Health Benefit Mandates

Introduction

There are many opportunities for North Carolina lawmakers to help lower the cost of health insurance. One way is to re-examine the 58 health benefit mandates that state officials have passed into law since the 1970s.

Health benefit mandates are laws that force insurance companies to cover specific health-care services, ensure access to desired providers, or expand the level of benefits offered to certain employers and people who purchase insurance policies on their own.

Historically, states have exercised most of the regulatory power over the number and scope of mandates. However, federal intervention accelerated in 1996 under the Newborns and Mothers’ Health Protection Act and the Mental Health Parity Act. These laws specified that, if health plans offered hospitalization care, they were required to cover a minimum length of stay for postpartum women. Additionally, if insurance carriers sold plans that included mental health treatment, those benefits could not be less favorable than the plans’ medical and surgical benefits in terms of out-of-pocket spending and scope of network providers. The Mental Health Parity Act was modified in 2008 to require employers to offer comparable substance abuse services if they chose to provide mental health benefits for employees.

The 2010 passage of the Affordable Care Act (ACA), commonly known as Obamacare, further extended the federal government’s authority over the insurance industry by enforcing limits on out-of-pocket cost-sharing for policyholders who access certain treatments that fall under the law’s 10 categories of Essential Health Benefits. Required services range from maternity and newborn care to chronic disease management. The ACA further outlines that policyholders in the individual and group markets can access a variety of preventive services with zero out-of-pocket cost-sharing (see chart below).

Despite these federal mandates, ample opportunities remain for state legislators to loosen insurance requirements and provide more affordable insurance options for North Carolinians.

Key Facts

• One study concluded that state health insurance mandates were responsible for between 9 percent and 23 percent of all premium increases between 1996 and 2011 and affected smaller firms more than larger firms.
• The insignificant cost of each mandate makes legislation relatively easy to sell to lawmakers. For example, people pay just 5 cents per month for pastoral counseling services. Access to dentists costs $1.02. Seeing a podiatrist amounts to $2.17. This partly explains why there are now 2,200 mandates nationwide, up from almost zero in the 1970s. Individually, each mandate costs little, but collectively, they make insurance policies more expensive.
• Because of the added costs associated with state benefit mandates, small businesses are discouraged from offering health coverage to their employees. A 2021 survey found that 1 in 3 small-business owners reported that it was a challenge to obtain health insurance coverage for their employees during the pandemic.
• Not all businesses are subject to state health benefit mandate laws. Self-insured employers are exempt under the 1974 Employment Retirement Income Security Act. Nationwide, 65 percent of covered workers were enrolled in a self-funded plan in 2022. However, the exemption from state regulation does not deter these firms from offering generous health benefits to their workers.
• A Senate bill introduced early in the General Assembly’s 2025 legislative session would have required state legislators to repeal an existing insurance mandate for every new mandate that is added. Moreover, the bill would have required that any newly added mandate be accompanied by an appropriation to the State Health Plan to cover the added cost of the mandate to the coverage provided to state employees. The bill passed the Senate but stalled in the House.

Recommendations

1. Reduce benefit mandates.

Legislators should allow for optimal competition among insurance companies and providers to let them best serve patients and respond to policyholder demands. Consumers should be able to select from insurance options with varying amounts of coverage. For example, insurance plans with less coverage can provide affordable and sensible options, especially for younger, healthier customers who need only basic catastrophic coverage. At a minimum, legislators should pass the legislation requiring that an existing mandate be repealed if they decide to add a new mandate.

2. Determine which health benefit mandates are indeed cost-effective and which ones are used by most policyholders.

More than half the states have mandated benefit review procedures to weigh the cost/benefit factors for any introduced mandate. Others conduct a retrospective analysis of all benefits that have been signed into law.