State moves to ban limits on drug and maternity coverage

The health care law requires most residents to have insurance that meets minimum standards, but regulators have discovered loopholes that have allowed employers' plans to restrict coverage in ways regulators said they never intended.

"What we have learned is that we can never anticipate what the market will bring to us," said Jamie Katz, general counsel for the Connector Authority.

Obtaining insurance is an individual's responsibility under the state law, so employees -- not their employers -- are subject to a tax penalty of up to $1,068 a year if regulators determine a company's plan falls short of minimum standards.

Regulations that went into effect Jan. 1 define the minimum package of benefits that adults must have in a health plan to be considered insured and to avoid the penalties. The package includes so-called core services such as emergency care, mental health and substance abuse services, and doctor visits.

The standards placed an annual cap on how much a patient can spend for these core services, but the regulations did not address limits in coverage on other specific services, such as prescription drug coverage.

As regulators started to review plans earlier this year to see whether they were complying with the new rules, they discovered scores that, for instance, excluded maternity benefits for dependents, such as the daughter of a subscriber. Others placed a dollar limit on how much prescription coverage they would provide.

Because the current rules did not specifically prohibit those limits, the plans were deemed to be compliant.

The proposed new rules corrects that oversight, Katz said, by mandating that coverage for prescription drugs be added to the list of "core services," which insurers are not allowed to cap. The proposal also addresses the maternity coverage issue by requiring that any plan that covers dependents also provide the same "broad range of medical benefits" to dependents as is offered to the subscriber.

With prescription drug costs -- and the number of consumer complaints about their affordability -- rising, regulators also planned today to vote on a proposal that would place an annual limit on out-of-pocket spending for medications. Current regulations limit total out-of-pocket costs to $5,000 for individuals and $10,000 for families, but the rules exclude what a consumer spends on prescriptions.

The authority opted to postpone any decision on that proposal because insurance companies have told regulators that they would need at least 18 months to figure out how to work those changes into their products.

"There was pretty strong feedback (from insurers) that this would be a huge challenge," said Kaitlyn Kenney, the board's manager of policy and research.

Kenney showed board members national data from 2006 that showed that over 98 percent of the US population did not exceed $5,000 for out-of-pocket costs, including what they spent on prescriptions. Data were not available specific to Massachusetts, where health care costs tend to be signficantly higher.

Still authority members said they felt the issue was important and requested that Connector staffers continue to study the feasibility of the proposal.

"I am not confident that national health reform will deal with this issue any time soon," said member Jonathan Gruber, an economics professor at the Massachusetts Institute of Technology.