Health Insurance Regulation and Ethics
Core concepts
Understand the regulatory framework: state insurance departments regulate insurance, while federal laws set minimum standards. Know licensing requirements for agents and insurers, market conduct exams, rate filing, and solvency regulation. Understand HIPAA (privacy and portability), ACA market rules (guaranteed issue, essential health benefits, medical loss ratio), ERISA (group plan fiduciary rules), and COBRA.
Know ethical duties: fiduciary responsibility, suitability, disclosure, confidentiality, and fair dealing. Understand twisting (misrepresenting to induce replacement), churning (excessive replacement), rebating (offering inducements not in the policy), and misrepresentation. Know the agent's duty to remit premiums and avoid commingling funds.
Traps
Questions confuse twisting and churning, or assume rebating is legal everywhere (it is generally prohibited). Another trap: mixing state and federal authority-HIPAA and ACA are federal, while licensing and market conduct are state. Watch for confidentiality questions where sharing protected health information without authorization is a violation.
Worked example
An agent persuades a client to drop an existing policy by exaggerating the new policy's benefits, without disclosing the surrender cost. This is twisting-a misrepresentation used to induce replacement-and violates fair-dealing and disclosure duties, exposing the agent to licensing discipline.
Rule of thumb: State = licensing and market conduct; federal = HIPAA, ACA, ERISA, COBRA. Ethical violations usually involve misrepresentation, inducement, or breach of confidentiality.