Question

Compare the main objectives of federal and state regulation of employer-sponsored health insurance practices. Explain your answer and please conduct research to support it, citing at least one scholarly resource.

Answer 1

Please see below for detailed answer :

States regulate health and other insurers, state regulation varies widely in both scope and intensity but may cover insurer information, taxation and operation, insurance contracts, and rates, unfair insurance practices, and other types of insuring organizations such as health maintenance organizations, preffered provider organizations(PPOs) and related managed care organizations (MCOs).

And talking about federal laws regulate employee health benefits. Most significant is the Employee retirement income act of 1974(ERISA). It is primarily concerned with reporting, disclosure, and fiduciary duties related to the establishment and administration of employee health benefit plans.The most noteworthy aspect of current federal law in particular ERISA , may be federal preemption of most state regulatory power relating to employee benefits. Federal tax policies,antidiscrimination laws, co-ordination with medicare , and also concurrent federal regulation of some HMOs(health maintenance organizations) also effect employee health benefits.

Now state regulations of health benefits arises from the historic role of the states as regulators of insurance. Whereas federal regulation of health benefits arises from the federal role in taxation and in regulating the relationships between employers and employees. Compared to current federal regulation of health benefits, state insurance tends to be more extensive and explicit. It should be noted that to some extent state regulation of health insurance and federal regulation of health benefits overlap and at times conflict.

STATE REGULATIONS OF HEALTH INSURANCE :

Formation and financial matters : Most states permit insurance companies to organize under general corporate statutes and to comply with industry specific requirments by obtaining a license, sometimes called a certificate of authority.The purpose of licensing is to protect the public against ineptly managed financially unsound insurance companies.

Insurance contract and Rate Regulation : State regulate health insurance contracts and seek to balance the interest of consumers in obtaining fair and reasonable coverage against the interests of insurers in avoiding unreasonable or undislosed risks. However the intensity with which state regulators pursue this objective may vary greatly from state to state . A representative approach to contract regulation could involve statutes or regulations that by their terms fix the definition of important terms in health insurance contracts require grace period prior to cancellation for nonpayment of premiums and require written disclosure of any coverage limitations or exclusions for preexisting conditions.

Unfair insurance practices : Insurance regulators rely upon the unfair insurance practice laws in many states to regulate discriminatory or deceptive behaviour by insurers . Typically unfair insurance practices laws are generic and regulate broadly all types of insurance companies and their dealings. Typical unfair practices includes misrepresenting benefits,making false or misleading statements, engaging in false advertising, or involving in unfair discrimination . Unfair discriminations includes making unfair or unreasonable distinctions between individuals of the same class and essentially the same levels of risk.

Coverage and mandate : States seek also to regulate the type of health insurance coverage that is available to their residents. Many require health insurers to offer specified benefits or to make payments to particular types of practitioners.

Managed care :

States also regulate insurance like , or risk-assuming, entities in what has come to be called managed care. Typically managed care involves organized systems of cost containment achieved through management of consumer and provider patterns of consumption of health care services.

FEDERAL REGULATIONS HEALTH BENEFITS :

Federal laws affects private employment-based health benefits in ways t

that are fundamentally different from those arising from state regulation. Federal law addresses the contractual aspects of health benefits provided as part of a benefits package in the context of a private employer- employee retaltionship : state health benefits regulations focuses on benefits in the context of an insurance arrangement.

Federal tax law which generally makes the economic value of conferring health benefits a largely nontaxable event and provides separate rules for certain specific types of plan including medical spending accounts and voluntary employee benefit associations.

Antidiscrimination laws which broadly prohibit discrimination based on race, gender, age and disability in employee benefit plans.

Medicare secondary payer rules which define when an employer health benefit plan must pay before Medicare will pay for an otherwise eligible medicare beneficiary covered by employment based health benefits.

On the other hand if we discuss on ERISA it normally focuses on process : how employers disclose and report information about their health benefits plans, how employers and other must behave as fiduciaries of these benefit plans ; how special rules on continuations of health benefits must be applied ; how the federal regulatory effort relates to state regulations .

Erisa has its roots in the common law of trusts . Its provisions governing the establishment of trusts and the requirements for fiduciaries have been derived from trust law . This body of law has also influenced the manner in which ERISA is enforced . Consequently courts approach violations of ERISA from the perspective of trust law .

Cobra continuation coverage :

Eligibility under COBRA continuation coverage provisions arises when certain qualifying events takes place that would otherwise result in loss of coverage for a qualified beneficiary or participant.Please see below events.

1) A termination or reduction in hours for a covered employee.

2) Death of a covered employee

3) A divorce or separation of a covered employee from his or her spouse.

4) A reorganization and bankruptcy by the employer of a retired employee