists helped block health insurance exchanges in a number of states.

However, Len Nichols, a health care policy expert at George Mason University, told The New Republic that states creating their own health care exchanges is one way to reduce federal power over health care.

Ironically, the only way to make PPACA a “federal takeover” is for states to do nothing. There is much state flexibility in the law, and much more could be sensibly negotiated and amended before 2014, but the strategy of repeal, do nothing and “get the government out of health care” will have exactly the opposite effect in those states that follow this path.

But tea party activists in other states say they should not create health care exchanges because a federal judge ruled the entire health care law unconstitutional.

However, the health care reform law has been upheld in court cases as well and is still in effect. It will almost certainly be appealed to, and heard by, the Supreme Court.

Keller has pushed changes to the State Investment Council since it has been rocked by scandal in recent years. Martinez also vetoed a bill that would, according to the Fiscal Impact Report of the bill by the Legislative Finance Council, “direct the State Investment Council to establish a subcommittee of its members to evaluate economically targeted investments (ETIs) by the council.”

The fourth of Keller’s bills that Martinez vetoed would have created a legislative office of accountability that would allow the LFC, according to Keller’s statement, “to receive and protect confidential information necessary for its important oversight function.”

That money comes on the heels of a $1 million federal grant to revamp the Division’s regulation of health insurance rates.

The new grant will be used to help consumers file complaints and to appeal insurance company decisions, track and analyze trends in those complaints, and to fund a full-time staff position to assist consumers who are seeking health insurance coverage, according to spokesman Gerald Garner and the Division’s grant application.

“I think it’s a very significant development,” state Sen. Dede Feldman said.

The grants will improve the Division’s attention to consumer protection, Feldman said. The earlier grant will help fund a new Consumer Protection Bureau at the Division and a public website detailing proposed insurance rate hikes, Feldman emphasized.

The grants are representative of a larger effort by the Division to reform itself, Feldman said.

Feldman is drafting legislation to strengthen the Public Regulation Commission (PRC)’s and Division’s regulation of insurance rates, she said. A draft of her bill should be available by mid-November and will likely allow Division analysts to consider insurers’ executive compensation and cash surpluses when considering rate hike approvals, Feldman said.

“Anything we can do through the Division of Insurance to assist consumers is a positive step forward,” Superintendent of Insurance John Franchini said. “This grant award allows us to implement new measures and to strengthen existing measures for improving our education efforts and ultimately empower consumers to make sound choices with regard to their health insurance coverage. We’re really excited about it.”

The grant was awarded by the Department of Health and Human Services (HHS) Office of Consumer Information & Insurance Oversight.

“The Division of Insurance deserves a hand for securing this important grant that will ultimately benefit New Mexico’s insurance consumers,” PRC Commissioner Jerome Block, Jr., said Wednesday. “The staff is working diligently to ensure that the best information and services are available.”

Franchini inherited a beleagered Division that faces allegations of lax oversight of health insurance rates.
Shortly after Franchini took the helm, the National Association of Insurance Commissioners (NAIC) issued a scathing audit report slamming the Division on staff qualifications and poor oversight of industry.

Franchini initially failed to alert commissioners to the audit report’s findings — an “oversight,” he said — and subsequently worked to prevent its discussion at public meetings. The Independent published the audit report last month.

The NAIC placed the Division on probationary accreditation status, pending implementation of the Division’s corrective action plan. The Division has refused to disclose the action plan to the public, in response to public records requests by The Independent.

The Government Restructuring Task Force has drafted a constitutional amendment and companion legislation that would abolish the scandal-plagued PRC, which is the state’s most powerful regulatory agency.

But the proposed legislation would give regulated industries an “unusually blatant” role in reassigning regulatory jurisdictions to other executive-branch agencies, Commissioner Jason Marks warned.

The PRC regulates public water, electricity and gas utilities, insurance and telecommunications companies and motor carriers, including ambulance services. It also administers the State Fire Marshal’s Office, the New Mexico Firefighters Training Academy in Socorro, N.M., the state Pipeline Safety Bureau and the Corporations Bureau.

The state

If passed, the new powers would allow the insurance agency to consider an insurer’s investment income, surplus and cost containment and an insurer’s overall profitability rather than just the profitability of a particular line of insurance when assessing a health insurer’s rate request, according to a document State Insurance Superintendent John Franchini handed out to state lawmakers during a legislative meeting Wednesday.

Franchini appeared before the Legislature’s Health and Human Services Committee to tell state lawmakers of the proposals he, his agency and the PRC hope state lawmakers will approve during the 60-day session that starts in January.

“That is a big deal,” said Sen. Dede  Feldman, D-Albuquerque, vice-chairman of the Health and Human Services Committee. “That is to their credit.”

The move to change law comes as some state lawmakers and officials already are trying to change how New Mexico’s insurance regulators deal with requests from companies that want to raise their rates. It also comes as New Mexico, like every other state, is responding to the nation’s federal health care law, which will allow states to deny “unreasonable” rate requests.

The scrutiny surrounding the Insurance Division coalesced in April after a previous Insurance Superintendent approved a 21 percent increase in the premiums 40,000 New Mexicans pay to Blue Cross Blue Shield New Mexico.

The way the insurance agency arrived at the decision provoked questions from consumers and state lawmakers alike, many of whom questioned whether the agency did an in-depth analysis of the health insurer’s rate filing, including questioning the company’s finances.

In fact, auditors for a national accrediting organization reviewing the New Mexico Division of Insurance this spring found an inexperienced, marginally trained staff often incapable of performing in-depth analysis of insurance filings, according to a June 24 draft reportobtained by The Independent.

The auditors from the National Association of Insurance Commissioners (NAIC) also were sharply critical of how New Mexico regulators have overseen the insurance industry, the report shows.

