Bills adding health benefit mandates undermine access to affordable premiums

Tomorrow the Minnesota Senate Health and Human Services Committee will hear several bills that would add new benefit mandates on health insurance plans. I provided the committee written testimony highlighting how “health benefit mandates undermine the flexibility to design and deliver affordable health plans.”

Any increase in premiums is particularly harmful to the small group health insurance market. People in the individual health insurance market benefit from federal premium subsidies. Large employers can more easily avoid state benefit mandates through a self-insured health plan — a plan where the employer assumes the financial risk. Small employers are largely stuck with the small group market. Enrollment in Minnesota’s small group market declined by 25 percent from 2017 to 2022, which strongly suggests small employers face the biggest challenges when it comes to affording traditional health insurance coverage.

Much of my testimony focused on how the Minnesota Department of Commerce is misapplying federal law and regulations in their assessment of the fiscal impact of these bills pose to the state. For plans that qualify for federal premium tax credits, the Affordable Care Act (ACA) requires states to defray the cost of benefit mandates that the state requires in addition to the essential health benefits (EHBs) required by the federal law. This helps protect federal taxpayers from paying for state benefit mandates.

I previously worked for the federal government and oversaw how the Centers for Medicare & Medicaid Services (CMS) administered the defrayal process. The ACA requires every health plan to provide a set of EHBs and federal regulations establish these EHBs based on a benchmark plan sold in the state. MN Commerce claims certain benefit mandates would not require defrayal because the health plans must already provide the benefits based on the EHB benchmark plan the state uses. However, CMS has specifically rejected this conclusion. Federal regulations clearly require states to defray the cost of every new health benefit mandate a state enacts after December 31, 2011 with one exception for benefit mandates enacted to comply with a Federal requirement.

The federal government has proposed a rule that would fit with how MN Commerce wants to apply federal defrayal policy. This proposal would not require defrayal when the benefit is currently in the state’s EHB benchmark. But that rule has not been finalized. American Experiment provided public comments opposing this proposed change. As I previously explained: “This gets a little technical and convoluted … [b]ut removing defrayal under these circumstances basically opens a back door for states to increase the scope of EHBs.”

Even if CMS finalizes the defrayal approach MN Commerce wants to apply, nothing will stop a new presidential administration from reversing this policy. A reversal would then require Minnesota to defray the cost of these newly enacted benefit mandates.  The fact is, during the ACA’s short history, a pattern has emerged of major regulations getting implemented in one presidential administration only to be quickly reversed by the next.

If the benefits these bills mandate are already required under the current EHB benchmark, it makes no sense for the state to mandate them on individual and small group plans now. This only creates a risk that the state will need to defray the cost in the future.

If this seems overly complicated and convoluted, it is. And it only goes to show just how dysfunctional the Affordable Care Act continues to be.

Read the full testimony