What is the definition of Rate Regulation?
Rate Regulation refers to the process where the state insurance commission regulates the premiums being charged by insurance companies.
Rate regulation is usually performed either through open competition or prior approval.
In an open competition state, the state leaves market forces to control premium rates, as long as these premium rates are not considerably prohibitive. In a prior approval state, the insurance company has to submit its new rates and wait for the state to give approval of it.
The state and the federal government have the authority to regulate the rates used by insurance companies that fall under their jurisdiction. They may regulate insurance provided for the individual market and fully funded employer-based plans, among others. But, private and self-funded employer-based plans fall outside of their authority to regulate.
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