State's health-mandate miasma

Feb. 2, 2010

By JOHN SEILER

The victory of Scott Brown in Massachusetts prevents Democrats from enacting a universal health-care reform bill. Something likely will be enacted. But the lack of universality means the states will continue to play a crucial role in their citizens’ health choices, especially health insurance.

One area California lawmakers should look into is health-insurance mandates, of which there are 56 in this state. These are laws the Legislature previously passed that require insurance companies to provide coverage for specific illnesses, conditions, or situations, such as AIDS/HIV Testing/Vaccine, Blood Lead Poisoning Screening, and Diabetes Self Management.[i] No mandates coverage, no insurance.

Of the 50 states and the District of Columbia, the average is 42 mandates. California has the seventh-most mandates, after Maryland (66), Minnesota (68), New Mexico (57), Rhode Island (70), Texas (57) and Washington State (57).

Some states have few mandates: Idaho has 13 and Alabama 21.  Ten states have what are called “mandates lite” polices, which allow insurance coverage with fewer mandates and can save from 5 percent to 10 percent on a health insurance policy. And six states in recent years have enacted laws that allow policies with no state mandates: Arkansas, Colorado, Florida, Montana, North Dakota and Utah.

Most mandates have a negligible effect on the costs of health insurance, according to a 2009 study by the Council for Affordable Health Insurance, a research and advocacy association of insurance carriers active in the individual, small group, health savings accounts and senior markets. But costs for some mandated coverage can add up. These California mandates add the most, according to the study:

Alcoholism/Substance Abuse can add 1% to 3% to the cost of a policy
Contraceptive, 1 percent to 3 percent
In Vitro Fertilization, 3 percent to 5 percent
Maternity, 1 percent to 3 percent
Mental Health General, 1 percent to 3 percent
Mental Health Parity, 5 percent to 10 percent
Well Child Care, 1 percent to 3 percent
Acupuncturist, 1 percent to 3 percent
Chiropractor, 1 percent to 3 percent
Dentist, 3 percent to 5 percent
Occupational Therapist, 1 percent to 3 percent
Optometrist, 1 percent to 3 percent
Psychologist, 1 percent to 3 percent
ocial Worker, 1 percent to 3 percent
Conversion to Non Group, 1 percent to 3 percent
Disabled Dependent, 1 percent to 3 percent
Newborn, 1 percent to 3 percent

Add them all up, and the increased costs potentially could be from 25 percent to 62 percent. That means fewer people could afford insurance than under systems with fewer mandates, meaning fewer people overall would be insured.

The key word is “potentially.” The cost also depends on many other factors, J.P. Wieske, co-author of the study and director of state affairs at the Council for Affordable Health Insurance, told me. “For example, the study shows that, nationally, in-vitro fertilization could increase the cost of a policy up to 5 percent. But in Arkansas, there’s just one center that does that, and it’s hard to get to from rural areas. Utilization is extremely low. The flip side is that the full cost could be reached in urban areas with in-vitro fertilization clinics.”

Moreover, he said that some mandates, such as that requiring a second surgical opinion (a mandate in California), in many cases could save money by leading the patient to forego surgery.

I asked whether it would be worthwhile for the Legislature to request a study of the exact costs of all the existing mandates in California. “An actuarial study is a good idea,” he said. “Costs depend on the state and the type of policy.”

The California example

Although the Council on Affordable Health Insurance is an advocacy group, similar estimates were provided in 2006 in a study commissioned by the California Legislature: “The California Cost and Coverage Model: Analyses of the Financial Impacts of Benefit Mandates for the California Legislature” The study limited itself to the mandated benefits being considered in the Legislature during 2004. It found that, in every case except maternity services, the proposed mandate would have a small impact on the insurance premiums.

However:

In the case of maternity services, we estimated a 13 percent premium increase on average among the 44,000 individuals (male and female) ages 25–39 who currently purchase individual policies, because premiums are typically age related, but do not differ by gender. Based on Lewin’s estimated elasticity of demand for insurance, we predicted that a 13 percent increase in premiums among this age 25-39 group would produce a 3.4 percent increase in the uninsured – about 1,900 additional uninsured Californians, of whom about 12 percent would be eligible for Medi-Cal.

The maternity services bill in 2004 was SB1555. It mandated:

Requires every individual or group policy of health insurance that covers hospital, medical, or surgical expenses that is issued, amended, renewed, or delivered on or after January 1, 2005, to cover maternity services.

Specifies that maternity services include prenatal care, ambulatory care maternity services, involuntary complications of pregnancy, neonatal care, and inpatient hospital maternity care.

