Insurance Mandates May Hurt Businesses

State lawmakers want health plans to offer expanded coverage for more than six new medical conditions, stirring concerns that small- and median-sized businesses will take a financial hit that they can’t afford.

While supporters say most of the new coverage would add pennies a month to the cost, just one change — tinkering with wellness programs — could add up to 3 percent to premiums, insurance experts estimate.

A health insurance “mandate” is something for which an insurance company or health plan must offer coverage.

The mandates bill is similar to the one proposed last year, which passed the House and Senate with overwhelming support, but was vetoed by Gov. M. Jodi Rell, who cited concerns about its cost to “taxpayers, policyholders and employers in the future.”

This year’s proposal would require employers to offer coverage for ostomy-related supplies, prosthetic devices, hearing aids for children, wigs for patients who suffer hair loss due to certain medical conditions, and bone marrow testing.

It would also prohibit copayments or out-of pocket expenses for patients ordered to have a second colonoscopy in a year, and require insurers to offer a wellness program with financial incentives. Employers would have the option of offering the program to workers.

Additionally, in a separate bill, lawmakers are proposing to prohibit insurers from requiring patients to make copayments or other out-of-pocket expenses for preventive care.

Eric George, a lobbyist with the Connecticut Business & Industry Association, said the new mandates will cause employers to pay more for health coverage, precisely at a time when they can least afford it.

Many Connecticut businesses are facing double-digit rates increases this year. For example, Health Net of Connecticut received regulatory approval for an average rate increase of 19 percent for its policies sold to employers.

“These mandates are absolutely killing our small companies,” George said. “Each and every time lawmakers pass a feel good mandate they are making it harder for businesses to survive.”

According to a report by the Council for Affordable Health Insurance (CAHI), Connecticut had 54 mandates at the end of 2009, more than neighbors like Massachusetts and New York and ninth highest in the country.

While mandates make health insurance more comprehensive, they also make it more expensive, requiring insurers to pay for care consumers previously funded out of their own pockets. Those expenses often get passed onto employers through higher premiums.

CAHI estimates that mandated benefits as a whole increase the cost of basic health coverage between 20 percent and 50 percent.

Merrill Matthews, CAHI’s executive director, said new mandates raise costs because they cause utilization to go up. “Those costs are then passed on to consumers in the form of higher health insurance premiums,” Matthews said.

George said companies most affected by health mandates are small- to medium-size employers because they are typically fully insured, which makes them subject to state regulation.

Larger companies that are self-insured or are regulated under federal ERISA laws do not have to comply with state mandates.

“Regardless of what their intention is, they are making it less affordable and they are going to have more people uninsured,” George said. “Small employers are going to get to the point where they are going to have to drop coverage.”

Rep. Steve Fontana, co-chair of the insurance and real estate committee, where the bill has been raised, is a supporter of the measure and says concerns about its cost are overblown.

Fontana, a Democrat from North Haven, points to a study recently released by the Connecticut Insurance Department and University of Connecticut Center of Public Health and Health Policy, which concluded that the six mandates proposed last year — including coverage for ostomy-related supplies, prosthetic devices, and hearing aids for children — would have cost 72 cents a month for every policy holder.

“I think the report reassures people that the costs aren’t exorbitant and that the benefits of the mandates outweigh the costs,” said Fontana, who added that he will be looking to get Rell’s support for the bill this year.

Last year, Rell said the state couldn’t afford the bill, and that it would be “fiscally irresponsible to burden our recovery with these significant future costs.”

Rich Harris, a spokesman for Rell, said if this year’s bill is similar to last years, than, “it’s likely to run into some concerns.”

The study, which was done in response to a bill lawmakers passed last year that requires a cost analysis of any new health benefit mandate, also said that the wellness programs could cost as much as 3 percent of health plan’s premium.

The report added that the expected payback in reduced medical costs would not occur in year one, but would grow over several years.

Keith Stover, a lobbyist for the Connecticut Association of Health Plans, said while the cost of those mandates may not be staggering, when taken as a whole they are burdensome.

“You can’t look at the mandates in a vacuum,” Stover said. “The fact is that additional mandates have a cost impact that is cumulative in nature. They do have an impact on increasing premiums.”

One of the most controversial mandates that did pass last year was one that broadens coverage for autism disorders by requiring a policy to cover the diagnosis and treatment of the disease, including behavioral therapy as well as certain prescription drugs and psychiatric and psychological services.

Rell supported that measure and signed it into law, but the Insurance Department’s study did not do a cost assessment on it.

George said he estimates the mandate could cost employers as much as $5 per member per month. “These are real dollars that cause real problems for businesses,” George said.