Health insurance companies face a tremendous amount of regulation, both on the federal and the state level. While federal regulation has sweeping implications for the health insurance industry, state health insurance law may be even more influential. Health insurance companies are effectively punished by state insurance laws and compelled into acting in a way that's fair to their customers, so when looking for health insurance, it's important to note the effect of individual state insurance laws and their enforcement.

Some of the regulatory tools used by states are subtle. For instance, state health insurance law often controls the definitions of terms in health insurance contracts. "Preexisting conditions" can mean entirely different things in two different states, which can affect coverage and insurance claims in a major way. States will also pass more explicit legislation that stops insurance companies from taking too long when answering claims or from unfairly denying claims. State health insurance law picks up where federal health insurance law leaves off, protecting consumers and preventing unfair practices. It's a good idea to read about a state's specific health insurance laws before choosing a policy, as state law can greatly affect the rights of residents and the overall cost of insurance.

Most states enforce their laws with insurance commissions, which are set up to regulate and control various types of insurance companies. Health insurance companies must stay in full compliance with state health insurance commissions or face heavy fines. In serious cases, a health insurance company can be banned from doing business in a state until grievances against the company are addressed. Insurance policy holders can turn to their state insurance commission to make a complaint against their insurance company, which usually happens if the insurer won't respond to a claim or if the insurer gives an unfair reason for denying a claim or coverage. The power of state insurance commissions can vary, but in general they're an effective means of resolving a conflict with a health insurance company, especially when all other options have been exhausted.

While state health insurance law can serve an important purpose in improving the quality of care for patients and keeping costs down, too much regulation can drive up costs. The more expensive it is for an insurance company to operate, the more expensive insurance will be for their customers. As such, states are constantly trying to find an even balance between regulation and free-market ideals. For insurance customers, however, it's always important to know rights and abilities under state law, as this information can be absolutely vital when looking for a policy or making a successful insurance claim.