257 Enforcing Mental Health Parity 2015
A. Regulation of Commercial Health Insurance
Generally speaking, states regulate insurance in the United States.30
State legislatures, acting as public policymakers, enact legislation that provides the regulatory framework under which insurance departments oper-
ate.31 These departments typically prohibit the sale of insurance by anyone
who has not obtained a license from the state insurance department.32 Government authorities heavily regulate the insurance industry mainly because
of the complexity of insurance contracts and because consumers have very
little involvement in the negotiation of plan terms.33 Insurance regulation is
often divided into six main functional divisions: licensing (of insurance
companies), taxation, pricing rates, solvency, forms, access and availability,
and market conduct.34
State control of insurance regulation has been affirmed both by the United States Supreme Court and in various federal statutes.35 In the mid-
1800s, state legislatures began creating independent administrative agencies
to supervise insurance activity in their states.36 Some early insurance issuers challenged state control of insurance regulation.37 The Supreme Court
would eventually hear this challenge after an insurance broker, licensed in
New York, was indicted for selling an insurance policy in Virginia.38 The
Court rejected the broker’s challenge to the validity of the Virginia law and
concluded that states were the primary regulators of insurance, not the federal government.39 This ruling placed the burden of insurance regulation
squarely with states and beyond the reach of Congress.40
However, the Supreme Court changed its position. In 1944, the Court
overruled its earlier decision in Paul v. Virginia and held in United States v.
South-Eastern that insurance was interstate commerce and therefore subject
to federal regulation:
30. See, e.g., TOM BAKER, INSURANCE LAW AND POLICY 651 (2008) (noting that this “is
at least in part the result of a long history of state regulation dating to the mid-nineteenth
31. NAT’L ASS’N OF INS. COMM’RS, STATE INSURANCE REGULATION 2 (2011), available
32. BAKER, supra note 30, at 637.
33. NAT’L ASS’N OF INS. COMM’RS, supra note 31.
34. BAKER, supra note 30, at 637.
35. McCarran-Ferguson Act, Pub. L. No. 79-15, 59 Stat. 33 (1945) (codified as amended at 15 U.S. C. §§ 1011–1015 (2006)); see, e.g., Paul v. Virginia, 75 U.S. 168, 170 (1869)
(holding that insurance is not interstate commerce and therefore cannot be regulated at the
36. BAKER, supra note 30, at 652.
37. Id. at 652–53.
38. Paul, 75 U.S. at 170.
39. Id. (concluding that “issuing a policy of insurance is not a transaction of commerce”).
40. Id. at 183; see also BAKER, supra note 30, at 652–53.