HD5 - The Financial Impact of Mandated Health Insurance Benefits and Providers Pursuant to Section 38.2-3419.1 of the Code of Virginia: 1994 Reporting Period

Executive Summary:
Section 38.2-3419.1 of the Code of Virginia and the State Corporation Commission's Rules Governing the Reporting of Cost and Utilization Data Relating to Mandated Benefits and Mandated Providers (Insurance Regulation No. 38) require every insurer, health services plan, and health maintenance organization from which a report is deemed necessary to report annually to the Commission cost and utilization information for each of the mandated benefits and mandated providers identified in §§ 38.2-3408 through 38.2-3419, and 38.2-4221. This document is the Commission's consolidation of reports submitted by affected companies for the 1994 calendar year reporting period.

Of the 889 companies licensed to issue accident and sickness policies or subscription contracts in Virginia in 1994, 80 were required to file full reports for the 1994 reporting period. In order to insure that the data used in the analysis was reasonably credible, it was necessary to use only that data contained in reports that were substantially complete. Information presented in this report reflects data reported by 49 companies that provided credible data. Of these companies, 11 issued only individual, 31 issued only group, and 7 issued both individual and group health insurance policies or subscription contracts in Virginia in 1994. This report reflects data reported by companies representing 56.65% of the Virginia accident and sickness insurance market and 928,858 units of coverage (single and family individual policies and group certificates) subject to Virginia's mandated benefit and provider requirements. In addition, 21 health maintenance organizations (HMOs) representing an additional 21.73% of the Virginia accident and sickness market and 505,082 units of coverage filed full reports. Because HMOs are not subject to most of the mandated benefit and mandated provider requirements of Title 38.2 of the Code of Virginia and are regulated by the Commission's Rules Governing Health Maintenance Organizations (Insurance Regulation No. 28) with regard to the services they must provide, the data reported by these companies has been analyzed separately from data reported by insurers and health services plans.

The figures displayed on the following page represent the amount of total annual premium which has been reported by insurers and health services plans to be attributable to mandated benefits and mandated providers, for both individual and group business, on a percentage basis. Mandated offers of coverage have been separated from those mandated benefits which must be included in policies and subscription contracts to illustrate their impact.

Percent of Total Annual Premium


Mandated Offers
Single: .83%
Family: 1.90%

Mandated Benefits*
Single: 3.93%
Family: 6.67%

Mandated Providers
Single: 2.25%
Family: 2.32%
Total Single: 7.01%
Total Family: 10.89%


Mandated Offers
Single: 2.71%
Family: 6.98%

Mandated Benefits*
Single: 8.86%
Family: 7.18%

Mandated Providers
Single: 2.92%
Family: 2.74%
Total Single: 14.50%
Total Group: 16.90%

* Excluding mandated offers of coverage

In addition to premium information, companies reported their claim experience for each mandate for the calendar year 1994. The following is a summary of this experience.

Percent of Total Claims


Mandated Benefits**: 4.40%
Mandated Providers: 2.07%
Total Individual: 6.47%


Mandated Benefits**: 11.72%
Mandated Providers: 3.35%
Total Group: 15.07%

**Including mandated offers of coverage

Reported group claim expenses for the 1994 calendar year generally support the annual premium figures reported for group business when compared on a percentage basis. Reported individual claims, however, are somewhat lower than the premium figures for individual business. This difference may be due to underreporting for individual business as a result of the use of less sophisticated data collection and information systems by companies in that area.

Claim information regarding the rate of utilization of the mandated benefits and providers has been reported. It is anticipated that these rates may also be helpful in assessing the relative effect of new mandates, and in comparing the changes that occur among providers that render similar services from one reporting period to another.

Claim information specific to certain medical procedures produced mixed results when comparing average claim costs attributable to mandated providers and their physician counterparts. In only a few cases did mandated providers appear to offer a significant cost advantage over physicians on a per visit basis.