Comprehensiveness vs. Affordability
To illustrate the complexity of balancing comprehensiveness and affordability, Ms. Malooley posed a question to the committee: When does one person’s need to have some new or traditionally non-covered procedure paid by insurance outweigh the majority’s need to keep premiums affordable? The desire to offer the most comprehensive benefits may not be worth the loss of affordable coverage.
The definition of the EHB, she said, is “critical” because:
It has been observed that there is a higher utilization rate for covered services (IOM, 2001). Furthermore, she continued, while utilization has positive effects on individual and population health if the covered services are beneficial and necessary for the individual’s circumstances, coverage can also have needless cost implications if unnecessary care is delivered. Thus, employers need freedom, Ms. Malooley said, to direct the content and utilization of benefits.
The Effect of State Mandates on Premiums
State-mandated benefits all “critically affect” the rise in premiums across the states, Ms. Malooley argued, such as those that cover marital and family counseling, contraceptives, and care by specific providers (e.g., acupuncturists, athletic trainers, massage therapists, and pastoral counselors) (CAHI, 2010). While an individual mandate may have a small impact on premiums, when these mandates accumulate, costs aggregate and “premiums really rise.” As states add additional benefit mandates, the “base” cost of a plan rises. Iowa, for instance, has 27 mandates, which she stated raises the base cost of a plan by 13 percent. Figure 3-1 illustrates how mandates can contribute to higher costs.2
This effect is significant, Ms. Malooley noted, because experience has shown that when premiums increase, more people drop or decline coverage (Chernew et al., 2005; Goldman et al., 2004). Thirty states now require fiscal analysis before the implementation of mandates (Bunce and Wieske, 2010), and at least 10 states offer a “mandate-light” program for people who feel they do not need certain mandated benefits (Bunce and Wieske, 2010).
Nothing precludes a state from requiring additional benefits beyond the EHB. “That is an issue,” she said, because the federal subsidy provided to individuals will not account for “how rich the benefit plan is and what the premiums are” for state-added benefits. Consequently, states will assume the additional cost of these state-specific mandates and make payments to individuals to defray the cost of these additional benefits in public programs.3
3 Patient Protection and Affordable Care Act of 2010 as amended. Public Law 111-148 § 1311(d)(3)(B)(ii), 111th Cong., 2d sess.