Insurance Division officials, however, argued during the controversy that the state law didn’t allow them to dig into a company’s finances, including its surpluses, as critics wanted.

Eventually the superintendent’s approval of the Blue Cross Blue Shield New Mexico rate hike was suspended after the PRC asked an interim superintendent to reconsider the case. The interim superintendent had stepped in to fill in after the resignation of the superintendent at the time of the BCBS decision.

Other pieces of legislation being considered by the PRC, which supervises the Insurance superintendent, includes making rate filings public and to require the Insurance Division to post rate filings on its website, according to the document.

The Insurance division also will hire four new people soon — a hearing officer, a financial analyst, consumer analyst and an information technology analyst to work on the Insurance Division’s web design and web site, according to a separate document also handed out Wednesday.

The new hires, as well as actuarial and website development contracts the Insurance Division hopes to let soon, will be paid for by $1 million in federal health care dollars the state won in August.

Not contained in any proposals Wednesday were other ideas percolating in the lead up to the legislative session as a result of the controversy that erupted over the Blue Cross Blue Shield episode.

Those include giving the PRC appellate power over insurance superintendent’s decisions in rate hike cases and of moving the insurance division out from under the PRC.

While the Insurance Division falls under the PRC, and the commission supervises the Insurance Superintendent, the commission doesn’t regulate the insurance industry. That falls to the Insurance Superintendent alone.

Some PRC members already have come out in support of putting the making the commission the appellate body for insurance rate hike decision. Right now challenges go to state district court.

That would require a change to state law.

Meanwhile moving the insurance agency out from under the PRC, which was organized by constitutional amendment, would require a new constitutional amendment, and hence New Mexico voters’ approval in 2012. That means it’d be two years before any change could happen, even if the idea clears every other hurdle.

Sen. Linda Lopez, D-Albuquerque, who attended Wednesday’s meeting, alluded to the ongoing conversation on what to do with the Insurance Division.

“Where the superintendent goes, who’d be the authorizing agency — there’s still a lot of ideas out there,” said Lopez, who is a member the Legislature’s Government Restructuring Task Force. “There still may be more changes when we get to the session.”

Home video taken by a resident in 2008 showed fugitive dust at the cement transfer station.

American Cement officials and the Greater Gardner Neighborhood Association met Tuesday night to create a community advisory panel (CAP) to help the company minimize neighborhood impacts from the company’s transfer facility in Albuquerque’s North Valley.

The North Valley group will be just one of three CAPs planned for New Mexico and at least five nationwide, parent company Grupo Cementos de Chihuahua (GCC) Environment Manager Kevin M. Adams told The Independent — part of the company’s new push to build community trust and good will in the face of new federal restrictions on pollution from cement facilities.

The groups will cut out regulators and allow residents and company officials to communicate directly and regularly — a welcome development, according to several residents who attended the meeting.

“We’re working on a corporate sustainability plan on social, economic and environmental sustainability,” Adams said. “Being a good neighbor affects the business. Right now if we asked to expand operations, the community would say no. But if two years from now, if we’ve earned their trust, the answer might be different.”

The other community groups will be established in Tijeras – home to GCC’s cement kiln — and Elida, N.M., home of another cement transfer facility. CAPs are being organized in Colorado and South Dakota, Adams said.

Residents and state lawmakers said they were cautiously optimistic about the CAP’s prospects after Wednesday’s meeting, the creation of which follows a series of contentious meetings last year over the company’s operations schedule, air pollution and asthma rates that pitted residents against company officials and City of Albuquerque Air Quality Division staffers.

“I can’t speak for everybody here, but speaking for myself, this is empowering for people in the community,” resident Byron Gatwood said after the meeting. “We’re dealing directly with the company now. This came about as a result of our feeling the (Albuquerque) Air Quality Division was not advocating for the community.”

Air Quality Division officials did not attend the meeting.

“I came to see how the process is going,” state Rep. Ed Sandoval, D-Albuquerque, said. “I think it’s a good starting point — a good first step.”

The CAP is the first such group since a 1970s partnership between area residents and a sawmill, Sen. Dede Feldman told The Independent.

The meeting was first of several planned for the creation of the CAP, and focused on a draft charter and discussions about the reporting to neighbors and city air quality officials of pollution events at the transfer station. After residents have read and responded to the draft charter, the group will meet again to agree on a final structure for the group.

The CAP should have a formal mechanism for conflict resolution between residents and the company, Feldman and some residents said. When conflicts on the CAP cannot be resolved, residents may have no recourse other than to attend public permit hearings to lodge their complaints, Adams acknowledged.

Part of the mission of the CAP was to improve company transparency and communication with the community, Adams and spokesman José Madera said.

Madera presented the latest chemical analyses of heavy metals in the cement and fly ash transported at the facility. The data indicated an increased concentration of lead and arsenic over previous months’ lab tests, but company officials said they would discuss the lab tests in detail at a future meeting.

Asked about the volume of material handled at the transfer station, Madera said that information is “proprietary” and the company would hesitate to release it.

“That information would be useful to our competitors,” Madera said. “We’d hesitate because of the competitive disadvantage in these hard economic times.”

“Industrial spying does happen,” Adams added. “I’ve had a competitor hire a law firm to check on our air permit filings each month just in case we let some confidential business information slip.”

Asked by North Valley Coalition president Chris Catechis if company representatives on the CAP would have “full authority and backing to reach agreements,” Adams said that “really important” decisions will require company approval.

The company is installing fugitive dust detectors on its storage silos, Madera said.

“We hope to have that done by the end of this week,” Madera said.

But the company has no plans to install dust detectors on the facility’s perimeter fence, as some residents had asked, he said to the frustration of some in the audience.

“If we had a fence-line monitor, we’d have a better idea of what gets out when ‘exceedence’ events occur,” said Kristine Suozzi of the New Mexico Health Equity Working Group. But the company’s current agreement with the neighborhood association only requires monitors on the silos, Adams said.

