Consumer Protection in Private Health Insurance: The Role of Consumer Complaints

New York

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A. Jurisdiction and Responsibility for Consumer Complaints Systems

Two state government departments, the Department of Insurance and the Department of Health, share responsibility for health insurance complaints.

The Department of Insurance Consumer Services Bureau is responsible for complaints concerning payment, reimbursement, coverage, benefits, rates and premiums, while the Department of Health Office of Managed Care is responsible for complaints relating to quality of care and adequacy of providers. Both Departments collaborate on the production of, and contribute data to, the complaints report card, "New York Consumer Guide to Health Insurers".

For complaints involving other payers such as Medicare and Medicaid, the role of the Department of Insurance will depend upon the nature of the complaint. For example, Medicaid complaints involving prompt payment (statutory requirement for claims to be paid within 45 days) are under the jurisdiction of the Department of Insurance. However for most complaints, the Department of Insurance refers the consumer to the responsible agency (i.e. HCFA(now known as CMS) for Medicare complaints and State Department of Health for Medicaid complaints).

New York also enacted an external review process which took effect from 1 July 1999 which applies to private insurance and Medicaid, but not Medicare-only beneficiaries. Under this process consumers have up to 45 days from the date of receiving a final adverse determination through a plan's internal appeal process to make an application to the Department of Insurance for external review.

There has been no discussion about the establishment of an ombudsman office. Regulators at the Department of Insurance believe that the Department's Consumer Services Bureau is generally considered to be equivalent to an ombudsman office. The Consumer Services Bureau will recommend legislation based on analysis of patterns of complaints (e.g. prompt pay, external review).

B. Jurisdiction and Liaison with Health Plans

While the Department of Health handles quality of care complaints and licensing, the Department of Insurance still has regulatory responsibility for all types of health insurance including: indemnity insurance, HMOs and POS plans). Moreover, self-insured plans are outside the Department's jurisdiction, with some of these plans contracting with PPOs.

New York, like some other states in this study, has experienced problems because of the lack of direct regulatory authority over independent practice associations (IPAs). In 1999 Wellcare HMO experienced financial difficulties due to losses by its primary IPA capitation contract. Proposals to enhance regulatory authority over IPAs which are under current consideration by the Department of Insurance include:

The Consumer Services Bureau (CSB) provides detailed monthly complaints reports to the Life, Health and Property Bureaus. The CSB views itself as the "eyes and ears" of the Department and may recommend market conduct exams on the basis of consumer problems. It may also advise the Life, Health and Property Bureaus if there are delays in payment of claims, indicating potential financial difficulties for a plan. The CSB participates in quarterly meetings which the Life, Health and Property Bureaus has with all plans.

Grievance Data

HMOs are required to submit internal utilization review (UR) and grievance data to the Insurance Department, which are then included in the Department's published annual complaints reports. This requirement applies to all HMOs, as well as insurers offering a contract that meets the definition of a managed health care insurance contract. Section C on Complaints Reports discusses the type of data submitted by plans in more detail. However, in summary, the Department defines UR appeals as when a consumer seeks to overturn an insurer's decision to deny a medical service on the grounds of medical necessity or that services are investigational or experimental, while grievances are defined as all other challenges to decisions made by an HMO.

To ensure consistency in grievance and UR data submitted by plans, the Department released a circular letter in 1999 specifying what should be included in these reports (Attachment 1). Regulators commented that, following the issuing of this circular, they were confident about the comparability of data coming in from plans. Regulators also noted that while the relevant legislation is quite clear in distinguishing between UR appeals and grievances, sometimes insurance plans will have a combined department which manages both types of complaints. The Department has established a single point of contact for each plan to deal with UR and external review.

C. Complaints Reports

Overview

The complaints reports produced by the New York Department of Insurance are among the most comprehensive of any of the states included in this study. Attachments 2 & 3 provide copies of the 1999 and 1998 reports respectively, which each include data for the previous calendar year. Both the 1998 and 1999 reports are examined as they differ in format. The key differences between these reports are:

These reports also provide advice for consumers on how to choose a health insurer, background information explaining the key differences between managed care and fee-for-service health insurance, and information on new consumer protections enacted by the legislature.

In addition to publishing comparative complaints reports, the Department makes available plan- specific information to consumers.

In what follows, the key features of the reports are described, the major findings from data analysis are identified, and the usefulness of the reports is assessed from both the perspective of consumer friendliness and their value in monitoring the implementation of patient protection legislation.

Features

Scope - As a result of their comprehensiveness, the New York complaints reports are highly complex. In particular, the reports break down complaints using two key variables, type of complaint and type of health insurance, as follows:

Type of complaint – the reports distinguish between the following different complaint measures:

Type of health insurance – the reports distinguish between the following types of health insurance:

Given the evolution of different types of managed care products, the differences among these three groups of health insurers are not as clearcut as previously.

Justification of complaints – the reports include both total and "upheld" complaints. For complaints received by the Department of Insurance or the Department of Health, upheld complaints are when the respective Department decides in favor of the complainant. Complaint ratios are calculated using upheld complaints. Similar measure are used for utilization review appeals and grievances where the reversal rate is the percentage of decisions decided by the health insurer in favor of the consumer.

