by Katherine Restrepo
Director of Health Care Policy, John Locke Foundation
As long as federal dollars are involved, many health policy decisions currently made at the state level come with federal ties. And there is no guarantee that federal health care reform will scale back the costly health insurance regulations that they impose on states.
Fortunately, there are opportunities for legislators to help North Carolina make coverage more affordable for consumers. One way is to re-examine the 56 coverage mandates state officials have passed into law since the 1970s. 1,2
Health benefit mandates are laws that force insurance companies to cover specific health care services, ensure access to particular providers, or expand the level of benefits they offer to certain employers and people who purchase insurance policies on their own.3
Historically, states have exercised most of the regulatory power over the number and scope of mandates. Federal intervention accelerated in 1996 under the Newborns and Mothers’ Health Protection Act and the Mental Health Parity Act.4,5,6 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 to 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, requiring employers to offer comparable substance abuse services if they choose to provide mental health benefits for employees.7
The passage of the Patient Protection and Affordable Care Act (ACA) in 2010 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 (EHBs)8. Required services range from maternity and newborn care to chronic disease management. Section 2713 of the ACA further outlines that policyholders in the individual and group markets can access a variety of preventative services with zero out-of-pocket cost sharing.9,10
Government mandates come with a cost. According to the Council for Affordable Health Insurance, health benefit mandates are one of the reasons why insurance premiums rose between 20 and 50 percent in recent years.11 Data provided by the North Carolina Coalition for Fiscal Health estimate that mandates cost North Carolina policyholders in the individual and small-group insurance markets over $218 million per year.12,13
While the cost to consumers is high, the cost to politicians is low. In general, it is politically palatable for lawmakers on both sides of the political aisle to pass benefit mandates. This type of legislation shields them from being called out for explicit tax increases. The per-member-per-month (PMPM) cost imposed on policyholders is miniscule. For example, people pay just 5 cents per month for pastoral counselor services. Access to dentists costs $1.02. Podiatrists amount to $2.17.14
The insignificant cost of each stand-alone bill also makes mandate legislation feasible for patient advocates and other established medical provider groups to require coverage of services from a defined group of providers.
There will be a strong tendency for politicians to support positions favored by well-organized, easily identifiable special interest groups. When the cost of special interest legislation is spread widely among the voting populace, most non-special interest voters will largely ignore the issue. …In contrast, special interest voters … will let candidates (and legislators) know how strongly they feel about the issue. … Given the intensity of special interest voters and the apathy of other voters, politicians will be led as if by an “invisible hand” to promote the positions of special interests.
The special interest effect partly explains why there are now 2,200 mandates nationwide – up from almost zero in the 1970s.17
The impacts are clear. Deductibles are rising six times faster than wages for employees who receive health insurance through their employer.18 Families are facing maximum out-of-pocket spending upwards of $13,000 for plans purchased in the individual market.19 For both groups, health benefit mandates remain problematic, but the odds are stacked against them. Those promoting the mandates have considerably more resources than the handful of groups working on behalf of taxpayers and actively advance new or enhanced mandates during every legislative session.
During the 2015 session of the N.C. General Assembly, five mandate bills were pending to expand coverage for oral cancer drugs, autism therapy, and chiropractic care. The Associated Press reported that, if all passed, policyholders would face a 16 percent health insurance rate increase on top of double-digit premium hikes for policyholders who buy their health insurance through the ACA’s Exchange.20
The concentrated benefits and diffused costs of health benefit mandates are not spread among all North Carolina policyholders. In fact, 62 percent of covered individuals in the state receive health insurance through a self-insured employer, which means that these group plans are exempt from state mandates under the 1974 Employment Retirement Income Security Act (ERISA).21 An exemption from state laws doesn’t deter self-insured employers from offering generous health benefits to their workers. For example, a National Business Group survey of more than 140 large employers shows that 74 percent in 2016 offer telemedicine benefits to their employees, up from 48 percent in 2015.22
Meanwhile, research shows that state benefit mandates do discourage small businesses from offering health coverage to their employees. The Mercatus Center reports that one in five small businesses that do not offer health benefits would if there were fewer benefit mandates built into small-group insurance plans. Although the costs of benefit mandates incurred by small employers don’t lead to a reduction in employment, they do generate a competitive advantage in the labor market for larger firms that self-insure.23
Another self-insured, mandate-free entity that provides generous coverage is North Carolina’s State Health Plan. There are cases in which all members of the State Health Plan, inclusive of legislators, subject themselves to health benefit mandates. But there are some exceptions in which legislators exempt themselves and other State Health Plan members from health mandates they have voted to become law.
If lawmakers think that health coverage requirements are a necessity, then they themselves and all other State Health Plan beneficiaries should comply with all of them as well.*
*If the statutory text of a health benefit mandate law does not specify that it will be built into the State Health Plan, then State Health Plan beneficiaries are exempt.
Improving access to health care is important, but coverage mandates that are enforced by the government are not a long-term solution. There are cases in which the market has been working to extend important services to patients without government intervention.
As mentioned previously, telemedicine is an example of this. Insurers such as Blue Cross and Blue Shield of North Carolina have decided on their own to offer plans that cover telemedicine for psychiatric care, psychotherapy, health behavior assessments, diabetic counseling, and more.24 Since 2015, UnitedHealthcare members can choose from multiple service providers to engage in virtual office visits for under $50. This is an innovative way to alleviate primary care physician shortages and medically underserved areas of the state.25 Direct primary care (DPC) physicians, who don’t accept insurance, provide telehealth as a value-added benefit that is included in their patients’ monthly membership fee. For example, RubiconMD is an app used by DPC physicians and other medical providers to save their patients time and money from unnecessary specialist referrals. If a primary care physician is unsure whether to refer a patient to a specialist, the physician can seek medical advice from a specialist through RubiconMD’s eConsult platform.26 This vehicle represents another creative way in which the private sector is responding to wasteful health care spending, while providing enhanced access to specialty care for patients at a lower cost.
Telemedicine is a multi billion-dollar industry that is helping solve many of the health care system’s access issues. In recognition of its potential, the North Carolina House Health Committee proposed a bill (formerly the Telehealth Fairness Act) that requires the North Carolina Department of Health and Human Services (NC DHHS) to study and recommend a telemedicine policy for the lawmakers to consider by October 2017.27, 28 One component of the bill looks at enacting a telemedicine parity law, in which insurance companies would be forced to reimburse providers for health services delivered via telemedicine that is otherwise covered during an in-office visit. To date, 32 states have passed telemedicine parity laws.29
Reimbursement for telemedicine services will surely incentivize more medical providers to adopt this method of health care, but this policy change could end up imposing limitations on how insurance carriers wish to design certain products or administer telemedicine services.
In sum, benefit mandates can serve as a disincentive for insurance carriers to truly compete for policyholders, particularly if all must incorporate the same treatments, services, and access to providers in their health plans.
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.
It’s important for legislators to take the time to determine which health benefit mandates are indeed cost-effective, which ones are used by most policyholders, and whether other benefit mandates that fall within preventative care are deemed excessive to an insurance policy. Over half of the states have enacted mandate benefit review laws to weigh the cost-benefit factors for any introduced mandate. Others conduct a retrospective analysis of all benefits that have been signed into law.30
More importantly, legislators should step away from enacting more benefit mandates and allow for optimal competition among insurance companies and providers to serve patients and respond to policyholder demands. It is unfortunate that many federal regulations prohibit insurance carriers from offering plans that can be tailored to policyholders’ preferences. Re-examining the scope of mandates is a step in the right direction.