Federal health reform adds a new wrinkle to mandate debate

Opponents of state mandates on what health insurance plans must cover have a new argument, and it comes from federal health reform.

Under the law, the federal government will define a set of “essential benefits” that must be included in health plans sold in the exchange, the marketplace for private insurance that will open by 2014. States that mandate benefits beyond what the federal government deems “essential” will have to pay the cost of covering those benefits if they are required for plans sold in the exchange.

The federal government has yet to define what essential benefits are, but the provision has added a new wrinkle to a longstanding debate about adding services to the list of benefits that state-regulated health plans must cover.

The Connecticut Insurance Department has urged lawmakers to consider the potential state cost as they contemplate creating new mandates. “In simple terms, all mandated coverage beyond the required essential benefits…will be at the State’s expense,” said the department in testimony on a bill that would require insurers to cover breast ultrasound screenings. The department did not otherwise take a position on the proposal.

The Connecticut Association of Health Plans also has cited the federal requirement in testimony opposing bills that would require coverage of breast ultrasound screenings, breast MRIs, and breast thermography.

“What we’ve tried to do is tune people into the fact that the analysis needs to be done under a new paradigm,” said Keith Stover, a lobbyist who represents the association.

But acting state Healthcare Advocate Victoria Veltri said the federal law should not be used to stop proposed legislation that could benefit a larger group of consumers.

“The exchange is only one portion of the insurance that’s going to be offered to people in the state of Connecticut,” Veltri said. “The vast majority of people are still going to be enrolled in commercial plans.”

It’s too soon to know how many people will buy coverage through the exchange. One estimate, cited in a state application for a federal exchange planning grant, projected that 120,000 uninsured state residents would be eligible for federal subsidies to buy coverage in the exchange. Individuals and small businesses that already buy their own coverage could also buy insurance through the exchange.

Lawmakers should consider the potential future cost when contemplating new mandates, Veltri said. But she said the issue should be “framed accurately,” with an acknowledgment that most state residents will still be enrolled in the commercial market.

Veltri also raised the possibility that plans sold in the exchange would not have to comply with state mandates, which would allow the state to avoid incurring costs for mandates beyond what the federal government requires.

The insurance department disputed that interpretation and cited guidance from the federal government stating that plans participating in the exchanges must comply with state insurance laws.

Veltri pointed to another section of the same guidance that said state had choices in several matters, including whether to require additional benefits in the exchange beyond the essential health benefits.

“I think what it points to more than anything is the need for more guidance, and soon,” Veltri said. “People are operating under different assumptions.”

State Sen. Joseph J. Crisco, Jr., D-Woodbridge, co-chairman of the Insurance and Real Estate Committee, said he would prefer to pass legislation that benefits people now and, if it conflicts with federal law later on, repeal it or make other changes then.

If legislators avoid requiring insurers to cover benefits because of changes that will take effect in the future, Crisco said, people will lose out on protection in the interim. “I can’t consciously support that,” he said.

Health benefit mandates are a reliable source of debate each year as lawmakers consider new services to require in state-regulated insurance plans.

Crisco, who has proposed several of them, prefers the term “prevention” to “mandate.”

“In the long run, you not only save people’s lives, but you reduce insurance costs,” he said.

But opponents say mandated benefits make insurance too costly, hurting individuals who buy coverage and businesses that want to offer it to their workers. The mandates apply to about 40 percent of state residents, typically those who work for smaller businesses or purchase coverage individually. Larger companies are generally self-insured–meaning they pay their own medical claims–and those plans are not subject to state regulations.

Health insurance mandates became a source of controversy during last year’s gubernatorial campaign when Republican nominee Tom Foley proposed allowing businesses that don’t cover workers or spend too much on health insurance to offer their workers “bare bones” plans that would be exempt from state benefit mandates. His opponent, now-Gov. Dannel P. Malloy, criticized Foley for the proposal, and his campaign ran an advertisement saying Foley’s plan would allow insurers to deny services.

So how much do the mandates add to insurance costs?

The benefit mandates in effect at the start of 2009 account for about 22 percent of the premium costs of group insurance coverage and about 18 percent of premiums for individual coverage, according to a report prepared for the insurance department by researchers at the University of Connecticut Center for Public Health and Health Policy.

But the authors noted that the figures likely overstate the cost. Some of the costliest mandates, including coverage for cancer, diabetes and mammography, “are considered part of the basic package of essential benefits covered by health insurance and thus not easily removed,” they wrote.

And many of the benefits the state mandates are covered by self-insured plans, even though they are not subject to state requirements. A survey of insurance carriers found that 13 state mandates are covered in 90 percent of self-insured plans, and 26 of the mandates are covered by three-quarters of self-insured plans, according to the researchers, although they cautioned that the results were not complete.

The overall cost of mandates amounts to $78.92 per month in group plans and $48.74 in individual plans, which are subject to fewer mandates.

The costliest mandated benefit, a broad-based requirement for coverage of cancer, tumors and leukemia, adds an estimated $13.20 to the monthly per-member premium in group insurance plans. The report said some minor parts of the mandate could possibly be removed, such as a requirement that insurers pay up to $300 for a wig after chemotherapy, although the authors added that it represents a minimal cost within the mandate.

The next most-costly mandates include diagnosis and treatment of mental conditions, which accounted for $10.20 in monthly premium costs, and diabetes testing and treatment, costing $5.52. Coverage of newborn infants added $5.95 per month, and a requirement that health plans cover the most effective psychotropic drugs added $9, although the authors said it was likely overstated because insurers reported the cost of all psychotropic drugs.

The 18 lowest-cost mandates accounted for less than 0.1 percent of the total medical cost for group plans. In many cases, that’s because they require coverage of services used by very few people, such as neurological testing for children undergoing chemotherapy–found to add no cost to group insurance plans–and orthodontic treatment for children born with cranio-facial disorders, which adds 2 cents to the monthly cost of group plans. Other mandates require coverage for services that are more commonly used but which carry relatively little cost, adding only a small amount to the overall cost of coverage.

A high-profile mandate that took effect in 2009, coverage for autism spectrum disorder therapies, was projected to add 4 cents to members’ monthly premiums.

Some state mandates will almost certainly be required in all plans–including self-insured ones–under the health reform law, according to the study authors, including coverage for newborns ($5.95 a month for group plans). The federal law already requires health plans not considered “grandfathered” to fully cover preventive care. The study authors said that would appear to encompass several state mandates, including screening for blood lead, colorectal cancer ($4.08), prostate cancer (23 cents) and breast cancer ($3.05), as well as some parts of the state’s birth-to-three program.

Stover said the effect of mandates should be taken cumulatively. Individual mandates might only add a few cents to an insurance rate, he said. “Then when you look across the field across dozens of mandates, all of a sudden it’s real money.”