Complaints ratios – in the 1999 report these ratios are calculated on the number of upheld complaints divided by the health insurer's total annual premium, using complaints received by the Insurance Department only (not Health Department complaints). A 1.0 ratio indicates the Department upheld one complaint for every $1 million in premium. The report does not include any ratios for grievances or utilization review appeals.

Coverage – the reports exclude data on some low-volume premium plans. HMOs are excluded with less then $25 million in NYS premium, while non-profit indemnity and commercial insurers are excluded with less than $50 million in NYS premium.

Data Analysis

Some of the key aggregate findings follow.

Consumers are more likely to complain to their health insurer than to state government departments.

The 1999 report includes the HEDIS measure as to the proportion of health plan members who had called or written to their plan with a complaint or problem in the last 12 months. On average, 21% of HMO members had done so, noting that this measure is greater than the number of complaints which might actually result in a formal grievance or utilization review appeal with a plan.

A Californian survey (see California chapter) has indicated that there is a hierarchy of where people complain, with consumers being much more likely to complain to their health plan than to a state government agency. This is confirmed for New York in Figure 5.1 which sums the total closed complaints across HMOs, nonprofit indemnity and commercial insurers, regardless of whether the complaint was upheld. Figure 5.1 indicates that consumers are about three times as likely to formally complain directly to their plan than to state government departments. This is not surprising. All state insurance departments including New York advise consumers to first take advantage of the insurer's internal appeal process to resolve any problems.

Figure 5.1: Where Complaints are Received, New York, 1999

There are major differences in whether complaints are justified or upheld according to where the complaint was lodged and the type of health insurance plan.

Table 5.1 shows the proportion of complaints that were upheld in favor of the complainant by where the complaint was lodged and the type of health insurance plan. The 1998 Report notes that interpreting reversal rates is complex. For grievances and utilization review appeals, low reversal rates may mean that plans are initially making determinations in compliance with contracts, regulations and laws, or it could mean that plans are incorrectly affirming some of their determinations. High reversal rates may reflect the poor quality of plans' initial determinations or may reflect a responsive internal grievance process.

In the context of these qualifications, it is notable that non-profit indemnity insurers have much lower rates of upheld complaints than HMOs and commercial insurers for complaints lodged with the Department of Insurance, suggesting that they have a better complaints record in being less likely to receive unwarranted complaints.

This difference for non-profit indemnity plans may partly be a function of the type of complaints - prompt pay and other complaints. If, for example, prompt pay complaints were more likely to be upheld and non-profit indemnity plans received a lower volume of such complaints, that might account for their lower reversal rate for total complaints. In fact, prompt pay complaints comprise 79% of all HMO complaints to the Department of Insurance, 62% of commercial plan complaints, but only 43% of non-profit indemnity complaints. However Table 1 also shows that prompt pay complaints are upheld at only a slightly higher rate than total complaints for HMOs and commercial insurers, suggesting that there are other factors behind the relatively good performance of non-profit indemnity plans.

Table 5.1: Share of Complaints Upheld, New York, 1999

Where complaint lodged Type of complaint HMOs Non-profit indemnity insurers Commercial insurers
Department of Insurance Total complaints 40% 16% 40%
Department of Insurance Prompt pay complaints 43% 13% 50%
Department of Health Quality complaints 21% NA NA
Health plans Utilization review appeals 51% 47% 21%
Health plans Grievances 48% NA NA

Non-profit indemnity plan members are much less likely to complain than members of HMOs or commercial health insurance plans.

Figure 5.2 shows the complaints ratios (total upheld complaints divided by the premium volume of plans), indicating that HMOs and commercial insurers are two to three times more likely to receive upheld complaints than non-profit indemnity insurers.

Figure 5.2: Complaints Ratios for Complaints Lodged with the Insurance Department, New York, 1999

There have been quite large increases in the rates of all types of complaints between 1997 and 1998.

Table 5.2 shows the growth in complaints between 1997 and 1998 for the different types of complaints. Ideally, it is best to use complaints ratios when examining trends as this adjusts for changes in the volume of health insurance business. However neither grievance data nor utilization review appeals are expressed as ratios, meaning that only changes in the total volume of such complaints can be examined. The very large increase in grievances and utilization review appeals between 1997 and 1998 may therefore partly reflect growth in these market shares.

Table 5.2: Growth in complaints, New York, 1997-1998

Complaint measure Health insurance type 1997 1998 % increase
Complaints ratio (total complaints to Department of Insurance) HMOs 0.162 0.302 86
  Non-profit indemnity insurers NA 0.119 NA
  Commercial insurers 0.112 0.329 194
Number of utilization review appeals (closed) HMOs 4,439 14,427 225
  Non-profit indemnity insurers 801 5,606 600
  Commercial insurers 1,371 5,979 336
Number of grievances (closed) HMOs 10,657 18,741 76

Note: In 1997 complaints ratios for non-profit indemnity insurers were calculated using claims, rather than premiums, and are therefore not included given the lack of comparability with the 1998 calculation.

