Kentucky has joined a growing list of states allowing health insurers to offer stripped-down insurance plans under controversial new legislation designed to expand coverage to individuals and small businesses.
Earlier this month, Kentucky Gov. Ernie Fletcher signed a bill that would allow insurers to sell basic, lower-cost policies that don't cover several of the roughly 30 health benefits otherwise mandated by state law, such as maternity care, psychotherapy, hearing aids, reconstructive breast surgery and treatment of HIV or autism.
The "limited-benefit" plans must still cover emergency and preventive care as well as diabetes, chiropractic and hospice care. And to the insurance industry's chagrin, HMOs must still abide by the state's much-debated any-willing-provider law, which requires them to accept all providers wanting to join their networks. The U.S. Supreme Court upheld the 1994 law in 2003 after it was hotly contested by the state's insurers (April 7, 2003, p. 6).
Supporters say the bill could help reduce premiums by up to 10%, enough to make coverage more affordable for many of Kentucky's small businesses and 561,000 uninsured. The pared-down policies also jibe with the industry's steady move toward consumer-driven plans, which give consumers greater control over their medical spending decisions, said Rachel Phelps, executive director of the Kentucky Association of Health Plans.
"We see them as one more way to possibly give employers greater choice in the types of plans they can offer their employees," she said.
Kentucky is among a growing number of states now rolling back their benefit mandates in an effort to make healthcare more accessible and affordable (April 5, 2004, p. 14). Last year, both Washington and Louisiana enacted laws giving small employers access to health plans that exclude many state-required benefits, such as eye care, mammograms or coverage of special, low-protein diets.
Spurred by the managed-care backlash and consumer demand, state lawmakers enacted hundreds of bills over the years requiring health insurers to cover an array of products and services, such as cancer screenings, clinical trials and wigs for chemotherapy patients. By 2002, the number of state-mandated benefits had surpassed 1,400, up from about 800 in 1990 and 300 in 1980, according to America's Health Insurance Plans.
But faced with continued double-digit premium increases in recent years, many states are giving insurers more leeway. Since 1999, 12 states have passed laws that permit mandate-exempt insurance options, and several others, including Michigan and Missouri, are considering such legislation.
Allowing traditional insurers to offer slimmed-down policies would also enable them to compete on prices with association health plans, or AHPs, which would be created under federal legislation pushed by President Bush (Nov. 29, 2004, p. 32). AHPs, which would let small businesses band together nationally to buy lower-cost insurance, would be exempt from state benefit mandates.
But some industry observers fear that limited-benefit plans could ultimately add to healthcare costs by discouraging patients from seeking important procedures, such as cancer screenings, and could leave patients saddled with large bills if they unexpectedly develop an illnesses for which care is no longer covered.
A study published in February by the policy journal Health Affairs found that 76% of Americans who filed for medically related bankruptcy in 2001 had health insurance. Many of them had "bare-bones" health plans riddled with coverage exclusions that left them with thousands of dollars in out-of-pocket costs, according to Elizabeth Warren, a Harvard University law professor and a study co-author.
"We must talk about high-quality, durable coverage, not just getting more names listed on nearly useless insurance policies," she wrote. "Comprehensive health insurance is the only real solution, for poor and middle-class Americans alike."