Such an “exceedance” occurred Aug. 4, when employees created a plume of cement dust while cleaning a truck at the transfer facility, Madera acknowledged.

Greater Gardner Neighborhood Association board member Kyle Silfer played a videotape for the audience, showing a thick plume of dust drifting across the facility.

The neighborhood association told plant officials about the event Aug. 25, and the company had notified the Air Quality Division by Aug. 26, Madera said.

“These events occurred at a higher rate two or three years ago,” Madera said. “Now it’s becoming more sporadic. GCC’s working toward zero emissions. We want to be good corporate citizens. These events cost us money.”

“The Aug. 4 emissions event recorded on video would not have been mitigated by the new bag leak detectors,” Silfer noted. “Just more evidence that this facility’s location near so many residences is inherently problematic.”

North Valley residents would like to coordinate with the other CAPs, Silfer said.

Tijeras and Elida residents may contact Silfer at ggna@macmountain.org or GCC Environmental Manager Kevin Adams at kadams@gcc.com or (303) 359-8071.

The data show the companies, an industry association and political action committees spread the money around, giving to several state office holders and nearly every state lawmaker in the Legislature.

Gov. Bill Richardson took in the largest haul, more than $180,000, while  Lt. Gov. Diane Denish received more than $26,000, data show. But nearly half the $428,000 — $202,000 – was divvied up in small amounts to 119 state lawmakers over the period, data shows. (There are only 112 lawmakers in the Legislature at any one time, meaning that some legislators in the Legislature during one election cycle were not there during another election cycle.)

About a third of that $202,000 — $67,500 — went to just 10 lawmakers who either were legislative leaders or chairs of powerful committees.

Donations ‘keep oversight at bay,’ critics say

One critic pointed to the showering of money on New Mexico’s decision-makers by health insurers as an example of the power the industry wields with policy makers.

The money helps to “keep oversight at bay, to get the best marketplace money can buy,” said Larry C. McNeely II, the healthcare advocate for Washington-based U.S. Public Interest Research Group.

A spokesman for one of the health insurers disputed those accusations, saying that the company was only supporting good elected officials through its campaign contributions.

“We tend to support elected officials we think are positive, helpful voices in the health care debate,” said Todd Sandman, a spokesman for Presbyterian Health Services, which contributed more than $250,000 to New Mexico elected officials over the four-year period.

As to the charge that the companies try to stave off competition by showering elected officials with campaign contributions, Sandman said, “I don’t know what evidence they would bring to that. I don’t see a lot of barriers to insurers coming in” to New Mexico.

Presbyterian insures more than 400,000 New Mexicans.

Influence of health insurers becomes an issue

The role of health insurers in policy-making decisions is coming under additional scrutiny at a time when a battle is brewing in time for the 2011 legislative session. Lawmakers and health insurers likely will face off over the question whether policy makers should re-write state laws to strengthen how New Mexico vets health insurers’ requests to raise premium rates.

The battle comes in the wake of the state Division of Insurance’s decision in April to approve a request by Blue Cross Blue Shield of New Mexico to raise by 21 percent what 40,000 New Mexicans pay in monthly premiums. Spirited protests followed that decision. Ultimately the state’s Insurance Superintendent at the time of the decision resigned and the insurance division has decided to reconsider the request, a move that was unsuccessfully challenged in court by Blue Cross Blue Shield.

Past efforts to strengthen New Mexico’s rate-review process have failed. That includes one proposal that would have given authority to the Public Regulation Commission to act as an appellate body in such requests, several state officials have said.

Currently, the state Insurance Superintendent is the only decision-maker on such cases.

The PRC proposal likely will be resurrected for the upcoming legislative session. But it will compete with other proposals.

The scrutiny over how New Mexico examines health insurer’s rate-hike requests also coincides with an increasing concern from the public about the rising cost of health care.

The data The Independent analyzed came from the National Institute on Money in State Politics, a nonpartisan, nonprofit organization focused on revealing the influence of campaign money on state-level elections and public policy.  The Institute provided the data after The Independent asked for campaign contributions from health insurers to successful political candidates from 2004 through 2008. It did not ask for campaign contributions from the 2010 election cycle because the fundraising by candidates is ongoing.

The Independent then analyzed the data. The records do not include campaign contributions to successful Public Regulation Commission (PRC) candidates. The PRC includes the state Division of Insurance, which vets health insurers’ requests for premium rate increases. The PRC does not have oversight authority over health insurers’ rate requests, however.

Blue Cross Blue Shield was second-biggest donor

Second in the amount of money given by a health insurer was Blue Cross Blue Shield of New Mexico, aided by its Illinois-based parent company, Health Care Services Corp., (HCSC) and subsidiaries. The companies contributed $81,450 to New Mexico elected officials over the time period examined.

That total included two contributions to New Mexico elected officials by Blue Cross Blue Shield of Illinois, a sister company of Blue Cross Blue Shield of New Mexico owned by Health Care Services Corp.

The Illinois company gave $7,000 to Richardson during the 2006 cycle, when he was running for re-election, and $500 in the 2008 election cycle to Rep. Luciano “Lucky” Varela, D-Santa Fe, the chairman of the Legislature’s budget arm, the Legislative Finance Committee.

A spokesperson for Blue Cross Blue Shield of New Mexico told The Independent on Friday she was waiting to see if the company’s president, Liz Watrin, wanted to respond to The Independent.

Blue Cross Blue Shield of New Mexico insures about 375,000 New Mexicans, the spokesperson said.

Insurers have much to gain—and fear—from states

Health insurers “have a stake in taxation policy. They have a stake in provider rates, in a Medicaid program,” said Sen. Dede Feldman, D-Albuquerque. “They have so many stakes. It’s not only a question of oversight, but also policymaking.”

