Who Regulates Group Health Insurance?


Offering group health insurance is an effective way to make your employees feel comfortably cared for, but it isn’t always an uncomplicated process. In fact, group health insurance is a relatively complicated topic, and it’s one that many employers have some trouble understanding fully. I’m here to provide answers to a few of the most commonly asked questions regarding group health insurance. If you’re an employer or an employee seeking information about group health insurance so that you can improve coverage at your workplace, you’ll find some answers here.

One of the most often-asked questions people have about group health insurance is: who regulates it? This question used to have a simpler answer: most group health insurance was governed at the state level. However, the ACA has involved the federal government in regulating many types of health insurance, and it remains to be seen whether impending changes to healthcare laws in the United States will affect that. Now though, learning about the role various levels of government play in the regulating process can provide you with the knowledge you’ll need to understand or make informed decisions about group health care.


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Who Regulates My Plan?

The most essential part of figuring out which authority regulates your employer-provided health care plan is to learn whether your company is fully insured or self-funded. Many people aren’t even aware of this distinction or what it means, so pay attention because it makes a substantial difference.

Employer-based healthcare that is fully insured works like this: your company pays premiums to a health insurance company who in turn provides benefits for employees and assumes the claims risk. These plans are still regulated at the state level. However, the ACA requires small businesses that offer fully insured healthcare to choose insurance companies that fulfil certain standards.

If a company is large enough (generally at least a few hundred employees), it has another option: it may insure its group benefit plans out of pocket, either in part or their entirety. Companies who choose this method will sequester away a certain amount of money instead of paying premiums to an insurance company, then assume the risk for health claims themselves. This process is known as self-funding, and the plans it affects are regulated by the federal Department of Labor.


Why Does It Matter Who Regulates My Plan?

Knowing who regulates your plan is important if you undergo a change in your life that threatens your coverage. The Consolidated Omnibus Budget Reconciliation Act of 1985 (or COBRA) is a federal law that helps many people on federally regulated plans keep their coverage for certain periods in such situations. However, some states have laws that dictate their own rules for continued coverage. These laws can be friendlier to employees in some cases, and less beneficial in others. If you are an employer, consider which option will be most cost-effective for your business. Learn your state laws, and determine whether self-funding will help you save money or cost you more.

Knowing who regulates your plan and how that can affect your coverage is a critical part of being prepared for unexpected circumstances, so it’s always useful to learn as much as possible. Find out whether your group coverage is self-funded or fully insured, and you’ll be a step closer to understanding your rights.