Recent changes to a pair of “mandate light” health bills, proposed by Gov. Tim Kaine and approved by the General Assembly, could have interesting consequences for the insurance industry, according to one lobbyist.

Tim Kaine

During the reconvened session April 8, the House and Senate approved a majority of Kaine’s amendments to HB 2024 and SB 1411, which allow insurers to offer group health policies without state mandates for employers with 50 or fewer employees.

The original versions of the bills, passed in February, included a requirement that an employee had to have been uninsured for at least six months before qualifying for the “mandate light” product. Kaine recommended elimination of that requirement to help the unemployed during the current economic climate and the General Assembly approved it.

“This will certainly make life easier for agents and brokers selling products to employers who might have had some employees who qualified and other who didn’t,” said Gerald Milsky, a lobbyist for the Virginia chapter of the National Association of Insurance and Financial Advisors. “Administration by the employer will also be simpler with this change. ”

The flip side of the change, Milsky noted, is the “unanswered question” of whether employers will ditch their existing coverage for the “mandate light” option.

“If the removal of the six-month uninsured period results instead in employees losing benefits they currently have by the employers ‘downsizing’ coverage to the ‘mandate light’ product, it would not be consistent with what the bill was designed to accomplish,” he said.

Reports to the Bureau of Insurance, required by the bill, will indicate if employers are downsizing coverage, said Milsky, who works for Richmond-based Macaulay & Burtch.

Screening vs. specific conditions

Kaine also won approval for what he called “basic health care items” under SB 1411.

The General Assembly approved those that provide for testing and early detection such as mammograms and colorectal cancer screenings, but rejected others providing benefits for specific conditions, including mental health and substance abuse services.

“The line between screenings and coverage for specific conditions seems like a reasonable one, and it also lets ‘mandate light’ policies be issued without the most expensive mandated benefits, thus keeping the potential premium costs somewhat lower,” Milsky said.

He said that adding in the testing and screening mandates does mean that premiums will not be as low as under the original bill, but it will be some time before the impact is realized.

“We really won’t know the full impact until we see what ‘mandate light’ products insurers begin to offer after the law takes effect, and how many of the mandates that they will no longer be required to offer will, in fact, be offered anyway due to employer/employee expectations of coverage,” he said.

Other amendments proposed by Kaine and approved by the General Assembly included the creation of a “mini-COBRA” plan for small businesses to extend health care to laid off employees and increased disclosure requirements so employees know what is covered under their health plans.

This story originally appeared in the May 2009 print edition of Insurance & Financial Advisor.