Regulate the Commercial Health Insurance Market Effectively

The federal law creates many new standards for health insurance underwriting and rating practices. Primary responsibility for enforcing most of those standards falls to the states. While insurance regulation is not a new state function, most states will be expected to dramatically increase their scrutiny of insurance rates and rate increases. Insurance regulation requires a significant number of resources, including highly technical skills. It also requires a range of enforcement tools. Effective regulation is essential to assure availability of affordable coverage, to avoid risk selection between the exchange and the external market, and to focus the health insurance industry on delivery system improvements.

The transition to new rating rules for small group and individual insurance must be handled carefully, as the existing market is fragile and subject to instability, and the amount of change in this market that will occur over a short period involves significant uncertainty. States will also have a significant new role regarding review of health insurance premium increases. States must scrutinize rating and marketing practices carefully inside and outside the exchange. States must monitor the status of grandfathered plans to assure that they do not become an opportunity for risk selection or risk segmentation.