Expanding the list of services that health insurance plans must cover has become a perennial fight in the state legislature. Connecticut now has more health benefit mandates than nearly all other states, a consultant told a state board Thursday. And when federal health reform rolls out in just over two years, that could leave the state, not the insurers, with a bill to pay.

Under the reform law, thousands–possibly hundreds of thousands–of individuals and small businesses will buy their health care coverage through the state’s health insurance exchange, a marketplace for purchasing health plans. Every plan sold on the exchange must cover a set of federally required benefits, known as “essential health benefits.”

States can require health plans sold on the exchange to cover additional benefits. But if they do, the state must pick up the cost of covering them.

Although it’s not yet clear what the benefits federal government will require, as many as three-quarters of the benefits that Connecticut mandates could exceed what the federal government requires, according to a presentation by a consultant to the board that oversees the exchange Thursday.

“These state mandates can really provide significant patient protections,” Kevin Lurito, a principal at the firm Mercer, told the board. “However, states will now have to assume the costs associated with these requirements.”

And that could add up. State benefit mandates in 2009 accounted for about 22 percent of premium costs for group insurance coverage and about 18 percent of premiums for individual coverage, according to a report by researchers at the University of Connecticut Center for Public Health and Health Policy. Those include mandates to cover cancer, tumors and leukemia–the costliest benefit–as well as some cancer screenings and autism spectrum disorder therapies.

The health reform law outlines 10 categories of benefits that must be covered by plans sold on the exchange, including prescription drugs and emergency hospitalization. But the U.S. Department of Health and Human Services has discretion to require expansive coverage or limited benefits within each category.

HHS hasn’t yet said what benefits it will consider essential. But a clue to the direction it will take came from the Institute of Medicine, which issued recommendations at the department’s request for how to determine the essential benefits.

Its suggestions: The package should be based on what small employers offer. Affordability and sustainability must be key factors. And the package should be designed to fit a predetermined price, not created independent of cost considerations.

“Without some constraint on the size of the [essential health benefits] package, the premium prices faced by individuals seeking to obtain coverage both inside and outside of the exchanges in the individual and small business market may prove unaffordable to the target population and diminish access to health insurance coverage,” the institute said in its report.

Mercer’s analysis found that nine of Connecticut’s mandated benefits would clearly fall under the federal essential benefits requirements. Those include coverage of newborn infants, diabetes testing and treatment, prostate and colorectal cancer screening, mammography and breast ultrasounds, prescription contraceptives, and the cancer, tumors and leukemia benefit.

Altogether, they account for 9.1 percent of claims costs in the individual market, and 10.6 percent of claims costs in the small group market.

For the rest of the state’s mandated benefits–28 that apply to the individual market and 31 that apply to small group health plans–it’s uncertain whether they will be considered essential, Lurito said. Those include coverage of mental or nervous conditions, off-label use of cancer drugs, infertility diagnosis and treatment, and a requirement that health plans cover the most effective psychotropic drugs.

It’s possible that some of those state mandates will be covered, but Lurito noted that the federal government might not require the services to be covered at the same level the state does.

So how should the state deal with a potential disparity between its mandates and the federally required benefits in exchange plans?

Lurito laid out some options: Wait for further guidance from HHS and then re-evaluate. Maintain all existing mandates–which would require the state to pay a portion of the premium costs of plans sold on the exchange. Or review and modify some mandates based on economic, social and medical efficacy.

As an example, he cited coverage of Lyme disease treatment, which the state mandates. The state requirement exceeds recommended treatment therapies, he said, which could make it unlikely that the federal government would include it in its list of essential benefits.

But, Lurito added, Connecticut has a much higher prevalence of Lyme disease than the country as a whole, and the estimated costs of the benefit is negligible when spread across the insured population. When the state considers its approach to mandates that don’t match the federal requirements, he said, it will need to look both at costs and social impact.

State Healthcare Advocate Victoria Veltri said it’s important that any evaluation of the state’s benefit mandates takes a broad view of costs and benefits. Coverage of hearing aids for children or ostomy supplies could have a significant effect on days missed from work or school, or reduce medical visits, she said.

“It really needs to be a cost-benefit analysis done, not just a cost analysis,” she said.

Veltri said she was a bit nervous about the idea of building a plan to hit a cost goal, rather than to offer certain benefits, based on the state’s experience developing the Charter Oak Health Plan. Its premiums were set at $250 a month, and despite efforts to design a suitable plan at that price, it ended up being bare bones, she said. Premiums have since gone up to $446 a month because it wasn’t possible to maintain the lower price and quality coverage, she said.

Mickey Herbert, an exchange board member and former CEO of the insurer ConnectiCare, said the mandates are a critical piece to address because affordability is key to the insurance plans sold under health reform. If the state’s costs for its mandates are high enough, the legislature might be compelled to repeal some of them, he said.

“Perhaps,” replied Benjamin Barnes, the state budget director.

Instead of focusing on the costs of mandates, more attention should go to eliminating other cost drivers that raise the cost of premiums while adding no value to the health care system, said Mary Fox, another board member.

It’s also important that the required benefits include prevention and wellness measures that can prevent disease from progressing and address problems like obesity, making sure that plan designs support the right interventions, said Fox, a former senior vice president for Aetna Product Group.

The presentation was part of a larger analysis by Mercer aimed at helping the exchange board as it develops the exchange. Mercer is expected to provide information about other parts of its research at later meetings.