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Consumer Protection in Private Insurance: State Implementation and Enforcement Experience

Publication Date


A Report for the Office of the Assistant Secretary for Planning and EvaluationU.S. Department of Health and Human Services

Contract No. HHS 100-97-0005


Stephanie Lewis, J.D., M.H.S.A. Karen Pollitz, M.P.P.

Institute for Health Care Research and Policy Georgetown University

October 2000


I. Introduction

II. Consumer Protections and Implementation Issues

III. Other Cross-Cutting Implementation Issues

IV. The Enforcement Process

V. Lessons for Federal Policymakers


Policymakers have the unenviable task of reining in managed care strategies that might prevent enrollees from getting care when they need it while not undermining the health plan community’s ability to contain health care costs. The U.S. Congress and the Clinton Administration have been debating health plan consumer protections for the private health insurance market that could help consumers who are most vulnerable. This federal debate follows almost a decade of activity by state policymakers in this area.

The Office of the Assistant Secretary for Planning and Evaluation (OASPE) has requested a study of state implementation of the following consumer protections specifically for the most seriously and chronically ill patients:

  • access to emergency services
  • network adequacy
  • continuity of care
  • standing referral, and
  • access to out-of-network specialists.

These protections are sought by people with AIDS, cancer, diabetes, heart disease, and other serious or chronic conditions, who require consistent access to a variety of health care services and whose care can be very costly. Consumer advocates seek broad rights that give individuals greater access to services that they need and that can be readily and strongly enforced. Health insurers that seek to manage the cost of care of such expensive conditions also are very concerned about these protections. They have sought to maintain broad discretion over decisions about access to services and to have standards that they believe are operationally feasible. States have sought to balance these interests in implementing patient protections. They have done so operating under significant constraints, including statutory language that is sometimes vague and ambiguous, lack of resources, and lack of data. State regulators also have struggled with challenges inherent to these protections. Crafting general rules to suit diverse individual situations has proven very difficult. So has been foreseeing all the ways in which these new protections might interact with existing laws and evolving markets. Educating consumers, health plans and providers also has been a challenge.

Federal regulators will face these and other challenges if national consumer protections are adopted. The states implementation experience yields important lessons about what kinds of things have and have not worked. Federal policy makers are fortunate to have the opportunity to learn from this experience and may benefit from it.

This report discusses the experience of four states — Colorado, Maryland, Minnesota, and New York — that have enacted continuity of care, standing referral, access to specialists, network adequacy and emergency service provisions.


Secondary sources were used to identify states that have enacted a comprehensive range of health plan consumer protections. We specifically looked at states that had enacted continuity of care, standing referral, access to specialists, access to emergency services, and network adequacy provisions.

— Emergency service standards require health plans to pay for emergency care when patients reasonably seek such services. The standards apply for emergency care obtained in or out of the health plan’s network. There are several components to state laws establishing these protections including the prudent layperson standard. Under this standard, health plans are required to pay for emergency care provided to enrollees who reasonably believe that they need immediate medical care because of their symptoms.

— Network adequacy standards are designed to make sure that health plans have an adequate network of providers to care for their enrollees. These standards often focus on the types and number of primary care and specialty providers, the distance which enrollees have to travel to see their providers, and hours of operation.

— Continuity of care refers to rules enabling a patient who is in a course of ongoing treatment to continue receiving care from a physician or other provider who is not in the plan network. The need for care continuity may arise because the physician leaves the managed care plan’s network or because the patient changes managed care plans. In either case, continuity of care is protected for a limited time — intended to permit a reasonable transition to care provided by a physician who is in the plan network.

— Enrollees who need ongoing specialty care may seek a standing referral to a specialist. A standing referral authorizes care for a longer period of time (up to an entire course of treatment) for patients with a serious or ongoing condition. By contrast, for less serious or short-term care needs, health plans typically require a separate referral each time a patient needs to see a specialist. We also explored states with a related law that authorizes the use of specialists to provide primary care services.

— Access to specialists provisions provide access to specialists including those who do not participate in the network of the enrollee’s health plan (out-of-network specialists). Because of our interest in provisions that most affect the seriously and chronically ill we did not explore issues related to direct access to obstetricians and gynecologists or other specific types of providers.

After identifying a subset of states that have these provisions, we researched the laws to determine when they were enacted and what approach was used. The four study states were selected primarily because they had several years of experience implementing most, if not all, of these provisions. Research protocols were developed to help determine these states experience in this area. Telephone interviews were conducted with health and insurance department regulators and other state officials, health plan representatives and consumer advocates in these states. Interviews were conducted on a “background” basis. As a result, interviewee remarks are not attributed to a specific person. The authors have made every attempt to assure that the information in this report is accurate as of the date of publication.

Structure of Report

This report examines Colorado, Maryland, Minnesota and New York’s experience implementing and enforcing continuity of care, standing referral, access to specialist, network adequacy and emergency service standards. In Chapter II we discuss the implementation challenges associated with each of these consumer protections. In Chapter III, we review implementation issues applicable across the consumer protections including the approaches regulators use to provide guidance. In Chapter IV, we review how regulators monitor and enforce implementation of these health plan consumer protections. Chapter V provides a discussion of lessons for federal policymakers based on these states’ experiences.


