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January 13 2011

What's "Essential"?

Nicole Kurokawa Neily

Today is the second day of the Institute of Medicine’s meeting to discuss what will be considered "essential health benefits" that must be covered under the new health care law. Up to this point, states have decided what must be covered by health insurance plans – with wide variation.

For the past few years, the Council for Affordable Health Insurance has released a report examining mandates in the states – and their effect on the price of health insurance. According to the most recent study, Health Insurance Mandates in the State 2010:

While mandates make health insurance more comprehensive, they also make it more expensive because mandates require insurers to pay for care consumers previously funded out of their own pockets. The Council for Affordable Health Insurance (CAHI) estimates that mandated benefits currently increase the cost of basic health coverage from a little less than 20 percent, but may be much higher, depending on the number of mandates, the benefit design and the cost of the initial premium. Mandating benefits is like saying to someone in the market for a new car, if you can’t afford a Cadillac loaded with options, you have to walk. Having that Cadillac would be nice, as would having a health insurance policy that covers everything one might want. But drivers with less money can find many other affordable car options; whereas when the price of health insurance soars, few other options exist.

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Because mandates can drive up the cost of health insurance, it would be easy to assume that the states with the most mandates would also have the highest premiums. While that may be true in some states, it is not necessarily so. Some mandates have a much greater impact on the cost of health insurance than others. For example, mental health parity mandates, which require insurers to cover mental health care at the same levels as physical health care, have a much greater impact on the cost of premiums than would mandates for inexpensive procedures which few people need. In addition, mental health mandates increasingly include “mini-mandates” within them, like coverage for autism diagnosis and treatment. 

Hopefully, the IOM takes these factors into consideration, and will issue a set of pared-back recommendations to keep costs relatively low – or as low as possible, given all the other mucking in the market.

I’m not optimistic – after all, there are a lot of special interest groups in town, and a lot of money on the line. But hey, a girl can dream…

Independent Women’s Forum’s mission is to improve the lives of Americans by increasing the number of women who value free markets and personal liberty. Sister organization of Independent Women’s Voice.
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