Insurance Mandates and Health Care Costs: Requiring Insurance Companies to Cover Certain Services Has Defendants and Opponents

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Substance abuse and chemical dependency treatment. Colorectal cancer screening. Newborn testing for sickle-cell anemia. Is there a common thread?

These are three of the hundreds of health insurance benefits required by law. And they are the result of some 30 years of legislatures increasingly requiring insurance plans to either cover or offer specified benefits.

Today, state or federal laws mandate insurance coverage for more than 1,500 health services.

It's a dilemma. On the one band, lawmakers continue to adopt insurance mandates. On the other, they're eyeing, with increasing scrutiny, any and all factors that may contribute to rising health care costs. And they're specially looking at what role insurance mandates play, particularly on premiums.

Two trends are emerging.

First, a growing number of states no longer pass health insurance mandates without a fiscal impact study evaluating how they will increase insurers' costs. Second, a number of new laws are now on the books allowing insurers to sell cheaper policies that cover basic services, such as hospitalization, but not some of the required services.

Health insurance mandates affect the coverage benefits of more than 60 million people. Proponents of benefit mandates embrace them as useful tools for more comprehensive health care and consumer access to services. They claim that mandates improve patient care and protect people who work for small businesses from health insurance policies that have limited coverage. Opponents argue that mandates are a major cause of excess health care costs.

But whether the effect is costly to consumers remains debatable. There's evidence aplenty to support both sides of the argument.


One of the most compelling arguments in favor of mandates is that preventive services can save money through early detection of diseases. Researchers tout the cost effectiveness of preventive services, such as tobacco cessation treatment and colorectal cancer screening.

And yet many states pass health insurance mandates without such evidence. Only 15 states, for example, require coverage for colorectal cancer screening even though research finds it is highly effective at addressing the second leading cause of cancer deaths.

It's constituents who push legislators to expand health insurance mandates, not research.

"Consumers who have a condition or a disease or who need a service--and the coverage has been rejected by their insurance company--come to the legislature to ask that the benefit be added to the law," says Lisa McGiffert, a health policy analyst with the Southwestern Regional Office of Consumers Union.

In 2001 lawmakers heeded the call and enacted a record 65 such mandates. They passed at least 25 in 2002 and at least 23 in 2003. On top of that, many states are amending existing laws, and a slew of others are considering the issue.


While many lawmakers continue to embrace new mandates, others want to put the brakes on what they believe is a major contributor to runaway health care costs.

"I can't think of any mandate that I can support," says South Carolina Representative Daniel L. Tripp. "It adds another layer of cost to already astronomical health costs."

Studies back up his claims. The federal General Accounting Office (GAO) reported in 1996 that mandates accounted for up to 22 percent of average claims costs in Maryland--which has the most mandates among states--and 12 percent of claims in Virginia. An April 2002 study by PriceWaterhouseCoopers prepared for the American Association of Health Plans found that $10 billion of the $67 billion overall increase in health premiums between 2001 and 2002 was due to mandates and other government regulation.

But those figures don't tell the whole story for Wyoming Senator Charles Scott. …