Conservatives’ Goal To Relax Mandatory Health Benefits Unlikely To Tame Premiums

This article first appeared April21, 2017 on Kaiser Health News.

By Julie Rovner April 21, 2017

Without essential health benefits, “you would either have very crappy benefits without drugs or physicians or hospitalization, or you would have roughly the same costs,” says an actuary who worked in the Obama administration and served on the board of Massachusetts’ health exchange.

As House Republicans try to find common cause on a bill to repeal and replace the Affordable Care Act, they may be ready to let states make the ultimate decision about whether to keep a key consumer provision in the federal health law that conservatives say is raising insurance costs.

Those conservatives, known as the House Freedom Caucus, and members of a more moderate group of House Republicans, the Tuesday Group, are hammering out changesto the GOP bill that was pulled unceremoniously by party leaders last month when they couldn’t get enough votes to pass it. At the heart of those changes reportedly is the law’s requirement for most insurance plans to offer 10 specific categories of “essential health benefits.” Those include hospital care, doctor and outpatient visits and prescription drug coverage, along with things like maternity care, mental health and preventive care services.

The Freedom Caucus had been pushing for those benefits to be removed, arguing that coverage guarantees were driving up premium prices.

“We ultimately will be judged by only one factor: if insurance premiums come down,” Freedom Caucus Chairman Rep. Mark Meadows (R-N.C.) told The Heritage Foundation’s Daily Signal.

But moderates, bolstered by complaints from patients groups and consumer activists, fought back. And a brief synopsis leaked from the intraparty negotiations suggests that the compromise could be letting states decide whether to seek a federal waiver to change the essential health benefits.

“The insurance mandates are a primary driver of [premium] spikes,” wrote Meadows and Sen. Ted Cruz (R-Texas) in an op-ed in March.

But do those benefits drive increases in premiums? And would eliminating the requirement really bring premiums down? Health analysts and economists say probably not — at least not in the way conservatives are hoping.

“I don’t know what they’re thinking they’re going to pull out of this pie,” said Rebekah Bayram, a principal consulting actuary at the benefits consulting firm Milliman. She is the lead author of a recent study on the cost of various health benefits.

Opponents of the required benefits point to coverage for maternity care and mental health and substance abuse treatment as driving up premiums for people who will never use such services.

But Bayram said eliminating those wouldn’t have much of an impact. Hospital care, doctor visits and prescription drugs “are the three big ones,” she said. “Unless they were talking about ditching those, the other ones only have a marginal impact.”

John Bertko, an actuary who worked in the Obama administration and served on the board of Massachusetts’ health exchange, agreed: “You would either have very crappy benefits without drugs or physicians or hospitalization, or you would have roughly the same costs.”

Maternity care and mental health and substance abuse, he said, “are probably less than 5 percent” of premium costs.

Of course, requiring specific coverage does push up premiums to some extent. James Bailey, who teaches at Creighton University in Omaha, Neb., has studied the issue at the state level. He estimates that the average state health insurance mandate “raises premiums by about one-half of 1 percent.”

Those who want to get rid of the required benefits point to the fact that premiums in the individual market jumped dramatically from 2013 to 2014, the first year the benefits were required.

“The ACA requires more benefits that every consumer is required to purchase regardless of whether they want them, need them or can afford them,” Ohio Insurance Commissioner Mary Taylor said in 2013, when the state’s rates were announced.

But Bayram noted most of that jump was not due to the broader benefits, but to the fact that, for the first time, sicker patients were allowed to buy coverage. “The premiums would go down a lot if only very healthy people were covered and people who were higher risk were pulled out of the risk pool,” she said. (Some conservatives want to change that requirement, too, and let insurers charge sick people higher premiums.)

Meanwhile, most of the research that has been done on required benefits has looked at plans offered to workers by their employers, not policies available to individuals who buy their own coverage because they don’t get it through work or the government. That individual market is the focus of the current debate.

Analysts warn that individual-market dynamics differ greatly from those of the employer insurance market.

Bailey said he “saw this debate coming and wanted to write a paper” about the ACA’s essential health benefits. But “I very quickly realized there are all these complicated details that are going to make it very hard to figure out,” he said, particularly the way the required benefits work in tandem with other requirements in the law.

For example, said Bertko, prescription drugs can represent 20 percent of costs in the individual market. That’s far more than in the employer market.

Bayram said another big complication is that the required benefits do double duty. They not only ensure that consumers have a comprehensive package of benefits but enable other parts of the health law to work by ensuring that everyone’s benefits are comparable.

For example, the law adjusts payments to insurers to help compensate plans that enroll sicker-than-average patients. But in order to do that “risk adjustment,” she said, “all of the plans have to agree on some kind of package. So if you think of essential health benefits as an agreed-upon benchmark, I don’t know how they can get rid of that and still have risk adjustment.”