The Regulation of the Individual Health Insurance Market. Covered Benefits

12/01/2008

While almost all health insurance policies cover the usual medical expenses associated with hospital, surgical and out-patient care received from licensed facilities and medical personnel, other requirements for coverage can be implemented through state regulations.  One way to spread the cost of a medical condition or treatment among a broad population, making it less expensive for the group of people who need such coverage, is through a benefit mandate.  It is also a way to encourage people to seek certain care that otherwise may not be received.

Mandates are laws that require health insurers to offer or include coverage for certain benefits or services.  These required benefits may include coverage for certain providers such as chiropractors and social workers, certain benefits such as well child care and acupuncture, and certain populations such as adopted and non-custodial children.  The number and type of mandates varies considerably across states.  States may apply these mandates to certain markets, differentiating between group and individual policies, and between types of plans such as health maintenance organizations (HMOs) versus other health insurance policy types.

It is sometimes difficult to determine whether a mandate in a particular state applies to only the group health insurance market or to individually purchased policies as well because some states allow health insurance coverage issued to “groups of one” (i.e., one person is considered a group) to be classified as a small group.

While mandates make health insurance more comprehensive, they also make it more expensive because mandates require insurers to pay for care consumers previously funded out of their own pockets.   However, in the absence of mandates, adding optional benefits to a policy may distort premiums if only those people who need the benefit select the coverage.

Policymakers make tradeoffs, balancing higher premiums with the need to help finance certain illnesses.  Many times mandates are implemented due to the strength of a particular advocacy group representing a particular constituency (advocates for coverage of diabetic self management and disposable testing materials) or because an instance of a denial of benefits caused some harm to a constituent patient (non-coverage of cancer medications).  However, because mandates increase the cost of health insurance, states have begun to consider costs before passing new legislation with some states requiring a cost impact study before mandates would be approved.

An analysis of the number of mandates that have been enacted over the past decades is shown below.  This chart indicates that there were over 1400 mandates in effect in the year 2000. A more recent report on mandates compiled by the Council for Affordable Health Insurance (CAHI) (Bunce and Wieske, 2008) indicates that as of early 2008 that number had risen to almost 2000.

Graphic shows a bar chart for number of mandates by year, from "pre-1965" with close to zero mandates, through 1976 when there were 200, through 1990 with almost 800, to the year 2000 with over 1400 mandates.

A grid developed by CAHI which shows the number and types of mandates by state for 2008 is shown in Appendix A.  As this grid demonstrates, some of the more frequently state-mandated services are breast reconstruction, diabetic supplies, and mental health parity (even before federal legislation was considered).  Frequently, mandated providers include chiropractors, optometrists, and psychologists, with coverage of adopted, handicapped, and newborn children among categories of frequently covered persons.

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