Who Controls Health Insurance?

Health care is expensive. We all pretty much agree on that. Yet, for the 297 million with health insurance (about 85 percent of Americans), care is more affordable than it would be without coverage.

How exactly does health insurance help keep costs down?

It combines and averages the risk of health care costs across a large number of people. By doing so, an individual’s health insurance premium is based on the average cost of medical care for the group, not the cost of care for that individual. This lowers the cost of health care for most people.

As a result, your health care plan helps protect you from unexpected or high medical costs when you’re ill. It gives you access to care when you need it. Preventive care is covered, too. Things like annual checkups, vaccines and health screenings are often covered at no cost – even before you meet your deductible.

It’s true. Health insurance can sometimes seem complex and confusing. Fortunately, a lot of safeguards go into protecting consumers like you.

Health Insurance is Controlled by Laws

It is a regulated industry. That means it’s supervised. Health insurance providers aren’t free to do whatever they want. Federal and state governments work to make laws and policies that control the way public organizations and private companies offering health insurance serve the public.

There are two types of health insurance:

• Federal and state taxpayer-funded programs like Medicare, Medicaid and the Children’s Health Insurance Program (CHIP)
• Private-funded offerings like Blue Cross and Blue Shield of Montana, non-Blue commercial plans, HMOs and self-funded employer plans

In each case, state and federal oversight ensures health insurance entities operate in a fair and above-board manner. These laws cover a broad range of issues to protect you, the consumer.

What Do State Laws Cover?

States set standards about who a state-licensed health insurer must accept as members. This prevents unfair practices and makes health insurance, and thereby health care, more equitable.

States also set rules about how much insurers can adjust premiums based on a person’s health status, number of claims they’ve filed and other factors.

States also require health insurance companies to offer certain benefits – although they can vary from state to state. Examples in some states may include:

• Fertility treatments
• Substance abuse treatments
• Breast reconstruction surgery after mastectomy

What Do Federal Laws Protect?

There are many important federal laws related to health insurance benefits. Here are four of the most notable.

Employee Retirement Income Security Act of 1974 (ERISA)

• Protects workers from losing their benefits
• Sets standards for benefits offered by employers and employee organizations (unions)
• Prevents states from controlling self-funded employee benefit plans

The Affordable Care Act

• Gives more Americans access to health care
• Defines essential care that must be part of every Individual and Small Group health insurance plans
• Helps lower health care costs  

Transparency Act

• Lets consumers know the cost of items and service before they get care
• Helps people shop for health plans by pricing

The Health Insurance Portability and Accountability Act (HIPAA)

Better known as the “patient privacy law” by most of us, HIPAA has made huge strides in protecting private patient health information. With its passage, a national Privacy Rule was created to safeguard protected health information (PHI). Today, an individual’s private and protected health information cannot be shared with anyone without a person’s consent or knowledge.*

The Privacy Rule not only helps individuals understand how their health information is shared, but also controls its use. Together, these measures protect the flow of patient information while promoting high-quality healthcare.

HIPAA laws do something else, too. They also:

• Protect workers from lapses in coverage when they change or lose their jobs
• Prevent the denial of health benefits for pre-existing health conditions

State-licensed private insurers must also accept certain people leaving group health coverage into the individual market. They must accept them regardless of their health status. There can’t be any exclusion period for pre-existing medical conditions. 

Other Built-In Protections

Along with many laws, health insurance companies must follow best-practice standards. Mandates include:

Be in good financial shape. They must have enough money to operate and pay health care claims.

Protect consumers. They must make insurance available to people regardless of their health status or preexisting conditions.

Control premium costs. They must follow federal and state requirements when it comes to setting the price for monthly health insurance premiums paid by members.

Offer good quality products. They must provide defined health services that meet the needs of their members at a reasonable, set price.

Fulfill their promises. They must pay the benefits they promise to members and pay claims promptly.

What If You Have a Concern or Complaint?

Complaints about health plans should be directed to the state agency that oversees health plans. Each state has slightly different procedures for filing consumer complaints. You can find information about how and where to file a complaint at the National Association of Insurance Commissioners. 

*Subject to certain conditions.

Sources: Health Insurance: How It Protects You From Health and Financial Risks,  HealthCare.gov, 2022; Regulation of the Individual Health Insurance Market,  Office of Health Policy, U.S. Department of Health and Human Services, 2008; Health Insurance Portability and Accountability Act of 1996,  Centers for Disease Control and Prevention, 2022.