As chairwoman of the Senate Public Affairs Committee, one of the destinations for health care bills, Feldman ranked second among legislative recipients in the amount of money health insurers gave from 2004 to 2008, data show. She received $9,150.

When asked how the money might influence her, Feldman responded with an old political adage.

“If you can’t take their money, drink their wine and vote against them, you shouldn’t be in politics,” Feldman said. “If you look at my record, you’ll see I’ve done that.”

The contributions are often unsolicited, Feldman added. “They are routinely given to those that the company has decided are in key positions,” she said. It’s a situation of good people trapped in a bad system. In the best of all worlds, I’d rather not take money from anyone but my constituents.”

The data seems to bear out Feldman’s point. Among the 10 lawmakers who received the most health care industry money, five were legislative leaders and five were chairpersons of important legislative committees.

Legislative leaders have more say than rank-and-file lawmakers in determining the fate of legislation, as do lawmakers who chair powerful committees.

Data show that Sen. President Pro Tem Tim Jennings, D-Roswell, was the top legislative recipient, receiving $9,550 over the four-year period.

“I’m not going to sit here and say you never notice. That’s naïve. You do notice when someone sends you money,” Jennings said. “The money might help companies get access to lawmakers, but it isn’t the only factor in their decisions. Legislators tend to respond more to the constituents than to a business group,” he said.

Jennings added that his long-standing interest in health care might help explain the amount of money he received. Jennings’ late wife ran the state’s medical high-risk insurance pool, which is a last-resort destination for hard-to-insure individuals.

House Minority Leader Tom Taylor, R-Farmington, — the top Republican in the state House of Representatives — was the top GOP legislative recipient of health insurers’ money, according to the data. He received $5,800.

Like Feldman and Jennings, Taylor said the money doesn’t influence how he votes.

“I can honestly say I have never had an insurance company remind me of their contribution,” Taylor said. “For me, basically I try to give everyone a fair shot.”

By way of example Taylor said he doesn’t drink alcohol and generally doesn’t “accept money from the liquor folks. I don’t see any benefit to society,” he said. “But I’m not just against them. I try to keep a very open mind and try to analyze it from a business standpoint. The same goes for health insurance.”

He added, “All of us receive funding from those guys.”

Money makes an impression

The amounts given to state lawmakers appears paltry when compared to what health insurers gave Richardson. But, except in rare instances, spending in legislative contests often reaches into the tens of thousands of dollars, not into the millions, like a run for governor.

“What I’d be more wary of than these $1,000 contributions or $500 contributions, is if one organization gives one candidate $50,000 to completely finance their campaign,” Feldman said. “There is no reason for the candidate to reach out to other entities, or other individuals.”

But Feldman acknowledged that the money sprinkled around by the health insurers, their political action committees and industry associations makes an impression on decision-makers, even if doesn’t alter their final decision.

While Jennings called the giving by deep-pocketed companies and industries a necessary evil of the political system, Feldman said she knew how to reduce that influence.

“I want public financing of campaigns,” said the Albuquerque lawmaker, referring to the idea where candidates would run on public money and forego contributions from individuals, businesses and unions.

The website won’t break down the infection rate by facility. That comes in July 2011, when the state will begin to post such data on several infections, meaning the public could compare how careful — or careless — hospitals and medical centers are in preventing — or allowing — sometimes deadly infections.

The catch: hospitals won’t have to share the data if they don’t want to on certain types of infections.

Unlike some states, including Colorado, New Mexico has no law requiring hospitals to publicly report rates of hospital-acquired infections even as the state is looking to expand the number of infections it tracks. And while a new federal rule issued recently requires hospitals to report to the federal government, the mandate only applies to one type of commonly contracted infection at hospitals and medical centers.

So the only data appearing on the state’s public portal once it is up and running will come from facilities volunteering the information, a state official said Tuesday.

“They would have to pass a law” to require hospitals to share that information, said Deborah Busemeyer, a spokeswoman for the New Mexico Department of Health.

Busemeyer, the health agency spokeswoman, pointed to the increase in hospitals and medical facilities voluntarily releasing the data to the state as evidence that hospitals and medical centers would continue to share the information.

“There’s been a lot of interest,” Busemeyer said. “We started with six hospitals. Now we’re up to 25.”

According to the website of the New Mexico Hospital Association, there are more than 40 hospitals and medical centers in the state.

One state lawmaker believes that New Mexico should be lauded for the progress it has made, but it isn’t where it should be in making such information public.

“I’m pleased that they’re moving forward and working with more consultants and epidemiologists to improve the quality of health care,” said Sen. Dede Feldman, D-Albuquerque. “But they have a ways to go in figuring out to report the information to the public in a usable manner.”

The state’s evolving program

The soon-to-be state website is an outgrowth of New Mexico’s move toward greater transparency regarding hospital-acquired infections, a problem receiving increasing public scrutiny across the nation.

In 2008, the state started tracking an infection that patients developed during stays at hospital intensive care units (ICUs). Nineteen incidents of central line–associated hospital infections in the ICUs were reported at six New Mexico hospitals from July 1, 2008, to May 31, 2009, according to a 2009 state report. A central line is similar to an IV. The rate of infection was lower than the national rate, according to a report last year. But it wasn’t clear where the incidents took place.

Since the initial pilot study more hospitals have joined the state’s voluntary program, Busemeyer said, with 17 hospitals reporting the number of central-line bloodstream infections patients contracted in ICU wards. Meanwhile, 25 facilities report on how many health care workers are vaccinated for influenza.

And in November participating hospitals will begin reporting two more infections: central-line-associated hospital infections outside of hospital ICUs  and clostridium difficile, a colon infection.

In addition, New Mexico has hired several staff to help run its new infection program, including two epidemiologists, a nurse, a program manager and several contractors, using more than $1 million in federal stimulus dollars, Busemeyer said.

