The Regulation of Private Health Insurance

    • January 1, 2009

This paper examines the current role of health insurance regulation and the role that it could play in a reformed health care system. It begins by exploring the nature of health insurance and alternative approaches to its regulation. It next considers the current status of state and federal health insurance regulation, describing the development of health insurance regulation and examining arguments for and against regulatory interventions. Finally, it considers the kind of insurance regulation that will be needed in a reformed health care system, as well as the question of whether authority for insurance regulation should be placed at the federal or state level.

Key Findings:

  • Regulatory efforts may compel private, for-profit insurers to move slightly from their default business strategies, but rarely much or for long. This is particularly true in the current environment in which any insurer, employer, or individual can simply cease to operate if it does not like the opportunities available in any given market.
  • Regulations that bear little hope of success in purely private markets might take on new importance in markets in which the purchase of insurance is required or supported by public subsidies.

Any approach to health care reform that intends to achieve universal coverage through the use of private insurance will require some form of public subsidy for the purchase of private insurance, as a significant proportion of Americans do not earn enough income to pay the full price of unsubsidized private insurance. Perhaps the most promising approach to reform would be to develop uniform national minimal standards for health insurance enforced primarily at the state level.