Frankfort can improve affordability of health insurance by weighing costs of new mandates

Nowhere are the stresses of the pandemic on Kentucky more apparent than in the healthcare delivery system. Our state has seen the largest jump in Medicaid enrollment in the nation. Between Feb. and Aug., Medicaid rolls swelled 17.2 percent, with more than 226,000 new enrollees. Now, one in three Kentuckians are Medicaid beneficiaries.

It is clear Kentucky’s small business sector, which employed about 45 percent of the workforce before the start of the pandemic, is reeling. There has been some stabilization, but employers and workers are still doing their best under difficult circumstances to keep their jobs and their company-sponsored or individual health plans. In good times, but especially in lean times like this, it is incumbent on policymakers to keep healthcare costs in check.

As our health insurance providers strive to provide certainty and affordability to those we cover, we must honestly look at what really drives costs. A major contributor to increased health costs for employers and employees is the added expenses associated with benefit mandates. These often dictate what health plan coverage insurers can sell and what plan coverage consumers can buy as they relate to specific treatments, benefits, and providers.

Each year, the number of government mandates grow. From 2013-2019, 96 bills were filed in the General Assembly impacting the cost of health care by approximately $634 million - $974 million. Kentucky now has more mandates on the books than the national average.

As mandates pile up, consumer choice and competition take a backseat. The coverage begins to operate less and less as true insurance. Overregulation creates market distortions whereby health insurance bears much greater resemblance to a prepaid plan than to an actual insurance product based on risk. The inefficiencies lead to cost increases.

Each new mandate can add up to five percent to premiums. Most are small and championed by provider groups, pharmaceutical companies, or an individual who has expressed need. When lawmakers view them in isolation, they seem insignificant. For instance, 24 cents a month per subscriber for mandated coverage for prescription eye drop refills. Each mandate comes with an individual cost and they quickly add up.

Affordability is a pressing issue. Kentuckians’ total premium cost for employer-sponsored insurance plans as a share of median income is higher than the national average and among the ten worst states in the nation. The increases are most felt by small employers or individual payers who do not have the resources to self-insure. The rising cost pressures can force tough decisions. It may be that these small firms trim insurance or other benefits, increase the share their employees pay for premiums, eliminate coverage altogether and/or reduce wages.

As we approach another session of the General Assembly amidst the pandemic, lawmakers may be hearing from groups with wish lists urging more directives, but members of the General Assembly should weigh mandates with caution and restraint. If we want a sustainable system, Kentucky, like other states, may benefit from a more thorough vetting process.

Stephanie Stumbo is Executive Director of Kentucky Association of Health Plans, the trade organization representing the Kentucky health insurance community.