NCPA - National Center for Policy Analysis


January 9, 2006

State-mandated health insurance benefits drive up premium costs, potentially pricing consumers out of the market, according to a study from the Heritage Foundation.

Author Michael J. New examined the impact of four sets of regulations on insurance premiums: mandated health benefits, health plan liability laws (holding health plans liable for damages), laws mandating access to specialists, and provider due process laws (preventing a health plan from contracting with a provider).

Comparing identical insurance policies (same deductibles, coinsurance rates and coverage for physician visits) in 37 different states, New found:

  • Each mandated benefit increases health insurance premiums by $0.89.
  • Health plan liability laws increase monthly premiums by $26.72.
  • Laws mandating direct access increase monthly premiums by $33.10.
  • Provider due process laws increase premiums by $22.49.

New notes, however, that there are limitations to his research. For example, higher premiums in some states could be attributable to regional differences in the underlying cost of health care, and should be considered in future research. He also notes, however, that premiums in "high-cost" states are typically 50 to 100 percent higher than premiums in "low-cost" states, and may not be completely attributable to regional differences.

Sources: Michael J. New, "The Effect of State Regulations on Health Insurance Premiums: A Preliminary Analysis," Heritage Foundation, October 27, 2005.


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