What is it? It’s the decision to discontinue or drop mental health coverage after the state’s new mental health parity mandate went into effect on January 1.
Employers offering mental health coverage as part of their insurance plans must now see that the mental health coverage is as generous as coverage for any other diseases. While the law does not require employers to carry mental health coverage, it does mandate that if it is included, is needs to be of the same value.
In the year 2000, the National Federation of Independent Business (NFIB)-Wisconsin surveyed its members (about 12,000 statewide, with a 5% return) asking whether or not they felt their health insurance plans should cover mental health and substance abuse treatments to the same extent as they covered other physical illnesses: 21.5% said yes, 67.9% said no, and 10.6% were undecided.
Despite the opposition, the mandate for mental health parity is now on Wisconsin’s books, as is autism, and a mandate to include coverage for cochlear implants — a small, complex electronic device that can help to provide a sense of sound to a person who is profoundly deaf. These mandates join a long list of mandates from prior legislative sessions, including coverage for chiropractic care, optometrists, dentists, home health care, mammography, diabetes, maternity, and for HIV drug treatments, among others.
Can small business afford mandates?
Bill G. Smith, State Director of the NFIB-Wisconsin, doesn’t argue that such coverage is needed, but he does argue with mandating their inclusion.
“Typically,” Smith said, “mandated benefits are driven by providers of the services who say they need it, that it will make people healthier, improve health care and that we should all be covered. We [the NFIB] won’t argue on that level, but [the mandates] also make those plans more expensive.”
For the NFIB, a lobbying group for small businesses, the costs of government-directed mandates hit small business owners hard. Opponents to mandates argue on the side of fairness, Smith explained, since big businesses often aren’t affected by mandates because many self-fund their insurance plans. (That is, claims are paid out of their company assets, rather than through an insurance company.)
Government employees also are typically exempt from state mandated health coverage, as are those on Medicare and Medicaid. With mandates typically affecting only a small number of individuals relative to the population, Smith said small businesses ends up paying the price.
Smith said mandate proponents often claim there will be little or no cost to insurance plans, “but even a 1% increase in premiums, or a half-percent rise, can mean millions and millions of dollars that will have to come out of the pockets of the small business owners,” he said. To make matters worse, he explained, when several mandates are passed, the costs can multiply accordingly.
Woodman’s Opts Out to Preserve Its Other Coverage Levels
Phil Dougherty, senior executive officer at the Wisconsin Association of Health Plans, said mandates are imposed on insurance companies and products, not on the employers who purchase the plans. But businesses purchasing insurance from those commercial insurers will feel the pinch.
Larger, self-insured companies like Woodman’s can choose whether or not they want to include government-mandated insurance. “They have greater flexibility, he said, and can put a package together to match their budget, but small businesses, purchasers of commercial health insurance plans, don’t have the same flexibility.”
Woodman’s, which employees about 3,000 workers, opted not to offer the coverage. “We had great alcohol and drug and mental health coverage,” said Clint Woodman, a vice president at the grocery chain. “But the government was forcing us to change our health plan, which we considered one of the best around,” he said. “Our employees are covered 100%. They don’t pay anything for insurance. So to have the government come in and tell us how to run our health plan didn’t sit well.”
Woodman said his company had been offering up to $10,000 a year for mental health care, or a maximum of 25 visits. After that threshold had been reached, an employee would pay 50%. But that all changed on January 1.
“The gist of [the new mandate] is the unknown cost,” Woodman said, about their decision to drop mental health coverage. “When you’re not able to have control over a part of your plan, it jeopardizes the rest of your plan. The fact of the matter is, if an employee has a real problem and comes to us, we’ll take care of them.”
Woodman added that management has not heard any complaints from employees after making the decision to discontinue coverage. “I think they know they’ve got great health insurance and they don’t want anything to jeopardize that,” he said.
