Mandate Cost Myth

North Carolina mandates that health plans offered in NC cover certain critical benefits. These include cancer screenings, a right to an impartial, independent review when a health plan denies treatment, newborn hearing screenings, and other provisions (PDF). While some politicians like to claim such basic guarantees are a huge part of premium costs, every study not connected with the insurance industry has concluded otherwise. Here’s a short review:

The Congressional Budget Office concluded that mandates – at most – add 5% to premium costs. Interestingly, in the same paper, the CBO explored the effect of removing mandates and other state regulation. They find that while some smaller firms with healthy employees could see a premium reduction, small firms where employees were older or less healthy and larger firms would actually see a premium increase since some relatively lower-cost young and healthy employees would now be paying less for coverage. Overall, the CBO saw a “slight effect on insurance coverage nationwide” of removing state regulation.

A US General Accounting Office review of mandated benefits research found that additional marginal costs – that is the difference between the benefits businesses would actually offer if there were no mandates and what businesses offer with mandates was similarly low.

In addition, the Texas Department of Insurance has estimated that mandated benefits add only 1% to 3% to medical expenses.

The California legislature recently estimated the impact of removing most state mandates would be a reduction in premiums and patient out of pocket costs of between one half of one percent and 2.4%. Like the CBO, the California report noted the potential for premiums to rise for less healthy workers through the movement of younger and healthier workers to lower cost less comprehensive plans.

A Massachusetts legislative analysis this year put the cost of state mandated benefits at between 1.2% and 6.4% of premiums.