Mandate-lite Plans: The Texas Experience

Health Action 2009January 30, 2009

Stacey Pogue, Policy Analystpogue@cppp.org

What the Industry Says

• Texas has 54 mandates

• Ranked 4th in U.S. for most mandates

• Mandates increase costs 20-50%– Council for Affordable Health Insurance

Is Counting Mandates Important?• No simple answer on number

– Mandated offers (NOT the same as benefits)– Covered people. Ex: adopted children, college students– Covered providers. Ex: chiropractors, psychologists– If/Thens– Many don’t apply to all plans. Small business coverage

often excepted. Some apply only to HMOs.

• Get a list from state department of insurance• Texas small group plans:

– 14 mandated benefits– 5 mandated offers

• Texas individual plans:– 20 mandated benefits– 1 mandated offer

TDI Consumer Guide

BenefitFee for Service Plans

Regular Mandate-lite

HIV, AIDS, or related infection Yes No

Chemical dependency treatment

Yes No

Serious mental illness Offer No

Mammography Yes Yes

Emergency care (only stabilization)

Yes, if PPO Yes, if PPO

In vitro fertilization Offer No

Complications of pregnancy Yes Yes

Example minimum required benefits in small-employer health plans

“Consumer Choice” Plans

• Consumer Choice Plans = mandate-lite• All insurers may offer. Small group carriers

must offer• Insurers must still offer a regular plan• Notice and signed disclosure (from employer)• Purpose:

– Create more affordable coverage– Help more small businesses get coverage

What’s Left Out of Consumer Choice Plans?

Taken Out Left In

HIV/AIDS Mammography

Chemical dependency treatment Emergency care (only stabilization)

Crisis stabilization unit and residential treatment center for

children

Alzheimer’s (certain requirements if Alzheimer’s is covered)

Inpatient mental health PKU treatment (if Rx covered)

Contraceptives (if Rx covered) Maternity minimum stay (if maternity is covered)

Bone mass measurement for osteoporosis

Reconstructive surgery for mastectomy

Acquired brain injury Complications of pregnancy

Example: Texas Small Employer Plans

Texas Data on Mandated Benefits and Mandate-lite Plans

• Cost of mandated benefits (1998, 2000 studies; 1992-2006 annual reports)

• Utilization of mandated benefits• Number of CCPs issued and renewed• Number of CCPs issued to previously

uninsured• Plan savings from removing benefits• Insurers average premium for the most

popular CCP and regular plan

Costs and Benefits of Mandated Benefits

• Failure to offer the benefits would diminish a person’s health status in many cases.

• Removal has other social and economic impacts, ex: lost productivity, higher disability costs for employers.

• Lack of coverage for benefits would cause a financial burden on those who need treatment.

• If paid for out-of-pocket, related care would be lower quality and less cost-effective than if covered by group insurance.

• Eliminating mandates would have little impact on the number of uninsured.

• Insurers likely would offer the benefits even if they were not mandated (generally in self-funded plans).

– Cost Impact Study of Mandated Benefits in Texas—Report #2, 2000www.tdi.state.tx.us/reports/documents/benefits2_00.pdf

Mandated Benefits Don’t Cost MuchGroup

CoverageIndividual Coverage

Mandated benefit cost as a percentage of total claims paid 4.4% 3.6%

Mandated benefit cost as a percentage of total premiums earned 3.8% 3.3%

Average monthly premium for mandated benefits - single coverage $8.98 $5.12

Average monthly premium for mandated benefits - family coverage $22.59 $11.83

Data based on 20 (group) and 13 (individual) mandated benefits, October 2005-September 2006

www.tdi.state.tx.us/reports/life/documents/lhlmanbenrept06.pdf

Mandated Benefits Don’t Cost Much (con’t.)

Most and Least ExpensiveGroup Mandated Benefits

Monthly Premium Cost

Single Coverage

Family Coverage

Serious Mental Illness $1.20 $3.02

Childhood Immunizations $0.99 $2.71

Craniofacial Surgery for Children $0.04 $0.09

Nutritional Supplement for PKU $0.02 $0.05

Texas Department of Insurance, October 2005-September 2006

Removing Mandates Doesn’t Result In Big Savings

Consumer Choice Plan (CCP) experience:• Generally less than a 3% savings from

removing mandated benefits– BCBS of Texas – 1.25% savings– Aetna – .5% savings– United Healthcare – 2-2.5%

• Many mandated benefits still included• Savings primarily from increases in

deductibles, copays, and coinsurance (≈ 2% - 35%)

Few Consumers Buy Mandate-lite Plans   2004 2005 2006 2007

Number of Consumer Choice Plan Policies Issued

Individual Policies 4,289 31,676 33,240 43,344

Small Employer Group Policies 670 2,528 5,438 10,595

Large Employer Group Policies 13 57 150 360

Total 4,972 34,261 38,828 54,299

Number of Lives Insured in Consumer Choice PlansIndividual Policies 7,383 60,386 52,722 65,284

Small Employer Group Policies 4,689 14,973 55,772 141,781

Large Employer Group Policies 5,373 12,316 21,604 46,301

Total 17,445 87,675 130,098 253,366

• ≈14 million Texans have employer-sponsored or individual health insurance

• ≈6 million uninsured Texans

• Mandate-lite plans accounted for 6% of small employer lives covered in 2006; up to 12% in 2007.

Mandate-lite Plans Do Little to Reduce the Uninsured  2004 2005 2006 2007

Number of Policies Issued to Previously Uninsured Groups and/or Individuals

Individual Policies 449 3,233 1,336 414

Small Employer Group Policies 176 325 701 915

Large Employer Group Policies 0 0 21 0

Total 625 3,558 2,058 1,329

Number of Lives Insured That Were Previously Uninsured

Individual Policies 2,404 5,886 2,056 540

Small Employer Group Policies 1,879 1,439 8,354 6,955

Large Employer Group Policies 0 0 4,019 0

Total 4,283 7,325 14,429 7,495

• ≈200,000 small businesses do not offer coverage• ≈6 million uninsured in Texas• Only 7% of newly issued mandate-lite plans sold to previously uninsured in 2007- Most sold to insured

Mandate-lite Plans Have the Potential to Segment the Market

• 61,000 people in newly issued mandate-lite plans in the small group market in 2007

• 89% of them had previous coverage – substituting full coverage for limited benefits

• ≈ 5% of total small group market substituted coverage in 2007

• Insurers predict/see healthier people in mandate-lite plans– Unicare: 4-6% saving from healthier population– Imerica: 5-6% savings from healthier population– Republic American: 2.5% savings from healthier population

The Texas Experience• Mandated benefits account for a small percentage of

premiums (4%).• Removing mandates produces little savings (< 3%)• Savings comes from increased cost-sharing.• Many insurers are still including mandated benefits

(consumers want this coverage).• Few consumers/small employers are buying

mandate-lite plans.• Mandate-lite plans have not brought many uninsured

small businesses into the market.• Most consumers/employers with mandate-lite plans

have replaced existing coverage.• Mandate-lite plans could segment the market (cause

adverse selection).

Advocacy Strategy• Is something better than nothing – will the program

really cover people who are currently uninsured?• Texas strategy: get some mandates back in.

Mandate-lite vs mandate-free.• Ways to improve a bill:

– Exempt certain mandates. Ex: child-specific mandates – Notice/signed disclosure (at a minimum)– Do not require insurers to offer– Collect data on where savings come from– Collect data on impact to uninsured– Require study on effect to the rest of the market– Require study on costs and benefits of mandates

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