SB1555 passed in the Legislature, but was vetoed by Gov. Schwarzenegger. In his veto message, he wrote:

In this period of significant premium inflation for consumers, mandating Californians to purchase new benefits is counterproductive to efforts to make health insurance more affordable and available to low-to-moderate income people or those who do not receive employer-sponsored coverage.  I am sincerely concerned that enactment of this legislation would force Californians that purchase their own coverage, for themselves and their children, out of the health insurance market altogether.  In fact, the California Health Benefits Review Program determined that nearly 2000 Californians would lose their health insurance coverage as a result of this legislation.

Another perspective comes from Marian Mulkey, senior program officer at the California Healthcare Foundation in Oakland. It calls itself “an independent philanthropy committed to improving the way health care is delivered and financed in California.”

She told me:

There are tradeoffs.  Eliminating mandates would reduce the premium, though there’s debate about how much.  Many of the benefits mandated are not individually very costly, often because a very small share of people would take advantage of them. But if you drop all benefit mandates and/or don’t set some minimum floor on the level of benefits that must be offered, there’s pressure to fragment the risk pool which can drive up prices through adverse selection.  That, too, can result in fewer and fewer people able to afford coverage.

Out-of-state plans

One alternative to the situation is to allow people to purchase medical insurance plans from other states, specifically states with fewer mandates. Then a Californian could purchase a plan from, say, Colorado to save money. Rep. John Shadegg, R-Arizona, has introduced a bill to allow such such interstate plans.

Mukley brought up the opposing view:

Again, there would be winners and losers – you’d expect healthier, low-use people to choose less-comprehensive coverage from other states, which might be more affordable for them.  But those who continued to purchase more comprehensive coverage through California-regulated plans would tend to be a little sicker, a little more likely to use services, so that they’d tend to pay more in premiums than if purchase across state lines weren’t allowed.

She added that increasing such choices “assumes that people understand existing mandates and exactly what benefits they’re currently buying, and are sufficiently engaged as consumers that they’d quickly move among products according to their economic advantage.”

Federal developments

Even though a universal health-care bill is not going to happen now, other actions are being taken at the federal level. Mulkey said,

The current House-and Senate-passed health reform bills envision “essential benefits packages” which all “qualified” health benefits plans would have to offer.   The legislative language is framed broadly, indicating that qualified plans would have to meet overall actuarial value requirements but would not necessarily have to cover the specific services typically mandated under state law.   There is a lot of discretion left to federal regulatory agencies to determine exactly what would go into the benefits package, which would have to be worked through in implementation stages.

Finally, last week the California Senate passed a single-payer health-care bill that would put the government in charge of paying for health insurance for every Californian. If it passes the Assembly, Gov. Schwarzenegger almost certainly would veto it.

Reported the Contra Costa Times, “It’s to lay the foundation for what could be an epic ballot battle two or four years from now, said Sen. Mark Leno, D-San Francisco, the author of Senate Bill 810, which was approved this week by the Senate.” By then, the state will have a new governor, possibly a Democrat favorable to signing such a bill bill.

Critics say it would cost $200 billion a year. Leno replies that such already is the cost of the existing system.

However, if such a system did pass, the Legislature might be less inhibited in passing more mandates because, with coverage paid by the state for every person, higher costs would not mean the lost of coverage – only higher premiums or tax payments.

John Seiler, an editorial writer for 19 years at The Orange County Register, currently is a reporter and analyst for Calwatchdog.com. His email: [email protected].

---

[i] All 56 California health-insurance mandates:

State-mandated benefits: AIDS/HIV Testing/Vaccine, Alcoholism/Substance Abuse, Asthma Education, Blood Lead Poisoning Screening, Bone Mass Measurement, Breast Reconstruction, Cervical Cancer/HPV Screening, Clinical Trial Cleft Palate, Colorectal Cancer Screening, Contraceptive, Dental Anesthesia, Diabetes Self Management, Diabetic Supplies, Drug Abuse Treatment, Emergency Service, Home Health Care, In Vitro Fertilization, Mammography, Mastectomy, Mastectomy Minimum Stay, Maternity, Maternity Minimum Stay, Mental Health General, Mental Health Parity, Off Label Drug Use, Orthotic and/or Prosthetics, Other Infertility Service, Pediatric Asthma Education/Self Management, PKU/Metabolic Disorder, Prostate Cancer Screening, Reconstructive Surgery, Second Surgical Opinion, Special Footwear, Telemedicine, Well Child Care.

State-mandated providers and covered persons: Acupuncturist, Chiropractor, Dentist, Nurse Midwife, Nurse Anesthetist, Nurse Practitioner, Psychiatric Nurse, Occupational Therapist, Optometrist, Podiatrist, Professional Counselor, Psychologist, Public or Other Facility, Social Worker, Speech/Hearing Therapist.

Covered persons: Adopted Children, Continuation Dependent, Continuation Employee, Conversion to Non Group, Disabled Dependent, Newborn, Domestic Partner/Civil Union.