Health Insurance

Last Updated 7/25/2024 

Background: Health insurance in the U.S. is a system where individuals pay premiums to insurance companies to help cover medical expenses. These plans often include deductibles, co-pays, and out-of-pocket maximums, which are costs that the insured must pay before the insurance covers the rest. The system can be complex, with various types of plans and coverage options, often provided through employers or purchased individually. 

The health insurance market continues to deal with challenges in the areas of affordability and access to care. The costs of health care continue to rise faster than other goods and services. According to the Centers for Medicare & Medicaid Services, national health care expenditures represent 17.3% of the gross domestic product, reflecting growth of 4.1% in 2022. While Medicare broadly protects seniors and can be supplemented through private coverage options known as Medicare Supplement (Medigap), costly long-term care (LTC) services remain outside Medicare and Medigap benefits. 

Unlike other types of insurance, health insurance regulation is done both at the federal and state levels depending on the plan. The Affordable Care Act (ACA) and the Employee Retirement Income Security Act (ERISA) are two federal laws that have significantly impacted health insurance and employee benefits regulation in the United States. The primary regulator of any given health plan depends on the type of plan (e.g. employer-sponsored, marketplace, Medicare, supplemental, etc). 

Enacted in 2010, the ACA aimed to expand health insurance coverage, improve its value through market reforms, and control healthcare costs by promoting competition among insurers. Provisions such as guaranteed issue, community rating, and the prohibition on preexisting condition exclusions have allowed millions of previously uninsured Americans to enroll, increasing access to healthcare. However, challenges related to ACA compliance, limited competition in certain areas, and insurer exits have led to higher premiums and cost-sharing, making coverage unaffordable for some without subsidies or alternative options. 
 
ERISA, enacted in 1974, sets minimum standards for most private sector pension and health plans to protect plan participants. It requires plans to provide participants with essential information about plan features and funding, and sets standards for participation, vesting, benefit accrual, and funding. One notable aspect of ERISA is its preemption of state law, which limits the authority of state insurance regulators over employer-sponsored self-insured health plans. This preemption creates a distinct regulatory environment for ERISA-covered plans, setting them apart from plans that are subject to state regulation. 

Status: In 2024 the NAIC continues to provide nonpartisan expertise to the U.S. Congress and the federal government, particularly on equity considerations and the differential impact on underserved populations. The NAIC's committees continue their work to develop model policies and highlight best practices on healthcare cost control, including reviewing long-term care insurance (LTCI) premiums, regulating pharmacy benefit managers, monitoring telehealth, and educating consumers on health insurance and their coverage options. 

The Health Insurance and Managed Care (B) Committee is charged with examining rising healthcare costs and insurance premiums and reviewing state initiatives to address cost drivers as well as monitoring the impact of healthcare and health insurance-related federal regulation on state insurance regulation. The Consumer Information (B) Subgroup is working to develop resources for consumers to understand their coverage. 

The NAIC's Improper Marketing of Health Plans (D) Working Group focuses on addressing issues related to the marketing practices of health plans that are not fully regulated under the Affordable Care Act. This includes Association Health Plans (AHPs) and Short-Term Limited Duration (STLD) plans. The group works closely with the (B) Committee to ensure consumer protection, with a particular emphasis on underserved populations and promoting equitable health coverage. Their efforts align with the broader NAIC strategy to develop model policies, enhance transparency, and improve consumer understanding of health insurance options, especially in light of rising healthcare costs and the complexities of health insurance regulation. 

In 2022 the NAIC’s Center for Insurance Policy & Research (CIPR) published a report detailing the potential for telehealth to reduce health disparities by surmounting barriers to access to care. This study reveals that the limitations in broadband access and digital literacy can meaningfully limit efforts to increase access to care through telehealth.