Are Consumers Better Protected When States Regulate Health Insurance?

Study of laws protecting consumers from loss of health benefits

During 1995 and 1996, researchers at George Washington University compared consumer protections under state-regulated health care plans with protections available under employer-paid self-insured plans, which federal law exempts from state regulations.

The research entailed analysis of state and federal laws and marketplace developments, reviews of court decisions, interviews of insurance and managed care regulators, and consultations with representatives of employers, insurers, the actuarial profession, managed care plans, health care providers and consumer groups.

Key Findings

  • Employees in self-insured plans typically enjoy significantly fewer consumer protections than those in other insured plans.
  • Many firms opting for self-insurance carry no stop-loss coverage, placing employee health benefits at risk.
  • Little systematic information exists on the extent of self-insurance and the stipulations of self-insured plans, such as stop-loss coverage and covered services.
  • The Employee Retirement Income Security Act of 1974 contains no financial standards for health plans and no requirement to inform employees about major benefit changes or managed care restrictions.
  • Consumers do not understand the meaning and implications of being enrolled in a self-insured plan.
  • The Department of Labor has neither the mandate nor the resources to investigate benefit disputes between self-insured plans and individuals.
  • Members of employee health plans maintain access to fewer legal remedies than consumers of individual insurance products.
  • Federal and state laws provide a patchwork of protections to help people leaving jobs maintain health benefits.