Small employers and benefits mandates – includes information on health insurance market reforms in Connecticut
Roger Thompson
Small employers and benefit mandates Throughout the 1980s state legislatures were adding benefit mandates onto the group policies sold by commercial insurers and the Blues. The total number of specific mandates reached 785 earlier this year, up from 406 in 1980.
Typical mandates cover chiropractors, well-baby care, dental checkups, and alcohol or drug abuse treatment. Some states even require coverage for more exotic procedures, such as in vitro fertilization, hair transplants, acupuncture, and herbal medicine. Today, each state has an average of 10 to 15 mandates; some have more than 30.
But the mandate trend may be over–at least as mandates apply to small employers. Lawmakers in five states–Virginia, Missouri, Washington, Florida and Illinois–this year stripped all or most benefit mandates from the group health policies purchased by small employers.
Lawmakers are feeling compelled to do an about-face on mandates as evidence mounts that well-intentioned efforts to broaden coverage are putting the cost of health insurance out of reach of many small employers. Studies, including those conducted by Blue Cross and by a team of researchers at the University of Illinois (Chicago) indicate that benefit mandates add up to 20 percent to the cost of health insurance.
Small employers, unlike larger companies, can’t afford to self-insure and thus dodge the mandates bullet. Confronted by the cost of health insurance plus mandates, small businesses are often priced out of the insurance market altogether.
“If lack of coverage for workers is a significant public policy problem, then you have to recognize that you are adding to that problem by continuing to add more mandates,” says Steve Woods, vice president for state government relations with the National Federation of Independent Business in Washington, D.C.
Here is a summary of what the states have done this year:
Virginia. The reduced-mandate law, effective July 1, exempts companies with fewer than 50 employees from most of the state’s 24 benefit requirements–which add an estimated 12 percent to 16 percent to the cost of health insurance. Eligibility is limited to those companies that have not offered health insurance in the previous year, a provision aimed at preventing companies from canceling their current insurance to sign up for the new lower-cost plans.
The reduced-mandate statute requires employers to provide a minimum of 30 days of hospitalization annually; comprehensive prenatal, obstetrical and well-baby care; and at least two physician visits a year.
Using those guidelines, Blue Cross and Blue Shield of Virginia has designed a new health insurance package for small employers that will cost about $85 per month for single coverage and $225 for family coverage, compared to $140 and $350 respectively for standard comprehensive coverage.
Missouri. Using the Virginia legislation as a model, the Missouri legislature exempted firms with 50 or fewer employees from all state mandates, effective Jan. 1, 1991. It also exempted insurers from a state requirement that they pay claims from all “duly licensed providers.” This means that insurance companies writing policies in the small-group market may refuse to cover the services of such ancillary health care providers as psychologists, optometrists, physical therapists, chiropractors, and social workers. Insurers have not yet calculated the impact on premium costs.
Washington. The legislature exempted employers with fewer than 25 workers from the state’s 18 health insurance mandates. Small employers are simply required to offer unspecified levels of hospitalization (no minimum number of covered days was established) and physician care, and coverage for children. Thus, insurance companies have maximum flexibility to tailor health plans to meet employers’ individual needs.
Blue Cross and Blue Shield in Washington has indicated its intention to offer a prototype basic health-care package for a monthly premium of about $60 per worker, compared to a typical cost of $90. The plan would include coverage of surgery, chemotherapy and other professional services; hospitalization; maternity care; inpatient and outpatient chemical dependency treatment up to a $10,000 lifetime maximum; and home health care.
Florida. Employers with 25 or fewer workers were freed from all but five of the state’s 18 health-care mandates. Small companies must continue to provide coverage for mammography screening, chiropractors, and routine newborn and infant care. The reduced-mandate law also forbids insurers from dropping handicapped children from coverage after age 21, provided the child remains a dependent. Insurers have not yet calculated the impact on premiums.
Illinois. Two bills affecting mandates were passed in late June. One allows businesses with 25 or fewer workers to purchase health policies with a minimum number of mandates, such as routine mammography screening, coverage for normal newborns and adopted children, and a provision barring discrimination against the blind and other handicapped persons.
The second bill bars the legislature from passing new health mandates for any business unless the mandates also apply to self-insured companies. Since federal law exempts self-insured firms from state insurance regulation, this measure in effect prevents any new state mandates.
Minnesota. Minnesota, with 38 mandates, enacted a law allowing insurers to write mandate-free policies for small businesses, but only after the policies had received approval from the legislature. It was not immediately clear how, or whether, the law could be implemented.
Roger Thompson is a senior editor with Nation’s Business.
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