The federal government is doing its part to require disclosure. In January a new federal rule will require 47 hospitals in New Mexico to report central line-associated infections to authorities in Washington. That information will wind up on the U.S. Department of Health and Human Services’s publicly accessible Hospital Compare web site, the state health department said Wednesday.

Hospitals that don’t report the infection data required potentially could lose some federal funding.

“New Mexico hospitals welcome the requirement,” Jeff Dye, president and CEO of the New Mexico Hospital Association, was quoted as saying in a  news release issued by the New Mexico health department Wednesday. ” Many have already built the reporting structure and those that have participated in the state pilot project have outperformed national averages.”

But the state’s decision to rely on voluntary reporting of infections despite a recommendation in a 2009 Healthcare-Associated Infections Advisory Committee report to mandate such disclosure potentially means that hospitals don’t have to notify the state of certain infections if they don’t want to. For example, clostridium difficile, the colon infection that participating hospitals will begin to report voluntarily in November.

Moving toward transparency

The move to tamp down on hospital infections has dovetailed with a national movement for medical facilities to become more transparent about the quality of care they provide patients.

The movement got much of its impetus from a 1999 Institute of Medicine (IOM) report “To Err is Human,” which estimated that up to 98,000 deaths and hundreds of thousands of injuries occur annually in the U.S. because of medical errors and infections.

In 2006, just two conditions caused by hospital-acquired infections in the U.S. (sepsis and pneumonia), were responsible for nearly 50,000 deaths and cost more than $8 billion to treat, according to a February report in the Archives of Internal Medicine.

Hospital-acquired infections have garnered so much public attention the new federal health care reform law addresses the issue.

One of the provisions in the law will require more public reporting of medical errors, including hospital-acquired infections, according to the Consumers Union, which publishes the magazine Consumer Reports.

Beginning in 2014, the U.S. Health and Human Services Department will report, on its Hospital website, each hospital’s record for medical errors and infections involving Medicare patients, the consumers organization found during a review of the new law.

The federal law also attempts to encourage better patient outcomes through incentives and restrictions, the consumers organization says.

Beginning in October 2012 non-rural acute care hospitals that beat federal performance standards for at least five measures, including certain hospital-acquired infections, will receive higher Medicare payments, the organization found in its review of the law. Medicare is a federal health insurance program for individuals over the age of 65 and individuals under 65 with certain disabilities.

Two years later in 2014, the federal government will reduce Medicare payments by one percent for those hospitals with the highest rates of medical harm as measured by “hospital-acquired conditions,” the Consumers Union reports.

Those include certain preventable infections and medical errors, such as serious bedsores, catheter-associated urinary tract infections and certain types of falls and trauma, the organization reports.

Blue Cross and Blue Shield of New Mexico’s parent company, Health Care Service Corporation (HCSC), increased its reserves from $4.3 billion in 2005 to $6.7 billion in 2009 while imposing double-digit rate hikes on individual-market policyholders who buy their own insurance in New Mexico, Texas and Illinois, study co-author Sondra Roberto told The Independent.

“HCSC’s $6.7 billion is the highest surplus I know of,” Roberto said. “It’s five times the amount regulators consider necessary for solvency protection.”

Although many Blue Cross Blue Shield programs are set up as nonprofit charities, HCSC is a mutual insurance company, meaning it is owned by its policyholders.

The nonprofit Blue Cross Blue Shield of Arizona raised rates on individual-market policyholders every year between 2007 and 2009, while its surplus grew from $648 million to $717 million, the study shows. In North Carolina, Blue Cross Blue Shield raised rates by a total of 39 percent between 2008 and 2010, even though its surplus was $1.4 billion by 2009 — more than four times the regulatory minimum.

Surpluses, also called reserves, are meant to protect insurers – and policyholders – against unexpected losses, and to ensure all claims can be paid. State regulators impose minimum reserve requirements to avoid insurer bankruptcies, based on insurers’ finances, risks and histories.

But surpluses held by Blue Cross Blue Shield plans across the U.S. far exceed those minimums, Roberto said.

And only a handful of states limit how much surplus insurers can accumulate.

“Solvency is an important factor,” Sen. DeDe Feldman told The Independent Thursday in an e-mail. “No one wants companies to go belly up and be unable to pay claims for medical expenses. That is why a minimum (but not a maximum) reserve has been required in the past.”

Blue Cross Blue Shield New Mexico’s controversial 21.3 percent rate hike, approved in April by former insurance superintendent Morris “Mo” Chavez, and suspended by acting superintendent Johnny Montoya last month, included a 5 percent fee for policyholder contributions to company reserves, state Insurance Division records show.

Next week, the state Supreme Court is expected to hear the company’s petition to reverse Montoya’s decision.

“When people are struggling to pay increased premiums and to keep their coverage, that’s not the time to increase already sizable reserves,” Public Regulation Commission (PRC) Commissioner Jason Marks said Wednesday. “It’s hard to imaging why they’d want to increase reserves (now). The timing doesn’t make sense. This is a time to do what is possible to moderate rates.”

The PRC oversees the semi-autonomous state Insurance Division.

‘Surpluses are not profits’

The Consumers Union study unfairly depicts reserves that serve to protect solvency as profits, Blue Cross and Blue Shield of New Mexico spokeswoman Becky Kenny said in an e-mail Wednesday.

“The (Consumers Union report) does not accurately depict the necessity of, or customer protection provided by, health insurance financial reserves,” Kenny wrote. ”Although sometimes called ‘surplus’ for accounting purposes, reserves are by no means extra cash or ‘profits’ that can be used for any purpose a company chooses. To the contrary, reserves are funds specifically set aside to cover risks and obligations for our member-owners.”

HCSC’s reserves come to just $500 for each of its 12.4 million members, Kenny estimated. That would be enough to cover all claims and expenses for 70 days without policyholder payments, she said.

