Tuesday, January 11, 2011

The Link Between Benefit Mandates and Higher Premiums

Wanted to flag an article from Kaiser Health News this morning on an issue that will generate much discussion over the coming year – namely, what health benefits insurers must cover.  The health care law imposes new mandates on insurance – not only will individuals be forced by the federal government to buy a product for the first time, but the government will tell Americans WHAT kind of product to buy.  The specific details of the “new health insurance” weren’t codified in law; instead, federal officials were granted the authority to determine the benefits on their own, and an Institute of Medicine panel on this issue first meets tomorrow.

On a related note, states already force insurance carriers to offer myriad benefits in the (state-regulated) individual market.  The Council for Affordable Health Insurance found that as of October 2010, states had enacted a total of 2,156 benefits, an average of more than 42 mandates for each state and the District of Columbia.  CAHI’s annual list of benefit mandates imposed by various states, most recently compiled in the spring of 2010, includes more specifics about what some of those mandates require insurance policies to cover:

  • Acupuncturists;
  • Circumcision;
  • Chlamydia;
  • Hair prosthesis;
  • Massage therapists;
  • Oriental medicine;
  • Port wine stain elimination; and
  • Varicose veins.

All these mandates increase rather than decrease costs and insurance premiums – yet all these requirements have political constituencies that fought for their enactment on the state level, and will do the same as part of the new federal process.

It’s worth noting the Congressional Budget Office’s conclusion that the health law will raise individual health insurance premiums by an average of $2,100 per family, because of the new mandates: “average premiums would be 27 percent to 30 percent higher because a greater amount of coverage would be obtained,” and individuals will need to buy richer plans due to “the minimum level of coverage (and related requirements) specified in the proposal.”  Of course, if the bureaucratic process to determine the minimum essential benefits yields a richer insurance package than CBO originally assumed when it completed its premium analysis back in November 2009, premiums could rise by even more than the $2,100 per family CBO projected.

While Democrats argue that various benefit mandates provide “needed consumer protections,” the tacit assumption in mandating coverage of specific diseases is that some coverage (i.e., “Chevrolet” plans that may not cover all health benefits) is NOT better than no coverage at all.  Conversely, most Republicans believe that consumers should be able to purchase the plan that best meets their needs, without the federal government telling Americans what to buy and how to buy it.  At a time when premium increases continue unabated and progress on candidate Obama’s promise to reduce premiums by $2,500 per family seems elusive (at best), many may find the Republican policy better addresses most Americans’ goal of reducing health care costs.