Fiscal Fitness: How States Cope

State-mandated benefits legislation slows, focus is on autism, broader mental health categories

The Council for Affordable Health Insurance (CAHI) says introduction of state-mandated benefit legislation is slowing down, with 50 or 60 mandates being enacted each year rather than 100 or more. "That reduction implies that state legislators are finally getting the message," the council's "Trends and Ends" report says. "While one mandate by itself may not generate a large increase in premium, it is the culmination of many mandates that increases the cost of coverage. When the number of people without health insurance is increasing, it is important to recognize that mandates can make health insurance more expensive and that some employers or individuals may not be able to afford health insurance coverage."

A mandated benefit is a law that requires a health insurance policy or health plan to cover, or offer to cover, specific providers, procedures, benefits, or people. CAHI says while mandated benefits make health insurance more comprehensive, they also make it more expensive. Mandates require insurers to pay for care that consumers previously paid for out-of-pocket, if they purchased the care at all, and eventually the insurers must raise premiums to cover the costs of the additional claims being paid.

CAHI says its actuaries have estimated that, depending on the state, mandates can increase the cost of a health insurance policy between 20% and 45%. At a time when the number of people without health coverage is growing, it says, it is important to recognize that mandates drive up the cost of health insurance, and that some employers or individuals will not be able to afford it.

Some mandates have been passed in virtually every state, while others appear in only a few states. CAHI says that's because some mandate legislation "catches on" in states once one or two states have approved it. Such mandates, often pushed by interest groups and advocates, gain a momentum that can be hard to stop, no matter their impact on insurance cost.

Autism and treatment for its various complications is becoming one of the most discussed mandates, CAHI reports. In the past, autism has fallen under the broader category of mental health, but one of the latest state legislative trends is to pass an autism mandate separate from mental health benefit mandates. Such legislation can provide for autism evaluation and treatment, as well as for specific services such as school mainstreaming. There now are 11 states with an autism-specific mandate, although states often differ in what they include in evaluation and treatment.

Is autism a separate disease?

A major issue now is whether autism falls under the broader category of mental health. CAHI has identified 39 states with mandated mental health benefits and 47 states with mental health parity laws.

Autism support groups and their families are looking for financial relief or more alternative treatments and want to include coverage of Applied Behavioral Analysis and other therapies that proponents say contain some of the most effective forms of treatment and have the best outcomes and long-term economic benefit for families. They believe health insurers should assume the financial burden—often in the range of $50,000 per year per child—for autistic children that families and school districts have borne.

For their part, the insurers say that most medically related treatments already are covered for autism. They also say because autism is an individually based disorder, there often is no clear standard of care to determine the appropriate therapy. In many instances, they say, the most effective therapies are provided by parents or unlicensed medical providers such as play therapists. The insurers say autism generally falls into a disability category needing long-term care and not health insurance.

HPV screening mandated

Another benefit receiving significant attention in recent years is for a cervical cancer/human papillomavirus (HPV) screening mandate. At least 29 states have enacted this screening mandate. And now there is growing interest in an HPV vaccine mandate. In the 2007 legislative session, at least 41 states introduced legislation to mandate coverage for the vaccine and 24 states introduced legislation to mandate the HPV vaccine as part of the school entrance vaccine list. At least 16 states actually enacted the HPV vaccine this past legislative session.

"With legislators looking at enacting such mandates, we expect more specific disease-screening mandates to emerge," says CAHI director of research and policy Victoria Bunce. "Since these mandates currently cost less than 1% of premium, legislators may deem them 'affordable' and require insurers to cover them. However, our actuaries have cautioned us that creating a separate screening mandate could have a significant increase in premium because it will make it easier to add other new disease screening mandates as they become available."

Raising eligibility age is problem

CAHI also questions legislation introduced in some states to increase the dependent-eligibility age, perhaps up to age 30. The group says there is a valid underwriting reason for opposing extending health insurance policies to adults up to 30 years of age: the cost of coverage.

It explains that insurers price children at much lower rates than adults because as a group, those ages 2 to 18 are very healthy. But, it says, once people hit age 21 they are adults, and not children, and the likelihood of them incurring significant health care costs goes up dramatically. "By legislatively forcing them to be covered as children under their parents' policy, states are simply forcing health insurers to raise the price of children's coverage to compensate for the increased losses of adults being underwritten as children," Ms. Bunce says.

There are two bright spots seen by CAHI—at least 10 states provide for so-called mandate-lite policies that allow individuals to purchase a policy with fewer mandates and thus is more tailored to their needs and financial situation, and at least 30 states require that a mandate's cost be assessed before it is implemented.

"While one mandate by itself may not generate a large increase in premium," Ms. Bunce says, "it is the culmination of many mandates that increase the cost of coverage. When the number of people without health coverage is increasing, it is important to recognize that mandates can make health insurance more expensive and that some employers or individuals may not be able to afford health insurance coverage."

More information is available online at www.cahi.org. Contact Ms. Bunce at (703) 836-6200.