NAHU Written Testimony on Mandated Health Insurance Benefits

July 28, 2000

The Honorable Edward Oliver
Senator, State of Minnesota
Chair, National Conference of Insurance Legislators Health Insurance Committee
139 Lancaster Street
Albany, NY 12210-1903

Dear Senator Oliver: The National Association of Health Underwriters (NAHU) represents more than 16,000 health insurance agents, brokers and other benefit professionals nationally. On behalf of our membership, I am submitting this letter outlining our views concerning NCOIL's proposed Mental Health Parity Model Act.

Our members service the health insurance needs of millions of Americans, and their clients include large and small employers as well as people seeking individual health insurance coverage. Every day, our members work to obtain insurance for clients who are struggling to balance their desire to purchase high-quality and comprehensive health coverage with the reality of rapidly escalating health premium costs. As such, one of our primary goals as an association of benefit specialists is to do everything we can to promote affordable access to health insurance coverage.

While the intent of this model may be to provide needy individuals with access to mental health and possibly substance abuse treatment services, NCOIL's proposed Mental Health Parity Model Act would actually hinder affordable access to health insurance coverage. Mandated benefits like the ones outlined in the proposed model cost health insurance carriers and employers money. And those costs are often shifted to the consumer in the forms of increased premiums and cost-sharing requirements, reduced benefits and lower wages. Mandates have driven up health care costs so much that experts estimate that between 20 and 25 percent of all uninsured Americans lack health insurance coverage due to benefit mandates.

Mandating that health insurers provide equal coverage for mental health and substance abuse treatment is particularly expensive. According to a study conducted by the actuarial firm of Milliman & Robertson for the National Center for Policy Analysis, mental health parity requirements could add between $175 and $350 annually to the cost of a health insurance policy. Coverage of chemical dependency treatment has also been found to increase annual plan premiums by an average of nine percent.

NAHU is also concerned about the precedent NCOIL would set by passing a model act that includes a mandated benefit. With the number of uninsured Americans increasing each year, we should all be working together in order to make health insurance more affordable. It seems counter-productive for NCOIL to endorse a measure that would so substantially increase health insurance costs.

NAHU has serious concerns about this measure and we strongly urge NCOIL to reconsider adopting a parity mandate as model legislation for all states. If NCOIL does decide to pursue adoption of the proposed model, we would suggest the following changes to make the legislation less costly to consumers, thereby minimizing the number of Americans who will lose their health insurance coverage due to the subsequent rise in premiums:

• In section 3, provide an exemption for individual and small group health coverage since people with individual coverage and small employers disproportionally suffer from the cost of mandated benefits and are more likely to drop coverage due to increased costs.
• In section 3(A)1-3, employ the phrase "make available coverage" rather than "provide coverage." The use of such language would ensure that carriers make available plans that include equitable mental health coverage, while also guaranteeing consumers the opportunity to select the type of coverage that best suits their specific needs.
• In sections 3(A)1-3, limit the scope of mental illnesses covered under the act to a clearly defined list that includes the most severe of the biologically based mental illnesses. Many states that have already enacted parity laws have successfully employed this approach as a means of managing costs while still ensuring that the sickest individuals have access to coverage. We are concerned that the inclusion of any biologically based mental disorders appearing in the most recent edition of the Diagnostic and Statistical Manual of the American Psychiatric Association and/or alcohol and substance abuse dependency in the list of covered disorders would have the effect of opening Pandora's box.
• Clarify sections 3(a) 1-3 and 3(B)2 so that they explicitly allow health plans to employ managed care principles and utilization review procedures that are specific to the delivery of mental health treatment services. Such a clarification would both improve the quality of mental health care and reduce costs.
• Add a sunset date and a cost review requirement to the legislation so that states would automatically have the opportunity to assess after a period of time the effectiveness and financial impact of the parity legislation.

NAHU appreciates this opportunity to comment on the proposed Mental Health Parity Model Act. If you have any questions or need additional information, please do not hesitate to contact me at either (703) 276-3806 or jtrautwein@nahu.org.

Sincerely,

Janet Stokes Trautwein
Director of State Government Affairs

1. Jensen, G. and Morrissey, M. "Mandated Benefits Laws and Employer-Sponsored Health Insurance." Health Insurance Association of America, January, 1999.
2. Goodman, J. and Matthews, M. "Brief Analysis 237: The Cost of Health Insurance Mandates." National Center for Policy Analysis, August 13, 1997.
3. Jensen, G. and Morrissey, M. "Mandated Benefits Laws and Employer-Sponsored Health Insurance." Health Insurance Association of America, January, 1999.
4. Seward, J.A. and Henderson, James W. "Report on the Cost of Health Care System Mandates." Baylor University, January, 1999.

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