Inside Health Insurance: Part 2—Current State Regulation

Insurance is a tightly regulated industry with states in control of all the activities of every company which does business within its borders. Everything about a policy, including what is covered, what is excluded, and even a limit of how much can be charged, is ultimately under the auspices of each state insurance department. The only variables an insurance company can adjust, in order to manage their profit, is by reducing costs, or more carefully underwriting individuals before adding them to the pool. Even changes to the plan, such as increases in co-pays or deductibles, must undergo a review and approval by the state insurance department before those changes can be passed on to the group. What insurance companies cannot do is to arbitrarily raise premiums, unless they do so across all insured on similar plans, and even then, not without the consent of the state insurance department.

When you feel that your health insurance carrier is raising your premiums or lowering your coverage just to increase profits, understand that each state carefully reviews the financials of each company to confine their profits and activities within an acceptable range. Only justified increases; such as from higher than expected claims by the group, higher provider payouts, or rising prescription drug costs, will result in an approved increase of premiums. At the same time, your state insurance department is also making sure that in the future, the company who offers your health insurance will be financially sound enough to pay anticipated claims, and increases in premiums or changes in coverage may be required in order for the company to meet the cash reserve requirements of that state.

While many states mirror the way others regulate health insurance carriers, those states that choose to can impose their own rules and restrictions as they feel necessary for the protection and benefit of their residents. This difference, like the geographical and regional variations we enjoy in this nation, allow for customization of health insurance regulation as required by unique needs and circumstances in that state. If you appreciate what our founding fathers did in their original intent to loosely connect a union of individual states through a minimal national government, then you will also support that states retain control over insurance practices in their jurisdictions, rather than making a one size fits all insurance plan and forcing it across the entire country.