Cost of insurance mandates

A few months ago, the MA Division of Health Care Finance and Policy (DHCFP) released a study that showed that mandated health insurance benefits cost insurance purchasers about $1.3 billion – or 12% of their premiums – each year. Thanks to DHCFP for publishing the study. This issue is always the source of heated debate, and it’s nice to have a piece included on it that tries to inform the discussion.

Business people read the study and said, “Ah ha! Mandates cost a lot of money!” That would be correct. Health care advocates read the study and said, “Ah ha! Mandates don’t cost that much money!” That’s correct too – sort of.  As usual, where you stand depends on where you sit, how much twelve percent is worth to you for what you’re getting, and who pays the bill.

It’s also hard to tell if this kind of reporting influences the policy debate in MA or not. People here are screaming about the rising cost of health care, and the legislature responded by focusing on and enacting a cost containment bill.  But at the same time, the legislature considered many new mandates during its last legislative session, including significantly expanding the mental health benefit mandate for kids and adults.  Many in the legislature would argue – correctly – that the final bills that passed didn’t expand the benefit as broadly as many advocates would have liked, thereby significantly limiting the increase in costs associated with the new coverage requirements. Again, I think this is mostly a philosophical argument about how much is enough – and one that on the margin is hard to calculate.

But starting in January of 2009, the price for mandated coverage goes from 12% of premiums for some people to more like 30% – when the state’s mandatory drug coverage requirement kicks in. That’s right. Starting in January, Massachusetts becomes the only state in the United States that requires every privately insured person to have comprehensive drug coverage, or pay a steep penalty as part of the state’s health reform law. The cost of this requirement will add between 15-20% to the cost of an existing non-drug coverage plan.

This mandate will affect hundreds of thousands of MA residents who currently have the health insurance coverage they want. One fellow being interviewed on Channel 5 News the other night said demanding that he buy drug coverage was like telling someone who lived on the top of a mountain that he had to have flood insurance.  It’s ironic that the promise of more affordable options for individuals, which was offered as a trade off for requiring that they buy coverage in the first place, is being replaced by more mandated coverage and fewer plan options as the Commonwealth implements health care reform.

The Commonwealth Connector – which oversees the implementation of health care reform in Massachusetts – had a hearing the other day to discuss their proposed requirement. Many, many businesses and other individuals showed up to testify against this new mandate, making many of the same arguments I’m making here. It doesn’t appear that the Connector will reverse its decision and this is too bad. Mandating drug coverage is the latest in a string of public policy decisions that is making health care insurance more expensive than it was BEFORE the reform plan passed – exactly the opposite of what was promised when the bill was enacted.

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