State Health Benefit Mandates Come with New Costs

Insurance coverage requirements enacted by state legislatures across the country have always been a sore point among insurers in the individual and small group market. Now it's understood that under healthcare reform, they may carry new costs.

Insurers contend that mandates for treatments such as chiropractic care or autism services accomplish very little and actually make health insurance more expensive. Supporters assert that coverage mandates ensure access to important care.

There are in total, 2,262 state health mandates, according to the Council for Affordable Health Insurance. Idaho has the fewest—13, while Rhode Island and Virginia boast the most—70 each. The most popular include mammography screening, maternity minimum stay, breast reconstruction, mental health parity, and alcohol and substance abuse. The least popular mandates include breast implant removal, cardiovascular disease screening, circumcision, gastric electrical stimulation and organ transplant donor coverage.

Until now, legislators have usually been happy to appease constituents and risk the anger of insurers by approving mandates. But healthcare reform, especially essential health benefits and health insurance exchanges, adds a wrinkle that has some states rethinking that approach.

The Department of Health and Human Services struggled for months to define what essential benefits should be covered under the Patient Protection and Affordable Care Act before announcing that it would let the states decide—sort of.  (The Institute of Medicine  weighed in with a 300-page report last fall.)

Now states still have a bunch of hoops to jump through, including figuring out what to do with their own mandates.

Under essential health benefits, each state can select a health plan to benchmark coverage for the 10 broad categories of coverage. The options include the largest HMO in the state as well the smallest group plan. But here's the catch: HHS will require states to defray the costs of any state-mandated benefits not covered by the selected benchmark plan.

Legislatures are picking up on this potential mandate problem. Some are advocating the repeal of every healthcare benefit mandate on the state books while others are a taking a more measured approach and endorsing studies of the costs associated with their mandates.

A timely study released by the National Institute for Health Care Reform may put some of the legislative concerns to rest. It concludes that few benefit mandates are likely to exceed a state's essential health benefit package. And even if they do, a state's financial liability to pay for the additional mandated health benefits probably will not amount to much of a cost burden.

Still, there's some reason for concern because nongroup (individual) plans aren't a benchmark option for essential benefits. According to the report, in some states, benefit mandates for individual plans often exceed mandates for small-group plans. In this age of tight budgets states may want to take a hard look at those individual plan mandates to avoid needing to offset those costs.

Chapin White, PhD, a senior health researcher at the Center for Studying Health System Change, and one of the NIH report's authors, cautions that states need to look beyond merely avoiding a mandate liability in selecting its benchmark plan.

"If all a state wants to do is avoid that liability," he says, "then it shouldn't select a small group plan as its benchmark." He adds that the benchmark decision needs to be based on much more, including why the mandate was put in place.

According to the study, some state mandates aren't always covered by other benchmark plans. In vitro fertilization services and applied behavioral analysis therapy for autism, for example, are covered by some small-group plans but are not typically included in the other benchmark plan options.

The NIH study looks at Maryland and its 67 mandates to develop an example of what a state mandate liability might be. One analysis shows that Maryland's liability for mandates in 2016 would range from $10 million to $80 million depending on the benchmark plan selected. That  may sound like a lot of money, but it's a drop in the bucket for most state budgets.

Looking ahead to 2014 when health insurance coverage will begin through state exchanges, the study suggests that the exchanges will provide states with new and more effective ways to regulate benefits in the individual and small group markets.

"Since states will be selecting a benchmark plan to regulate the benefits covered, the regulatory focus can shift from service-specific benefit mandates to a broader focus on the overall scope of benefits that are covered."

The study further notes that states may use their authority to certify qualified health plans as a way to exclude plans that offer inadequate benefits. "This authority can be used in addition to—or instead of—benefit mandates."