A coverage mandate is a legal requirement that dictates that all health insurance policies sold in North Carolina cover certain services, providers, and groups of people. Mandates are the result of laws passed by the General Assembly as a means of regulating the insurance market. Insurance buyers pay for coverage mandates through higher insurance premiums. While some mandates do not affect the price of insurance by very much, others are more costly. North Carolina has 46 mandates, which together have increased the price of health insurance an estimated 41 percent.
The General Assembly is considering another mandate that could increase premiums by 5 to 10 percent: mental health and chemical dependence parity. Such a mandate would treat mental health benefits on an equal basis with other health benefits for the purposes of establishing copays, deductibles and other such costs. The Legislature is currently considering two bills that would implement mental health parity: SB 1434, sponsored by Senator Bob Atwater (D-Chatham); and HB 973, sponsored by Representatives Martha Alexander (D-Mecklenburg), Hugh Holliman (D-Davidson), Verla Insko (D-Orange), and William Wainwright (D-Craven).
How Much Do Mandates Cost?
The cost of coverage mandates varies. Some mandates add less than 1 percent to the cost of an insurance premium. Others, such as mental health parity and prescription drug coverage, add up to 10 percent. Moreover, the cumulative effect of adding one mandate after another can result in a significant increase in cost.
- Although North Carolina has few expensive mandates, it imposes a total of 46 mandates, for an estimated cost of $41 per $100 premium for a health plan, or 29 percent of the total premium (including mandates).1 Thus, while a policy that only provided catastrophic insurance would cost $300, the same policy with 46 mandates costs $423. If legislation for mental health parity passes this year, premiums would rise to approximately $446.
- Four of the most expensive mandates cover services provided by chiropractors, dentists, psychologists and social workers. Together, these mandates add an estimated 10 percent to the premium cost of health insurance. Mental health parity is the most expensive coverage mandate being considered in North Carolina. This mandate alone would add an estimated 5 to 10 percent to the cost of health insurance premiums.
- To get an idea of how much mental health parity will increase the cost of insurance for ordinary consumers, we can look at how much adding such a mandate has increased costs in the State Health Indemnity Plan, the insurance program that covers most state employees and retirees. The total cost to the plan last year for these services was $35.6 million, or an average of $60 per covered person. Actuaries consulting with the Fiscal Research Division of the General Assembly estimate it will cost the state between $4 million and $5 million to add mental health and substance abuse parity to its newly instituted, optional PPO plan.
Why Have Mandates?
While some mandates have been imposed in response to complaints that certain consumers could not obtain insurance coverage for needed medical services, many mandated services would be covered even in the absence of state mandates. For example, insurance companies are unlikely to offer policies that do not include preventative care (routine mammograms, for instance) and lower-cost service providers, such as a nurse practitioner instead of a doctor. Moreover, other mandates apply to services that consumers can voluntarily purchase by tailoring their insurance coverage to meet their specific needs.
How Does North Carolina Compare?
- Rare Mandates. Six of the rarest mandates, covered by 15 or fewer states, add about 3 percent to the cost of a premium: birthing centers/midwives (6 states); bone mass measurement (15); cleft palate (14); marriage therapists (13); pastoral counselors (2); and pharmacists (5).
- Analysis of Impact. According to the Council for Affordable Health Insurance, at least 30 states require an analysis of the impact of existing or proposed mandates on health insurance premiums. Virginia and Maryland, for example, analyze the cost of all mandates (current and proposed). While North Carolina requires fiscal analyses of bills that would financially impact the state or local governments, health insurance mandates for private insurers do not fall under these categories. (Thus, while any legislator can request a fiscal note on any bill, there is no automatic obligation to review the cost of mandates). Insofar as HB 973 would apply to the state’s PPO plan, a fiscal analysis has been done of the impact on the PPO plan. Yet no legislative analysis has been published detailing what effect mental health parity will have on private plans.
- Estimates are based on reports from the Council for Affordable Health Insurance (CAHI). The costs of mandates also depend on other factors, such as the size of the state’s population (risk pool), the degree of competition between health plans, and the details of the mandate. In Virginia, for example, mammograms add an estimated $4.90 per $100 premium cost. CAHI estimates that the U.S. average is much lower: $.50 per $100 premium cost.