The state’s pioneering healthcare law requires residents to have insurance that meets minimum standards, but regulators are discovering many employers’ plans test the limits by exploiting loopholes in the rules.
Regulators yesterday said that reviews of scores of health plans show many cap the benefits insurers pay each year on prescription drug coverage, exclude maternity coverage for dependents, or place an annual overall dollar limit on benefits.
Jamie Katz, general counsel for the Connector Authority, which oversees the state’s health initiative, said the gaps raise "difficult issues" because companies are assuming their plans are adequate in the absence of specific regulations that say otherwise.
Katz said that while rules created by the Connector require, for instance, health plans to include prescription coverage, they don’t address whether such coverage is allowed to have limits. As a result, thousands of Massachusetts residents may be paying for health insurance plans that meet the letter but not the intent of the law.
"We would like some clarity on this issue," Katz told Connector board members during a meeting yesterday.
Because the state’s healthcare initiative makes obtaining insurance an individual responsibility, employees – not their employers – are subject to a tax penalty of up to $1,000 a year if regulators determine a company’s plan falls short of minimum standards.
As Congress debates an overhaul of the nation’s healthcare system, borrowing heavily from the Massachusetts blueprint, any flaws in the state’s system are likely to become part of the discussion, said healthcare policy specialists.
"You can bet, to the extent that Massachusetts is a bellwether for this proposal nationally, that the difficulty the state is having now, that foretells what is going to happen on the national level, only much bigger," said Jon Oberlander, an associate professor of health policy at the University of North Carolina at Chapel Hill.
The Connector Authority last year adopted regulations that went into effect Jan. 1 which define the minimum package of benefits that adults must have in a health plan to be considered insured and to avoid tax penalties. The package includes so-called core services such as prescription drug coverage, emergency services, mental health and substance abuse services, and doctor visits. It sets caps on the most a patient can spend for such services – such as a maximum $5,000 limit on out-of-pocket spending for deductibles.
But the regulations do not address caps in coverage on various services within plans. During the months of public debate leading up to the adoption of the minimum standards, some board members and many public advocates spoke against benefit caps. Others said capping spending helps make coverage more affordable.
The approved rules allow some caps on services – such as for physical therapy – but generally prohibit them in broad terms, such as not allowing a limit on total benefits in a given year.
Katz said at least 85 Massachusetts companies have submitted plans for review that exclude maternity benefits for dependents, such as the daughter of a subscriber. In the absence of any direction from the Connector Authority, he said, his staff has already approved 40 plans that include the maternity exception.
"This is clearly discriminatory," said Connector Authority board member Nancy Turnbull, an associate dean at the Harvard School of Public Health. "It singles out one class of people."
Turnbull said that allowing the restriction on maternity benefits is akin to permitting limits on male dependents for coverage of testicular cancer. Other board members agreed.
"The fact that . . . employers have limited pregnancy benefits for dependents should make us aware of what other unintended consequences are out there because of our mandates," said board member Ian Duncan, a healthcare financing consultant. "Employers may start increasing costs for dependents."
Board members said the issue of whether to allow limits on prescription drug coverage was less clear.
Katz said some companies have submitted plans with caps that range from $5,000 to $25,000 annually on prescriptions. He said many of the plans otherwise meet or exceed minimum standards.
Katz also the state lacked data to know what Massachusetts residents are spending, on average, on drug coverage, but he said a preliminary study suggested 99 percent of annual claims are under $10,000.
Board members said they needed more time to study the issue before voting to change any rules regarding prescription drug coverage limits. Without taking a vote, they agreed that limits on drug coverage and maternity benefits for dependents would be allowed to stand for this year, but that companies should be aware that the board will likely take a stand against such practices in the future.
Kay Lazar can be reached at klazar@globe.com.
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