Federal Mandates in Health Insurance Alarm Providers

Employers and insurers, shaken by Congress’ decision to take a strong role in directing health insurance benefits, are worrying about a torrent of proposals for new mandates next year.

A guarantee of 48 hours in the hospital for women who have had mastectomies. A pledge that insurance companies will pay for your costly emergency room visits, whether or not the doctors decided you were sick enough to be admitted to the hospital. And protection for doctors who discuss treatment alternatives with their patients in defiance of HMO “gag” rules.

These are some of the proposals that drew attention in the final hours of the legislative session as members of Congress rushed to finish their work and go home to campaign.

The sponsors will be back again in 1997, probably joined by advocates for many other health causes. The door has been opened because Congress has broken its hands-off policy in dealing with the details of health insurance.

The new law just passed--requiring health plans to offer a 48-hour hospital stay for new mothers, and equal spending limits for treating mental illness as well as physical ailments--represents the first federal mandates in private health insurance.

“We think it’s alarming,” said Susan Nestor, policy director for the Blue Cross-Blue Shield Assn., the umbrella organization with 62 plans serving 66 million people. “The fundamental question is: Do you want a private health-care system to work or do you want to have it heavily regulated?”

From the employer’s viewpoint, “it is not the first ant at the picnic but his hundred thousandth cousin that spoils the day,” said Neil Trautwein, manager of health-care policy for the U.S. Chamber of Commerce.

“The biggest danger now is that you start attracting more and more mandates,” he said. “We can wind up with lobbyists wrapped around the Capitol.”

With the federal government setting a new standard by requiring parity in spending for treatment of mental illness, “virtually every other disease group is likely to seek similar protection,” according to an analysis by the National Assn. of Health Underwriters, which represents insurance agents and benefit specialists.

Ironically, the new approach of federal government intervention was adopted by a Republican Congress, whose leaders boasted it was the most conservative in a generation.

Two years earlier, a Democratic Congress had rebuffed President Clinton’s call for mandatory health insurance by all employers and a standard package of benefits. Clinton wanted to tell all companies they had to offer insurance.

This year, Congress said those who offer insurance must provide certain types of benefits. Isn’t this a government mandate, which Republicans usually oppose?, Sen. Pete Domenici (R-N.M.) was asked at a news conference. He glared at the questioner, and responded: “If this is a mandate, it is a good one.”

Many states have had mandates for years, with coverage required to include such things as the services of chiropractors, social workers and marriage counselors, payments for childhood immunizations and infertility treatments.

State mandates can add anywhere from 5% to 20% of the cost of basic coverage, according to Blue Cross-Blue Shield Assn. estimates.

“Mandates can raise the price and take insurance out of the reach of some businesses,” said Alan Katz, executive director of Cornerstone Financial & Insurance Services, a Woodland Hills firm serving the small-employer market.

However, bigger companies, usually those with 100 or more workers, had been able to escape the state mandates by using self-insurance. Under this approach, the company paid the claims for its workers and bought reinsurance to cover expenses above a very high level.

The new federal law closes the self-insurance escape hatch, and that makes employers very nervous.

The exemption they just lost gave them complete freedom to set the terms of their insurance programs. And in recent years, they used this freedom to adopt a system of managed care with strict restraints on payments to doctors and hospitals, and limitations on workers’ choice of physicians.

By imposing mandates from Washington, Congress was responding to a nascent backlash against managed care.

“Businesses and insurers got so intent on bringing the costs of health care down that they [swung] to the other end of the pendulum, so people who needed services did not get them,” said Russ Newman, director of professional practice for the American Psychological Assn.

“If everything worked the way it should, why would we need the government stepping in to be sure patients are getting care they need?” he said.

But employers argue that they must retain the full freedom to decide on the terms and conditions of health benefits without interference from Washington.

“We don’t want Congress to micro-manage health-care systems,” said Mark Ugoretz, president of ERISA Industry Committee, which represents 150 of the nation’s biggest corporations.

He says the health mandates are a new form of “political pork--Congress is giving away something that belongs to someone else and not facing the consequences.”

It is not one or two mandates, but the prospect of many, that worries employers and insurers. “How will these act cumulatively, and will they reverse the trend in the decline of health-care costs?” asked Carl Volpe, director of health policy for Blue Cross of California.