Health insurance companies in the United States are governed by both state and federal regulations that dictate how these companies can do business. The regulations put in place by state and federal agencies are meant to help protect the consumer against unfair practices and to help ensure everyone has the opportunity to receive health insurance.
State Regulations
While there are federal regulations on health care, each state is the primary regulator of insurance and insurance-related products. Every state has basic standards for health insurance that apply to all types of health insurance products. For instance, all states require insurers to be financially solvent and able to pay claims as they arise. All states also require that payment of claims is made promptly. In addition to these regulations, each state imposes its own regulations (see Resources).
Guaranteed Issue Regulation
Guaranteed issue laws prohibit insurance companies from denying coverage to any applicant because of health issues. This law came about in the 1980s, when state policymakers enacted the guarantee issue law, stating that insurance providers had to offer at least two health plans to employers regardless of the health of its employees. This law became a federal law in 1996.
Guaranteed Renewability
The guaranteed renewability law stops insurers from canceling insurance coverage because of medical claims or any diagnosis of an illness during the coverage period. Under this law, all group and individual health insurance policies must be guaranteed as renewable. This doesn't mean an insurance company can't go out of business and cancel policies, but if a company does dissolve, there's a penalty for reentering the market within five years.
Unfair Marketing Practice Requirements
To prevent insurers from finding ways to get around the guaranteed laws, states have introduced regulations that require insurance companies to actively market insurance products to all small businesses rather than those with a healthy employee list. As of 2010, federal law doesn't require this.
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