“Reserves protect that coverage, which is especially critical in the current economy and in an untested health care reform environment,” Kenny said. “In addition, as a customer-owned health insurer, HCSC can’t access the capital markets on Wall Street like our for-profit competitors should we need capital to cover our customers’ needs.”

But the real measure of whether surpluses are sufficient is not the number of days they could cover a company’s total costs, Roberto said.

“The measure of sufficient surplus for solvency protection should be one that looks at the real potential risks that a company faces,” she said.

“We are not suggesting that HCSC ‘deplete’ its surplus or that rising medical costs are not a factor behind rate increases. Yet we need to take a hard look at whether some financially strong insurers like HCSC can be doing more to moderate these large increases. HCSC describes itself as the most financially secure health insurer in the U.S. Its customers, particularly those who buy without the help of an employer, should get the benefit of that financial strength in the form of more competitive prices for health insurance.”

Some states limit insurer surpluses

In Rhode Island, insurance regulators have denied Blue Cross Blue Shield requests for policyholder contributions to a surplus of 2.5 percent — half the 5 percent New Mexico regulators approved for Blue Cross Blue Shield New Mexico, whose parent company has much larger reserves. (HCSC runs Blue Cross Blue Shield plans in New Mexico, Texas, Oklahoma and Illinois, and is a different company than Blue Cross Blue Shield of Rhode Island.)

In both Rhode Island and Maine, insurance commissioners have denied surpluses as unjustified because insurers’ surpluses were sufficient to protect the company and would impose hardships on policyholders.

The new federal health reform law will require all Americans to have health insurance by 2014 but does not impose cost controls on health insurers.

It will fall mainly to state regulators to control increasing insurance rates, Roberto said.

One way to do that is to limit how much insurers charge policyholders to build reserves beyond what is necessary to protect the company, Roberto suggested.

That could happen in the next legislative session, suggested Sen. Dede Feldman.

“I support a requirement that the Insurance Division must consider profitability, and surplus/reserves across lines of business in making a determination as to whether a rate increase is ‘unreasonable’,” Feldman wrote in an e-mail Thursday. “Other factors which should be included in the review include investment income on the surplus, a more precise breakdown of medical expenses, including provider payments, and claims history.”

A few states, including Pennsylvania and Maryland, have limited surpluses already, preventing companies from charging customers for surplus contributions when reserves are deemed adequate to protect a company.

New Mexico should empower its insurance superintendent to do the same, Roberto said.

Big, stable insurance companies need the same scrutiny as small, unstable ones

The state Insurance Division already has the authority to do that, Marks said Wednesday – but he’s not convinced capping surpluses would be the best approach to protecting consumers.

Marks, who had not yet read the CU study, said “Our code would benefit from an update but we’ve the tools in the interim to protect consumers. … Our insurance statutes are based on the assumption we have to look out for under-capitalization and fraudulent marketing but in the past year or two it has become apparent the big, dominant players’ premiums really need the same or more scrutiny we’ve given more questionable outfits in the past.”

Feldman and Marks also pointed out that the state’s current system puts the burden of proof on Insurance Division regulators.

Regulators have to prove a rate increase is unreasonable, Marks explained.

“Maybe we should reverse the burden of proof,” Marks said. “If reserves offer no value to customers in terms of claims paid and stability of the company, there’s not value in it.”

Marks wouldn’t be opposed to a cap on surpluses, he said. But caps wouldn’t be his first solution to unreasonable rates. Giving the PRC more control over the insurance superintendent, who can currently be fired only “for cause,” and allowing the Commission to hear policyholder appeals in rate hike cases would go further in protecting consumers, Marks said.

Limiting how much surplus insurers can accumulate would put them and their policyholders at risk, Kenny said.

“Premiums are a direct result of medical costs, which continue to rise,” Kenny said. “Even if reserves were depleted to impact current premium cost, premiums would still need to be adjusted to cover ever-increasing medical costs. In that scenario, however, there would be no safety net for consumers to cover their medical costs in the case of an emergency or some other unforeseen event.”

The National Association of Insurance Commissioners did not respond to a request for comment.

And that hole could double in size if Congress fails to send extra stimulus dollars New Mexico’s way to help pay for Medicaid, the government’s low-income health insurance program.

It’s not exactly the kind of political climate gubernatorial candidates would prefer.

“The next governor is going to have her hands full,” Sen. John Arthur Smith, D-Deming, and chairman of the Senate Finance Committee, said Wednesday, confirming the challenges ahead for the next occupant of the governor’s mansion.

The two women running to become New Mexico’s next chief executive responded Wednesday to news of the worsening financial news with plans on how to address the problem that varied in degrees of specificity. But not before taking swipes at each other.

“While my opponent has put forward thin one-liners and platitudes, my plan tells New Mexicans exactly how I propose to cover the budget gap,” Democratic Lt. Gov. Diane Denish said in a statement.

Republican District Attorney Susana Martinez shot back: “Diane Denish’s scheme is just more of the same Enron accounting that created this budget mess.”

Both candidates pledge to cut political appointees

Three and a half months before Election Day, Denish’s and Martinez’s plans to address the state’s budget woes reflected a mixture of gritty realism and pie-in-the-sky election-year promise-making at a time when New Mexico finds itself foundering financially.

Martinez, whose campaign sent out a 364-word statement, promised to implement zero-growth budgets at most state agencies and rid state government of waste and fraud. She said she could find 5 percent to cut, but didn’t go into too much detail about how to accomplish that goal.

Denish, whose campaign sent out a six-page report issued earlier this year, touted a voluntary one-time buy-out she would offer to state government workers and a thorough review of tax credits to make sure they create jobs. If they don’t, Denish would push to have them eliminated. What she didn’t mention is that such a review likely would take months, and wouldn’t save money this year.

