The Affordable Care Act: Who’s Watching?

The Affordable Care Act has a certain tension built into it. The Act is a federal law that requires individuals to have a minimum level of health insurance coverage. Health insurance in the United States, and the benefits that must be covered by that insurance, has long been a matter for regulation by the states. The ACA does not create any new federal mechanism to regulate health insurance. The tension thus comes from a system that sets out a federal requirement to purchase a product that meets certain specifications, but making sure that those specifications are met is left to the states.

How do the states regulate health insurance policies under the ACA? Traditionally, state insurance commissioners have had several enforcement mechanisms at their disposal to enforce compliance with insurance laws. These mechanisms include imposing fines for violations of laws, disapproving insurance plans that do not conform to state requirements, and market conduct examinations.

Many states continue to regulate health insurers’ ACA compliance in the same ways that they have always regulated insurance. The majority of states conduct a rate review process, and require the insurers to submit their proposed plans and rates for review by the insurance commissioner before the plan may be offered to the public. Under this proactive approach to enforcement, the insurance commissioner reviews the plans for compliance with both state laws and the ACA.

If a state does not have the statutory authority to regulate ACA plans, or if it is “substantially failing” to enforce ACA requirements, federal regulators will step in. To date, federal regulation is in place in only five states–Alabama, Missouri, Oklahoma, Texas, and Wyoming.

Thus far, the states appear to be taking a cooperative approach to ensuring ACA compliance. Instead of levying fines or imposing penalties, insurance commissioners tend to disapprove rates or plans or disallow the sale of non-compliant plans. Insurers are often provided the opportunity to gain approval if specified changes are made to its plan.

This cooperative approach to enforcement is consistent with guidance issued by the Department of Health and Human Services (HHS). Under the good faith compliance policy established by federal regulation (45 C.F.R. 156.800(c)), HHS will not impose civil monetary penalties against issuers who do not meet marketplace requirements, if the insurer makes good faith efforts to comply. For their part, insurers are expected to develop internal compliance monitoring programs, and to collaborate with HHS to remedy violations. This good faith policy will end in 2015.

The states often follow HHS’s lead, so states may be less inclined to follow the “good faith” policies of previous years. As the parties become more familiar with the ACA, the rationale for a lighter touch on enforcement is less compelling. Going forward, states may be more willing to impose fines or monetary penalties for non-compliant plans. While regulators may still be willing to give insurers the benefit of the doubt in some situations, insurers should be prepared for the possibility of tougher state enforcement in the future.


For further information, we invite you to download the following Legal Insights White Paper:

The Affordable Care Act: Mandated Benefits Compliance Standards

Further Reading and References:

Centers for Medicare and Medicaid Services, FINAL 2016 Letter to Issuers in the Federally-facilitated Marketplaces (Feb. 20, 2015), available at

Centers for Medicare and Medicaid Services, FINAL 2016 Letter to Issuers in the Federally-facilitated Marketplaces (Feb. 20, 2015), available at

Centers for Medicare and Medicaid Services, State Effective Rate Review Programs, available at (last visited Sep. 28, 2015)

Mark C. Nielsen and Tamara S. Killion, View From Groom: DOL and HHS Enforcement Activities Targeting Health Plans and Insurers (Jan. 30, 2015), available at