Question

Discuss when state regulation does and does not apply to health coverage sold by different types of managed care plans and arrangements.

Answer 1

The regulation of managed care depends on who sponsors the plan and who bears the risk for paying for the insured services. Generally, the federal government regulates managed care and other health plans sponsored by private-sector employers. On the other hand, the states regulate the business of insurance, which includes the MCO (such as a health maintenance organization (HMO)) that offers a managed care policy to an individual, employer, or other purchaser. If a private sector employer sponsors a plan that is not purchased from an MCO (i.e., the plan is self-insured), then the plan is regulated solely by the federal government. If that employer contracts with an MCO to provide managed care services to his or her employees, then the regulation of that plan depends on who bears the risk. If it is the MCO, the plan is regulated by the state; if the risk is borne to any degree by the employer, then the plan is subject to federal law only.