The effect of state health insurance benefit mandates on premiums and employee contributions

The average US state has 40 benefit mandates, laws requiring health insurance to cover particular conditions, treatments, providers or people. We investigate the extent to which these mandates increase the health insurance premiums paid by employers, and the extent to which these higher premiums are passed on to employees in the form of higher employee contributions. We use state-level data on premiums and employee contributions to health insurance from the insurance component of the 1996--2011 Medical Expenditure Panel Survey. Our main analysis is a fixed effects regression that controls for age, race, income, union membership and the presence of state mandate waivers. We find robust evidence that the average mandate increases premiums by approximately 0.6%, and that mandates lead to similar increases in employee contributions for single-coverage health insurance plans. Alternative specifications using an AR(1) error structure estimate a larger effect of mandates, while those using generalized estimating equations estimate smaller effects. We find that mandates requiring insurers to cover a specific benefit, as opposed to a specific type of provider or person, lead to the largest increases in employee contributions.