Private Health Insurance: Federal and State Requirements Affecting Coverage Offered by Small Business

Most employees in the U.S. have health coverage through employers. Small businesses with fewer than 50 employees, however, are less likely to offer coverage than larger businesses. Many say they cannot afford it. When they do provide coverage, small businesses typically purchase insurance policies, while larger businesses are more likely to use their own funds to pay for some of their employees' health care, a practice known as self-funding. One proposal to make health coverage more affordable for small businesses would establish Association Health Plans (AHP), which could offer coverage to small businesses subject to different federal and state requirements than currently exist. In light of this proposal, GAO was asked to summarize current federal and state requirements for health coverage offered by small businesses, including mandated benefits, premium-setting requirements, and requirements regarding availability of coverage. To identify these requirements, GAO reviewed federal and selected states' laws and literature from the Department of Labor (DOL), National Association of Insurance Commissioners (NAIC), and other sources. For further detail on some states' insurance requirements, GAO reviewed 8 states with a range in the number of mandated benefits and 4 states with different types of premiumsetting requirements.