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Expensive Health Insurance Mandates Threaten to Worsen Cost Crisis

Posted on September 21, 2011

The escalating health insurance cost crisis in Massachusetts has not stopped Beacon Hill lawmakers from introducing more than a dozen bills that would impose expensive new health care mandates requiring insurers to cover everything from aqua therapy and Devic’s Disease to “linguistically appropriate” mental health service.

Health mandatesAIM opposes new mandated benefits for three distinct but related reasons.

First, mandated benefits are one reason the cost of health insurance in Massachusetts is so high. A few years ago, the Division of Health Care Finance and Policy released a report examining the cost of mandated benefits. The report estimated that current mandates account for $1.3 billion or 12 cents of every dollar paid for health insurance.  With the total spend on health care growing each year, the number has increased in absolute terms and has become less affordable for insurance purchasers in these challenging economic times. Adding new mandates will increase the cost of health care for employers and runs counter to the need to control costs.

People of good intent will always be able to make an emotionally compelling case for a new mandated health insurance benefit by arguing that it helps society. The problem is that the cumulative cost of all the “societal goods” piled upon health insurance will ultimately erode the economic foundations of that same society.

If we are serious about taking cost out of the system, we have to acknowledge there are limits to what insurance can pay for. We also need to re-educate consumers, constituents, employees about the premise of insurance – it is to ensure against catastrophic harm and not to pay first dollar coverage for all anticipated health expenses. 

Second, adding new mandated benefits runs counter to the goals of payment reform.  Payment reform is about delivering medical care in an efficient, coordinated manner as a way to take costs out of the system. It is about reducing care that is not clinically necessary, even if the patient thinks he or she needs such care. Payment reform also involves educating the public that where they get their care, what type of care they receive and how much care they consume impacts the cost of health insurance. More care is not necessarily better care.

A third reason for opposing mandated benefits is that they burden small businesses only. Large, self-insured employers are subject to the provisions of the federal ERISA law and not subject to state insurance laws.  It is thus the smaller companies who are least able to shoulder this additional cost that would be subject to the new mandate provisions.

AIM also testified this week in opposition to a now-familiar bill that would give state government the authority to regulate hospital staffing. The proposed bill is projected to add between $200 million and $500 million annually to the cost of health care delivery in the commonwealth. Adding hundreds of millions in costs in a short time frame – with no proven effect on patient care or the public’s health – is directly contradictory to our collective goal of creating lasting cost containment strategies.