Assessment of the Report

Consumer friendliness - The length and comprehensiveness of these reports may deter some consumers. The 1999 report recognizes this potential problem, noting that the amount of information "can appear to be intimidating", and proposes a strategy for consumers to navigate the report through a series of steps according to their type of health insurance. The series of questions about choosing a health insurer and the explanation of managed care options are also helpful in providing consumers with some context for the complaints data.

The style and layout of the 1999 report is more consumer-friendly than the 1998 report. In part, this is a result of including HEDIS data using a graphical presentation format (colored circles denoting average, above average and below average performance). The presentation of the complaints data is also simplified in the 1999 report, with easier-to-read tables that include some bar charts and the complaints ranking prominently displayed in the table. Also helpful from a consumer perspective is the deletion of the detailed policy analysis material found in the 1998 report which examined three-year trends in complaints and differences in complaints by geography, profit status and premium volume.

Despite these improvements, the 1999 report still presents the consumer with a significant analytical challenge - to understand the importance of the different types of complaints measures (total complaints, prompt pay complaints, UR appeals, grievances, complaints to the Department of Health), to compare the performance of relevant plans across these measures using either rankings or complaints ratios, and then to make a balanced judgement as to the most suitable plans.

Monitoring patient protection implementation - The data in these reports do not provide sufficient disaggregation of the types of complaints, grievances or utilization review appeals to be useful in monitoring the implementation of specific patient protections. However it is likely to be of use to regulators, particularly in assessing differences among plans in reversal rates for grievances and utilization review appeals.

Future plans - Under the recent external review legislation, the Department will be required to include external review data in its 2000 report to the legislature.

D. Public Education Activities

Publications

The Department of Insurance produces a wide range of consumer publications on health insurance. In addition to the New York Consumer Guide to Health Insurers described in the previous section, other significant publications include:

Outreach

The Consumer Services Bureau runs about 100 outreach programs annually including visits to groups such as senior centers and high schools to talk about insurance. The Department of Insurance also works with the Department of Aging to provide advice about how to select different types of insurance policies.

The Department meets with HCFA(now known as CMS), the Office of Aging and the New York Health Department on the HIICAP program (Health Insurance Information, Counseling and Assistance Program) which is funded by the federal SHIP program. Under the HIICAP program volunteers sit down on a one-to-one basis with seniors to explain health insurance options. There is a training manual on the HIICAP program which the New York State Insurance Department reviews and provides technical assistance. Assistance is also provided at the end of the year, for example, when HMOs withdraw from the market.

Media

The Department of Insurance is extremely vigorous in using the media to publicize its efforts on behalf of consumers with weekly and sometimes, daily, press releases on issues including the release of the annual consumer guide to health insurance, promoting the availability of the external review hotline and penalties against non-compliant insurers. Attachments 4 & 5 provides examples of press releases promoting the consumer complaints guide.

E. Agency Performance Measures

Staffing

The Department's Consumer Services Bureau has 107 allocated staff, 34 of whom are clerical support staff. While some specialize in health insurance, others work across multiple lines of insurance business. In addition to its 1-800 hotline, the Department maintains offices in several cities including New York City, Albany, Buffalo and Mineola, all of which have a shop-front capacity to deal with consumers in person.

Volume of Business

The Department monitors web site hits and information calls to the Consumer Services Bureau. In 1999 the Consumer Services Bureau responded to about 450,000 telephone inquiries for information and received 67,186 complaints from consumers and providers across all lines of insurance business. Of the 52,737 complaints closed in 1999, 21,436 concerned accident and health insurance.

The Department also has dedicated toll-free lines for specific issues - the New York State Partnership for Long Term Care and Prompt Pay Complaints. In 1998 the Consumer Services Bureau responded to about 6,400 calls about the Partnership which allows individuals to qualify for Medicaid after their long term care policy benefits are exhausted, without divesting themselves of their assets. The Prompt Pay Law took effect as of January 1998 and requires all health insurers to pay undisputed health insurance claims within 45 days of receipt. Since the law took effect the Department has handled over 40,000 prompt pay complaints, with fines to insurers in 1999 of more than $266,000. Other toll-free lines include the disaster line, the multi- lingual line and the external appeal line.

Financial Savings to Consumers

The Insurance Department does not track financial savings to consumers with regulators commenting that it is unclear whether this information is particularly useful. For example, regulators noted that many consumers want information on whether they are treated properly and this may not result in additional financial savings to consumers. Regulators believe that measuring complaints only by $ returned to consumers understates the breadth of the role that the Department performs for consumers.

External Audit

There are two types of audit. The Office of the Controller audits all state government agencies. This report is given to the Insurance Department for comment, goes to the Superintendent/Governor and is publicly available, including receiving media coverage in the newspaper. There is also an internal control officer who audits the Department, including the Consumer Services Bureau.

Consumer Satisfaction Surveys

The Insurance Department has not yet undertaken consumer satisfaction surveys of people using its complaints function. It is building an "imaging system" which will involve paperless management of complaints. Under this system there will be the capacity to generate consumer satisfaction surveys. There is no view yet as to what form such surveys might take (e.g. postcard or telephone surveys).