Health Insurance Regulation:

Varying State Requirements Affect Cost of Insurance

HEHS-96-161: Published: Aug 19, 1996. Publicly Released: Sep 23, 1996.

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Pursuant to a congressional request, GAO provided information on the costs of state health insurance requirements, focusing on: (1) premium taxes on insured health plans; (2) mandated health benefits; (3) financial solvency standards; and (4) state health insurance reforms affecting small employers.

GAO found that: (1) state health insurance regulation imposes requirements and costs on third-party health plans, but not on employers' self-funded health plans; (2) state premium taxes and other assessments for guaranty fund and high-risk pool fees, are the most direct and quantifiable costs on insured health plans; (3) the extent to which these requirements increase insured health plans' costs varies by state because of differences in the nature and scope of state regulation and plans' operating practices; (4) most states mandate that insurance policies cover certain benefits and providers that might not otherwise be covered; (5) costs are higher in states that mandate more costly benefits; (6) most self-funded health plans offer many of the same mandated benefits, but these plans would lose flexibility in offering uniform health plans across all states; (7) state solvency standards have a limited potential effect on plan costs, since most insurers maintain capital and surplus levels that exceed state minimum requirements and typically perform tasks similar to state reporting requirements; and (8) the cost implications of states' small employer health insurance reforms are unclear because of incomplete cost data and the difficulty of isolating the impact of such reforms.

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