Health Insurance Regulation:

Wide Variation in States' Authority, Oversight, and Resources

HRD-94-26: Published: Dec 27, 1993. Publicly Released: Jan 11, 1994.

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Pursuant to a congressional request, GAO provided information on how states regulate health insurance, focusing on state insurance departments': (1) role in regulating health insurance; (2) standards and regulatory responsibilities; (3) budget and staff resources; and (4) oversight activities.

GAO found that: (1) although state insurance departments are responsible for overseeing health insurers and protecting consumers, their authority varies widely among states, is limited to only a part of the insurance market, and does not extend to many companies because they have self-insured health plans; (2) about 24 percent of health care is paid for by private health insurance and regulated by state insurance departments; (3) although the National Association of Insurance Commissioners has developed models for establishing a national health insurance regulation system, it does not have sufficient authority to require that states adopt and implement its model policies; (4) funding for insurance departments' regulatory activities varies among states; (5) state insurance departments often have difficulties in estimating the amount of staff needed for oversight activities; (6) state insurance departments' regulatory functions include protecting consumers from insurer failures, unfair policy provisions, excessive premiums, and unfair insurer business practices; (7) the practices that state insurance departments use to monitor insurer solvency, approve health premium rates and policy forms, and respond to consumer complaints vary significantly; and (8) Congress needs to consider how and to what extent state insurance departments will be used in regulating health insurance as health insurance reform is implemented.

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