More states are allowing bare-bones health coverage

In a growing number of states, efforts to mandate coverage of certain health care services have not only slowed but also moved into reverse.

Since 2001, eight states have passed legislation allowing insurers to offer policies to individuals and small employers that exclude some or all state-mandated health benefits. Insurers are still required to offer policies that include all state-mandated benefits but now are allowed to offer the bare-bones policies as a less expensive coverage option.

The trend is a sign that lawmakers increasingly recognize that benefit mandates add cost to health care coverage, according to the Council on Affordable Health Insurance, a nonprofit research and advocacy association that supports market-oriented approaches to health care.

Kentucky and Georgia are the most recent states to allow stripped-down health coverage, also known as "mandate-light" policies.

In 2005, the Kentucky Legislature approved a bill that allows insurers to offer such an option to individuals, small employers with up to 10 workers and employer-organized associations. Signed into law by Gov. Ernie Fletcher, MD, the measure permits bare-bones policies that drop all state-mandated health benefits except coverage of diabetes treatment, hospice services and chiropractic care. Insurance policies are still required to cover federally mandated benefits, such as hospitalization after childbirth and breast reconstruction surgery for mastectomy patients.

The Kentucky Medical Assn. supported the legislation, which it hopes will make coverage more affordable for small employers, said Marty White, KMA's director of public and governmental relations.

The disadvantages of benefit mandates are not only that they increase health insurance costs but also that they fail to keep up with changes in medicine, White said. "For example, Kentucky still has a mandate on the books that requires insurers to offer coverage for a bone-marrow transplant for breast cancer," he said. "That treatment, scientifically, has been proven ineffective for years."

Benefit mandates take the wrong approach to improving patient care, said Larry Fields, MD, a family physician in Ashland, Ky., and president of the American Academy of Family Physicians.

The emphasis should not be to mandate certain types of treatment but to ensure that patients have access to a primary care physician who can serve as their medical home and help make appropriate treatment decisions, Dr. Fields said. "Once legislatures get involved in determining what is and is not good health care, you've got a problem," he said.

In Kentucky's case, the Legislature passed a slew of benefit mandates in the early 1990s, which caused all but two insurers to leave the state and led to an increase in the number of uninsured. Rolling back benefit mandates should make coverage more affordable and accessible for some workers, Dr. Fields said. But more importantly, "we really have to tackle the problem of getting patients quality care in a medical home."

In Georgia, the Legislature passed a bill similar to Kentucky's. It allows insurers to offer limited-mandate plans to individuals and small employers with up to 50 workers. The Medical Assn. of Georgia supported the measure, which Gov. Sonny Perdue signed into law in May 2005.

Originally, the legislation would have allowed completely "mandate-free" policies that exclude all state-mandated benefits. But MAG was not comfortable with that bill and urged lawmakers to retain some mandates, according to Executive Director David Cook.

Ultimately, lawmakers chose to exclude only about half of state-mandated benefits from the stripped-down policies. Benefits that were dropped include chiropractic care and other nonphysician services. Other mandates, such as coverage for certain cancer screenings, were retained.

Other states that passed "mandate-light" or "mandate-free" bills before 2005 include Arkansas, Colorado, Florida, Montana, North Dakota and Utah. Many more states have considered this type of legislation.

In Indiana, lawmakers proposed two such bills in 2005 that had the support of Gov. Mitch Daniels. But they failed to pass the Legislature.

The Indiana State Medical Assn. took a different tack than the medical societies in Kentucky and Georgia.

"We were not in favor of them," said Elizabeth Eichhorn, ISMA's director of government relations.

"The benefit mandates have been put in place over a number of years," she said. "These bills would erase all of that work in one fell swoop."

Eichhorn noted that Indiana established a health insurance mandate review task force in 2003 to systematically review mandated benefits and benefit proposals. In 2005, the Legislature passed a bill that added an actuary to the task force and provided per diem payment and cost reimbursement to its 10 members. "They've gotten a lot more done this year" as a result, she said.

Indiana's push for "mandate-light" legislation has lost momentum. "The state chamber of commerce was really pushing them," Eichhorn said. "But any study we've seen shows these policies aren't very popular, and employers just don't want to buy them. Even insurers were skeptical."

Some states continue adding mandates

State efforts to add benefit mandates have slowed, but they haven't stopped completely. Several states passed new requirements for health insurers in 2005, according to CAHI, which tracks coverage mandate legislation.

Four states -- Maryland, New Mexico, Rhode Island and Texas -- added a requirement for coverage of cervical cancer screening, which raised the total number of states to 28.

Arkansas and West Virginia added a mandate that insurers cover, or at least offer to cover, contraceptives when they provide coverage for other prescription drugs. The total number now stands at 23.

A few states also adopted some unusual mandates last year. They include Maine, which now requires that insurers offer coverage for medically necessary breast reduction and/or systematic varicose vein surgery.

The legislation was prompted by Cigna's announcement that it would exclude coverage of the procedures, according to Andrew MacLean, executive vice president of the Maine Medical Assn.

MMA was the bill's main proponent and testified before the Legislature in its support. The mandate's impact on the cost of health insurance should be modest, MacLean said.

More important is that "people expect to get decent coverage for the amount of money they pay for health care coverage and not to have insurers cut this or that out of it," he said. "When you buy an automobile, you expect it to come with four tires."