ALBUQUERQUE, N.M. — New Mexico’s largest health insurance provider will pay $18.5 million to resolve unpaid taxes to the state dating back more than a decade under a legal settlement with state prosecutors, New Mexico Attorney General Hector Balderas announced Monday.
Three state insurance regulators who came forward as whistleblowers and exposed the case will split $3.7 million of the settlement.
Balderas had accused the for-profit insurance subsidiary Presbyterian Health Plan of using an illegal accounting procedure to avoid paying millions of dollars in taxes and surcharges on insurance premiums dating back to 2003-2004.
New Mexico authorities are grappling with how to address unpaid insurance taxes from a long list of companies. A recent state-commissioned audit found tax underpayments of $65 million since 2003 — before Monday’s settlement announcement.
Balderas said he was pleased that Presbyterian settled but said he still has worries about oversight of insurance-premium tax collections.
“I continue to be very concerned that the state has done a horrible job of assessing, recovering and collecting taxes owed by insurance companies across the state of New Mexico,” he said. “I also remain very concerned that there are many health care companies and insurance companies that continue to not do the right thing and pay their fair share.”
Presbyterian Healthcare Services CEO Dale Maxwell confirmed the settlement agreement and stressed that fraud allegations against the company were dismissed.
“The important thing for us is the fraud allegations have been completely dropped,” Maxwell said. “Presbyterian did not commit fraud. We have worked together with the regulatory agency that oversees our premium tax payments, and we did that in good faith.”
The legal dispute hinged on Presbyterian’s revisions five years ago to prior tax obligations. The arrangement was finalized at a time when the oversight of insurance taxation was being transferred from the state’s Public Regulation Commission to an independent Office of the Superintendent of Insurance — only to be challenged in court years later.
The settlement represents a larger amount than the roughly $14.6 million in unpaid premium taxes and fees due from Presbyterian, as described in the state’s industry-wide audit.
Presbyterian and state officials said the settlement resolves those debts — but not an additional $14 million in estimated underpayment related to tax credits that offset Presbyterian’s contributions to a high-risk insurance pool for people who are denied insurance or considered uninsurable.
Maxwell said those estimated underpayments are related to a recent regulatory change that delays insurance-pool tax credits until the year after payments to the insurance pool.
The state’s case against Presbyterian stemmed from a whistleblower lawsuit filed by three employees at the Office of the Superintendent of Insurance: Accountant and auditor Monica Galloway, Financial Audit Bureau Chief Shawna Maestas, and Chief Administrative Officer Jolene Gonzales.
Balderas’ office took over the case earlier this year.
The original plaintiffs and their attorney will receive 20 percent of the settlement, according to the agreement and terms of the state’s Fraud Against Taxpayers Act. They stood to receive more if they prevailed in court without the attorney general’s intervention.
New Mexico collects hundreds of millions of dollars each year through a 3 percent tax on insurance premiums and additional surcharges.
“This case shows that lax oversight can jeopardize the health care system in New Mexico and cost the state millions of dollars,” Balderas said.
Leading state officials including Insurance Superintendent John Franchini want New Mexico to consider transferring responsibility for the collection of insurance premium taxes to another agency.
Maxwell said Presbyterian’s $18.5 million settlement payment will not interfere with its ability to provide health care coverage across the state and fulfill its mission.