June 14, 2017
RALEIGH — North Carolina legislators can help make health insurance more affordable by re-examining dozens of state health benefit mandates. They also should avoid creating new mandates. A new John Locke Foundation Spotlight report offers those recommendations.
“In an era of rising health care costs and uncertainty about the future of federal health care reform, state lawmakers are presented with an opportunity to act on a health policy issue that can bring down the cost of insurance without federal intervention,” said report author Katherine Restrepo, JLF Director of Health Care Policy. “They can look at the 56 health coverage mandates state officials have passed into law since the 1970s.”
At the same time, legislators should “step away” from enacting more benefit mandates, Restrepo said. “Instead, they should allow for optimal competition among insurance companies and health care providers to serve patients and respond to policyholder demands.”
The review of existing mandates should focus on several key issues, Restrepo said. “It’s important for legislators to take the time to determine which health benefit mandates are cost-effective,” she said. “They also should look at which mandates are used by most policyholders. And they should study whether other benefit mandates that fall within preventative care are deemed excessive to an insurance policy.”
Other states are taking a closer look at their own mandates, Restrepo said. “Over half of the states have enacted mandate benefit review laws to weigh cost-benefit factors for any introduced mandate,” she said. “Others conduct a retrospective analysis of all benefits that have been signed into law.”
Health benefit mandates can force insurance companies to cover specific health care services, ensure access to particular providers, or expand the level of benefits offered in selected insurance plans, Restrepo explained.
“Historically, states have exercised most regulatory power over the number and scope of mandates, but federal intervention accelerated in 1996 and reached a new level in 2010 with the Affordable Care Act,” she said.
Government mandates come with a cost, Restrepo said. “The Council for Affordable Health Insurance says mandates contributed to insurance premiums rising between 20 and 50 percent in recent years,” she said. “One estimate places the price tag for North Carolina policyholders in the individual and small-group insurance markets at more than $218 million a year.”
“In general, it is politically palatable for lawmakers to pass benefit mandates,” Restrepo explained. “The per-member, per-month cost imposed on policyholders is miniscule, so supporters can push for mandates without exposing lawmakers to criticism for explicit tax increases.”
Across the country, policyholders face roughly 2,200 mandates, Restrepo said. “That’s up from almost zero in the 1970s,” she said. “Advocates try to advance new or enhanced mandates during every legislative session.”
“During North Carolina’s 2015 legislative session, five mandate bills would have expanded coverage for oral cancer drugs, autism therapy, and chiropractic care,” Restrepo added. “If all of them had passed, the Associated Press reported that policyholders would have faced a 16 percent health insurance rate increase. That’s on top of the double-digit premium hikes for policyholders who bought health insurance through the ACA.”
Mandates do not apply equally to every person with health insurance, Restrepo said. Federal law exempts self-insured employers from mandates. “That exemption applies to 62 percent of covered individuals in the state,” she said. “But an exemption from state mandates doesn’t deter self-insured employers from offering generous health benefits to their workers.”
Research shows that state benefit mandates do discourage small businesses from offering health coverage to their employees, Restrepo said. “One study suggests that one in five small businesses that do not offer health benefits now would start offering them if there were fewer benefit mandates built into small-group insurance plans.”
Another self-insured, mandate-free entity that provides generous coverage is North Carolina’s State Health Plan for government workers and retirees, Restrepo said. “It’s interesting that lawmakers have voted to exempt themselves and state employees from a number of mandates that they impose on others.”
Government-enforced benefit mandates do not offer a good long-term solution for the goal of improving access to health care, Restrepo said. “There are cases in which the market has been working to extend important services to patients without government intervention,” she said. “Telemedicine offers a great example. The private sector has come up with creative ways to respond to wasteful health care spending, while providing enhanced access to specialty care for patients at a lower cost.”
The benefits from innovation could be blunted if lawmakers pursue legislation that would mandate telemedicine services or enforce standardized reimbursement rates, Restrepo said. “This would surely incentivize more medical providers to adopt telemedicine, but this policy change could end up imposing limitations on how insurance carriers wish to design certain products or administer telemedicine services.”
Mandates can serve as a disincentive for insurance carriers to compete for policyholders, Restrepo warned. “This is particularly true if all must incorporate the same treatments, services, and access to providers into their health plans.”
A focus on state mandates offers North Carolina lawmakers a rare opportunity to help address health care costs, Restrepo said. “It is unfortunate that many federal regulations prohibit insurance carriers from offering plans that can be tailored to policyholders’ preferences,” she said. “Re-examining the scope of state mandates is a step in the right direction.”
Katherine Restrepo’s Spotlight report, “Want Affordable Health Insurance? Scale Back on Benefit Mandates,” is available at the JLF website. For more information, please contact Restrepo at (919) 828-3876 or [email protected]. To arrange an interview, contact Mitch Kokai at (919) 306-8736 or [email protected].