Wisconsin Options
Wisconsin has several mandates on the books now, in additional to other regulations. “In the last 12 months, [the state] has added autism treatments, dependents to age 27, mental health parity, a variety of things,” said Dougherty. “Each has an additional cost associated with it, and adds to the cost of a health insurance policy sold through a commercial insurance company.”
Since small businesses are the most likely purchasers of commercially provided health insurance, their employees will likely feel the trickle-down effect.
Government mandates are quite common, Dougherty explained. “I’ve been working in health insurance and public affairs since the late 1980s, and I’m not aware of any legislative session that did not include proposals to mandate,” Dougherty said. “But it’s a myth to believe the state has to impose a mandate on a service desperately needed, because if there is a need, the insurers will provide it.”
Mandates are typically added in the state Legislature as a part of another bill, said Martin Priezler, long-time leader of Physicians Plus Health Insurance in Madison, and now the director of graduate programs at Edgewood College. The bill, he explained, goes to the Office of the Commissioner of Insurance and follows a normal legislative process prior to becoming law.
Eileen Mallow, assistant deputy commissioner in the Office of the Commissioner of Insurance, concurred. “The process varies for each mandate,” she said. “We talk to groups for and against, talk to insurers about what’s happened in other states.” Then they devise a report and talk to the bill’s authors before sending it on to the Legislature. “We try to estimate per member, per month, the cost of a mandate. Once a bill is signed, we have to adopt it, and [insurance] companies must implement it the way the statute is written.”
The Migration of Larger Companies Toward Self-Funding Options
But Dougherty argues that mandates, because they typically affect less than a third of the population, add cost, and those costs may also be driving larger businesses away from commercial insurance, as companies opt instead — if it’s economically feasible — to be self-funded. “We’ve seen a decline, since the late 1990s, in the commercially insured population in Wisconsin,” Dougherty said. “Part of the reason is a migration out of the commercially-insured market into the self-funded market by [larger] employers who no longer can afford to pay for regulations and mandates that exist in commercially-insured markets.”
While he said an exact measure of the health care insurance picture is difficult to obtain, trends have emerged.
A breakout of the 2008 Wisconsin Health Care Market, according to a report from the Office of the Commissioner of Insurance and the Department of Health and Family Services, showed 35% of individuals (1,989,829) covered by self-funded plans insurance plans, 30% (1,715,285) in publicly-funded plans (Medicaid, Medicare, HIRSP), 29% (1,663,126) commercially-insured, and an estimated 5% to 6% (319,000) uninsured.
Smith said the debate over government-mandates usually comes down to affordability and fairness. He is a proponent of more standardized insurance plans that give business owners the option of selecting and adding additional coverage as they deem necessary — a “cafeteria-plan” type of approach. “At least give us some alternatives,” he implored. “The market is already going against us [small business]. We have fewer options, and mandates on top of that. We want a level playing field. If big business can choose their coverage, we should be able to as well.”
It’s All About Affordability
Smith said mandates do not necessarily mean more individuals will be insured, citing a Congressional Budget Office analysis that concluded that a 1% increase in premium results in 200,000 more lives uninsured; and a Lewin Group report that doubles that number to 400,000. It’s all about affordability, he said.
Even the state recognizes that, he suggested. A recent announcement by Wisconsin Gov. Jim Doyle touting a new program, BadgerCare Plus Basic, for people on the waiting list for BadgerCare, notes it is affordable because it does not include many of the mandates required in other programs. Both Dougherty and Smith said that’s recognition by the state that affordable insurance is not possible if mandates exist. “You can’t have it both ways,” said Dougherty.
While mandates can add to higher insurance premium costs, Dougherty said the real elephant responsible for rising insurance premium costs continues to be the cost of health care. “Any reform intended to make health insurance more affordable that fails to address the rising costs of health care will fail. It’s not sustainable.”
Sign up for the free IB Update — your weekly resource for local business news, analysis, voices and the names you need to know. Click here.