Reducing the state’s vehicle fleet by 10 percent and merging several state agencies, thereby eliminating several cabinet-level positions and salaries, were other ideas Denish offered while Martinez talked of shrinking the state’s payroll through attrition.

While the two candidates played up their differences, there were similarities. Both promised to eliminate the hundreds of jobs across state government held by political appointees – a measure expected to save $8.8 million a year.

Both in the past also have mentioned reforming how the state doles out money for brick-and-mortar projects, also known as pork, an often-touted goal that somehow never found enough support among state lawmakers to become a reality during the past 7 1/2 years.

Everything is on the table—including education

Both gubernatorial candidates made clear Wednesday that while they were ready to cut expenses while eschewing major tax increases, they were prepared to protect the most basic services, including education.

It’s a scenario some lawmakers have questioned: keeping K-12 education untouched in future budget cutting. Education has suffered cuts in the past, but K-12 education is a big target, representing roughly half of the state budget.

“We can’t hit agencies” like the state transportation department any more, Sen. Steven Neville, R-Aztec, said Wednesday. “We might have to talk about wholesale elimination of functions. We may have to say we can’t provide XYZ anymore. Or the big taboo – education. We are going to have to re-look at education – at administration and overhead.”

Agreed Smith: “Everything on the spending side is on the table, including education.”

Sen. Dede Feldman, D-Albuquerque, however, said she was hard-pressed Wednesday to name where the state could cut in education.

“All I can tell you is I just finished talking to a … school nurse,” Feldman said. “People (at Albuquerque Public Schools) are really worried about what will happen this school year. We have a school principal covering two schools. School nurses who are covering more and more kids.”

Feldman also wondered if the state’s health system could take any more hits.

Funding for 33 county and community health councils and five Tribal Health Councils around the state already has been slashed this year because of the state’s budget troubles. The councils coordinate different agencies, organizations, in a community or county, that are addressing health needs at the local level, advocates have said.

“Doing away with these planning councils … it’s like your plane is about to crash and you are ripping out your control system,” Feldman said. “If we are looking to make a safe landing … we cannot afford to keep cutting those vital programs.”

No first-year governor will want to sign tax increases

“We have to look at what the situation is during the regular session,” Feldman said.

Smith ruled out a major tax increase as impractical, saying a first-year governor wouldn’t want to sign off on a tax increase to start off her tenure, he said. Smith acknowledged, however, that lawmakers would discuss – and likely would be open to– closing certain tax credits, deductions or exemptions.

Wednesday’s news wasn’t a surprise to him, Smith said. He and other senators had predicted that the Richardson administration’s projection that revenues would grow by 6 percent was overly optimistic. In the end revenues have grown by about 3 percent.

He also said the news could get worse.

New Mexico is one of 21 states without a contingency plan if Congress doesn’t pass legislation approving extra Medicaid dollars to shore up state spending plans.

Congress is currently debating whether to extend extra federal dollars for the government’s low-income health insurance program through June 30, 2011, six months beyond the current deadline of Dec. 31. If the extra dollars don’t come, however, New Mexico will be stuck with a $160 million hole in the state budget, meaning the current $160 million hole could double in size. That’s because this year’s state budget assumed the extra Medicaid dollars from the federal government.

Governor has authority to cut now

Martinez and Denish might have one saving grace. This year’s state budget gives Gov. Bill Richardson the ability to cut monthly allotments to agencies across state government, meaning some of the hard work of balancing this year’s budget actually might occur before the next governor takes office.

“Agencies have been preparing for a potential shortfall and, as a precautionary measure, were instructed to reduce spending by as much as 5 percent at the start of this fiscal year,” said Nicole Gillepsie, spokeswoman for the Department of Finance and Administration, the governor’s budget arm. “Agencies are hard at work finding ways to achieve maximum efficiency with the aim of avoiding reductions to services or additional cuts focused on state employees.”

Gillepsie also said the governor is “working to develop a plan for reducing agency budgets, and will present the plan for Legislative Finance Committee review and Board of Finance approval.”

Smith said he doesn’t hold out much hope that much cutting will occur before the next governor takes over.

“I don’t think this governor is going to move quickly enough,” Smith said.

The governor’s office did not respond to an e-mail from The Independent asking for a response to today’s news of the state’s worsening financial situation.

As New Mexico officials prepare to increase oversight of health insurance rates—with one eye on an influx of federal cash and the other on impending health care reform rules—members of the Public Regulation Commission are already struggling with public pressure to crack down on rapidly rising rates.

PRC Commissioner Jason Marks said Tuesday that although state law already allows the Insurance Superintendent to reject unreasonable premium rate requests (under 59A-18-14.A3) but it doesn’t require it.

A provision in the statute Marks pointed to allows the Superintendent to reject an increase when “the benefits offered are unreasonably restricted in relation to the premium charged.”

“Probably the best reason for revising the (state law) is to give the insurance superintendent clear direction that it’s not something he can do, but something he should do,” Marks said.

Marks’ comments come as state lawmakers and other New Mexico officials are pushing for New Mexico to strengthen its rate-review process following the state Insurance Division’s approval in late April of a controversial 21 percent increase in what 40,000 New Mexicans pay in monthly premiums to health insurer Blue Cross Blue Shield of New Mexico.

The New Mexico Public Regulation Commission requested last month that the Insurance Superintendent suspend the rate increase and start another review, setting up a possible court challenge from Blue Cross Blue Shield New Mexico. The health insurer has threatened litigation if the rate increase is overturned.

New Mexico rarely—if ever—rejects rate hike requests

New Mexico hasn’t had much experience with rejecting health insurers’ rate requests. Records show that the state Insurance Division had approved Blue Cross and Blue Shield rate hike requests in each year going back to 2004.

The Independent’s examination of state records revealed that the Insurance Division approved Blue Cross Blue Shield of New Mexico’s rate hike request, even though the company did not provide documentation for financial losses and expense figures cited as justification for its rate hike request.

