State needs a second audit to unravel insurance taxes

The oft-quoted Chinese philosopher Confucius is credited with saying “True wisdom is knowing what you don’t know.” By that standard, the five — yes five — New Mexico agencies weighing in on whether a handful of health-insurance companies really owe the state $193 million or more in back premium taxes are wise indeed.

Because it’s been two years since the Office of the Insurance Superintendent first asked for an audit. Three months since an independent audit reported the underpayment. Two months since state Auditor Tim Keller released the report and insurers vociferously denied being deadbeats. Two weeks after the Department of Finance Administration and the Legislative Finance Committee joined Keller to block any reduction in assessments proposed by the OIS. Days since state Attorney General Hector Balderas joined this game of 20 Questions because of a murky pending criminal investigation supposedly being done into at least one insurer that allegedly owes back taxes. And yet state officials — and thus the tax- and premiumpaying public —remain clueless as to who owes what, if anything.

“Maybe there’s only a tiny bit owed, or maybe there’s a lot owed,” Keller told Journal editors and reporters this week.

Either way, you can bet your bottom dollar that the folks who ultimately pay the premiums — New Mexico taxpayers and health-insurance customers — will get the bill.

Keller is right to push for a new independent audit, to require that audit to try to reconcile information not just from the Insurance Office but the insurers as well, and that any deals to reduce taxes owed be placed on hold until all that happens.

It is worth noting 330,873 voters passed a constitutional amendment in 2013 making the Insurance Office an independent agency so it could focus on complex actuarials, law and the entities, items or services insurance covers. Also, so it could presumably be more accountable for its decisions as its superintendent is hired — and can be fired — by a committee that is in turn mostly appointed by the Legislature and governor.

It is also worth noting Superintendent of Insurance John G. Franchini, who was unanimously recommended for his post, disputes the first audit’s methodology and findings and supports a second audit as a way to “bless” the system his staff has since put in place to assess back taxes. It’s good that Franchini is on board, especially given Keller’s statement this week that “I just don’t believe anything coming out of (the Insurance Office) anymore. We can’t rely on their own calculations . ... the department itself is broken on this issue. We’re not sure they’re capable of dealing with this question, and that’s the nicest way I can put it.”

Keller didn’t exactly sugarcoat his criticism, and he shouldn’t. There’s not much nice about a huge state budget deficit, about what would appear to be bureaucratic incompetence or about an ongoing inability to get to the bottom of who owes the state how much, if any, money.

The state needs to commission a second audit it can have confidence in ASAP.