State health insurance laws are passed to ensure that the health coverage provided by employers takes care of employee's needs that insurance companies have been reluctant to cover in the past. The health insurance industry in the state may not have offered certain kinds of coverage due to unreasonable costs or for other reasons. The state steps in and passes laws called consumer protection laws that mandate the employer's health coverage for employees cover the issue under the policy. If the health insurance company refuses to do so, the state can bar them from selling policies in that state. Insurance companies comply a majority of the time, but in doing so, premiums increase in order to cover the cost of the new state health insurance mandate.

There are different aspects of how state laws affect health coverage for residents of that state. Each are there to protect the consumer from being discriminated against by the insurance company in general, but each focuses on a different aspect of protection.

Community rating regulations restrict health insurance companies from picking and choosing who and how they insure individuals. In general, regulations require insurance companies to offer the same type of premium to everyone, no matter their age or gender. Pre-existing conditions can and are still used to deny insurance to an individual through employer health insurance as the insurance company has the right to not take on a high-risk individual.

However, pre-existing conditions are restricted by what are known as guarantee issue regulations. These regulations are used to limit the health insurance company the ability to deny insurance to an individual. Health insurance companies tend to get around this state health insurance regulation by offering prohibitively expensive policies to those who are categorized as high risk.

Hospitals and doctors have equality protections under regulations known as any willing provider. The state laws limit a health insurance company's ability to pick and choose which doctors and hospitals they prefer to contract with. This regulation falls under the guise of consumer choice, which allows a patient to utilize the doctor or hospital of their choice. HMOs may seem to get around this regulation, but in reality, they do not. The HMO still covers doctors that are out-of-network, but at a lower rate than doctors that are in the network.

Mandated benefits are state health insurance laws that make sure that there is health coverage for specific treatments. These laws are on the books to eliminate health care discrimination and ensure coverage for certain population groups.

Ultimately these laws wind up costing the consumer more money via premiums - even with employer discounts - an unfortunate side effect of state health care laws.