Feds want states to beef up regulatory oversight

Expect the discussion over how to improve the state’s rate-review process to grow beyond the handful of lawmakers and other state officials, especially if New Mexico wins the $1 million in federal grant money the federal government is offering states to help hold insurers accountable for unreasonable insurance rate increases.

Already some New Mexico officials are throwing out ideas on how to strengthen the rate review process.

“The state of New Mexico has no definition of what an unreasonable rate increase is and regardless of the model (of state health insurance exchange) we choose to enact we need to have something like this in the law,” said Sen. Dede Feldman, D-Albuquerque. “This is extremely important. The state has never turned down a rate increase request. That means there is no regulation of health insurance rates.”

Feldman and other state lawmakers say New Mexico shouldn’t wait until 2014 to define what ‘unreasonable’ means, but should address the issue during the upcoming legislative session. The federal health care law passed earlier this year empowers states in 2014 and afterward to reject “unreasonable” rate increase requests by health insurers.

What ‘unreasonable; means, and who gets to define it, would likely involve the usual input from lobbyists, advocates, medical professionals and the insurers themselves. Feldman counseled getting guidance on how to define ‘unreasonable’ from the U.S. Department of Health and Human Services and the National Association of Insurance Commissioners before New Mexico codifies anything.

Commissioners want the PRC to have more authority

Another change to state law Marks has advocated is giving the Public Regulation Commission the authority to hear appeals, and rule on them, after the New Mexico Insurance Division has granted or rejected an insurer’s request.

Currently, the Insurance Division has sole authority over requests to raise insurance premium rates, and challenges to them are made in New Mexico state court.

That reality made Marks and one other commissioner careful Tuesday about how they described the PRC’s action in the Blue Cross Blue Shield case. Both Marks and his colleague on the PRC, Commissioner Jerome Block Jr., said that the Public Regulation Commission had requested, not ordered, the Insurance Superintendent to suspend the Blue Cross Blue Shield rate increase.

“To the best of my knowledge, we have no authority to direct the superintendent to do anything in this case,” Block wrote wrote The Independent via e-mail. “To the best of my knowledge, we have no authority to direct the superintendent to do anything in this case.”

PRC Chairman David King agreed with the need for giving his agency more authority.

“All we can do is request” the insurance superintendent to suspend the request, King told The Independent. “We do appoint the Insurance Superintendent but we can’t keep re-appointing the Insurance superintendent. Once a person is appointed they can do whatever they want. They can’t be fired except for cause. It’s almost impossible to fire them. If they resign, that makes it a little easier.”

Outgoing interim Insurance Superintendent Craig Dunbar told The Independent that the New Mexico Insurance Division will apply for the grant if Gov. Bill Richardson approves.

Richardson’s office did not respond to an e-mail Wednesday asking if he supported seeking the federal money.

The money would come from a pool of $51 million in federal grant funds announced this week by U.S. Health and Human Services Secretary Kathleen Sebelius. Sibelius said in a news release that the grant money is meant to help protect consumers and small businesses from “unreasonable” insurance rate increases.

“By strengthening oversight of insurance premiums, these grants will help put affordable coverage back within the reach for Americans who have been hit hard by skyrocketing costs,” Sibelius said.

Insurance Division took heat for approving recent rate hike

The $1 million grant, should New Mexico win it, would come at a time when some state lawmakers and officials already are trying to change how New Mexico’s regulators deal with requests from companies who want to raise their rates.

The sudden burst of scrutiny surrounding how the state reviews health insurers’ rate hike requests coalesced in April, after the Insurance Division approved a 21 percent increase in the premiums 40,000 New Mexicans pay to Blue Cross Blue Shield New Mexico.

The way the agency arrived at the decision has provoked questions from consumers and state lawmakers alike. The Independent’s examination of state records revealed that Blue Cross Blue Shield of New Mexico did not provide documentation for financial losses and expense figures cited as justification for its rate hike request. Records also showed that the state Insurance Division had approved Blue Cross and Blue Shield rate hike requests in each year going back to 2004.

Meanwhile, a check of Illinois state records showed that top officials at Blue Cross Blue Shield’s parent company made millions in bonuses in each of the last two years.

Rate review process does not adequately protect the public interest, some say

Officials on Wednesday were already envisioning how the state could use the money to improve the rate review process.

“They (Insurance Div) need to take a look at streamlining the process and improving public transparency,” Public Regulation Commission Chairman David King told The Independent in an e-mail.

Added Sen. Dede Feldman, D-Albuquerque: ” They need to beef up the whole process.”

Feldman recently conveyed to federal officials at Health and Human Services Department seeking public input her thoughts on how insufficient New Mexico’s rate-review process is.

Feldman wrote:

“New Mexico’s methodologies do not take into account any balancing of the public’s interest versus the insurer; it does not require disclosure of executive compensation or broker incentives to avoid higher-risk customers. They do not allow consideration of excessive profits, reserves or the rate increase’s proportion to the health care cost index. It also does not allow consideration of the insurer’s practice of isolating plan enrollees into segregated closed plans or ”blocks” that exclude newer, potentially healthier populations and retain the individuals who face increasing premiums as members of that block age or develop illnesses.”

The Public Regulation Commission has since ordered the Insurance Division to suspend approval of Blue Cross Blue Shield’s premium increase; after which the company indicated it might sue.

Insurance Division Agency officials, meanwhile, have defended the way the agency reached its decision, saying state law doesn’t empower the agency to consider certain factors when reviewing a rate request, including how much a company keeps in a surplus account, executive compensation or the practice known as “closed blocking.”

That has led some state lawmakers to speak of changing state law to give the agency more latitude and power while others have talked of giving the New Mexico Public Regulation Commission final say over health insurers’ rate hike rather than the Insurance Division.