Each of these consumer protections presents their own implementation challenges. In some cases, these challenges are prompted by vague and ambiguous statutory language coupled with broad health plan discretion. At other times challenges arise because these consumer protections apply to such widely varying situations that it is difficult for regulators to provide definitive guidance applicable to each circumstance. In this section, we discuss some of the key challenges implementing each of these consumer protections and some of the approaches used by states to address them.

1. Emergency Services

Emergency service standards require health plans to pay for emergency care when patients reasonably seek such services. The standards apply for care obtained in or out of the health plan’s network. The emergency care access laws enacted by the four study states are reasonably similar. A discussion of some significant issues that have arisen in implementing these laws follows.

Definitional/interpretive issues

Prudent Layperson Standard: State laws vary in their definition of “prudent layperson” – the standard under which emergency care sought by patients must be covered by health plans. The term “prudent layperson” leaves a great deal of room for interpretation. Therefore, an early question for this part of the study probed how states have defined this term. We assumed that a precise or absolute definition would be very difficult to develop, given the many factors that might be considered in determining whether a lay consumer was prudent. Consider the following example:

Mary and Kevin present to the emergency room with their newborn who is crying continuously.
Scenario 1: The baby has no fever or any other symptoms.
Scenario 2: The baby has a fever of 101 degrees.
Scenario 3: The baby has a fever of 104 degrees.

Under which scenario would Mary and Kevin’s trip to the emergency room be considered prudent? Beyond the clinical symptoms, other contextual analysis could matter. Are Mary and Kevin new parents? Did they first try to call their pediatrician? Is it midday or the middle of the night? Is there other relevant history – perhaps they lost an infant previously to sudden illness – that should be considered? The fact-specific nature of this analysis poses implementation problems.

As it turned out, none of the study states have issued further, up front guidance on how to interpret the prudent layperson standard. In practice, health plans have been left discretion to apply this standard to their enrollees, subject to appeal and review by state regulators. Consequently, one plan might pay Mary and Kevin’s claim under the first scenario, while another might deny the claim under the first but pay it under the second or third.

Health plans have not always exercised their discretion well, as a sample of external appeals cases in Maryland illustrates. These include a man with chest pain radiating down his left shoulder and arm, a patient with back pain so severe she could neither sit nor stand, and a 61-year-old woman who had a clothes dryer dropped on her foot. These patients sought care in the emergency room. Maryland managed care plans denied all three of these emergency room claims for not meeting a prudent layperson standard. All three denials were subsequently overturned on external review.

In fact, across all Maryland health plans, the high overturn rate of emergency care denials suggests that further guidance on how to interpret the prudent layperson standard may be needed. According to an April 2000 report issued by the Maryland Insurance Administration, 65% of grievances to health plans involving emergency care were overturned or modified by health plans; 87% of emergency room denials taken to the Health Education and Advocacy Unit of the state's Attorney General's office were overturned or modified; 100% of external appeals of emergency room care (i.e., the three cases discussed above) were overturned by the MIA.1

By compiling these appeals decisions and reporting on them annually, Maryland is making it possible for such guidance to be discerned from the body of “case law” that accumulates.

Claims Forms and Recordkeeping

An investigation by Maryland regulators into emergency room denials uncovered a problem not anticipated when the state’s prudent layperson law was first implemented. The MIA reviewed over 800 cases involving denial of payment for valid emergency services and found these denials were not abusive, but rather attributable to incomplete data reporting. Hospitals were using uniform claim forms, such as the HCFA(now known as CMS) 1500 and UB92, which report data on final diagnoses and the services provided. These forms did not have places to report information on presenting symptoms and other circumstances necessary to evaluate the prudent layperson standard. Consequently Maryland hospitals now often attach appropriate pages from the medical record when they think the final diagnosis might give rise to questions about the validity of the emergency room visit. Plans may also seek additional information when necessary. Minnesota has gone a step further and requires health plans to seek information about presenting symptoms and other circumstances before an emergency services claim can be denied. Colorado recently fined a health plan for, among other violations, having a policy that encouraged the denial of emergency services without conducting an investigation of the circumstances under which the care was received.

Prior Authorization and Post-Notification

Most of the study states do not permit health plans to require enrollees to seek prior authorization before receiving emergency services. Minnesota’s law does allow a prior authorization requirement but both regulators and health plan representatives note that most plans in the state choose not to do so. Health plans have, however, developed administrative requirements that require the enrollee to contact them within a certain time period – such as 48 hours - after receiving emergency room services. Health plans note that this requirement helps ensure that the primary care provider is aware of the emergency services provided to the enrollee and facilitates the plan-provider relationship. Out of concern that some health plans were imposing on enrollees a 24-hour notification requirement, Minnesota established a 48-hour standard in its statute. The state’s law clarifies that HMOs must make exceptions to this requirement when the enrollee is not physically or mentally able to give notice within 48 hours and the care would have been covered if the enrollee had met this notice requirement. Colorado law requires a similar exception.

Payment Issues

There has been some question about how plans must respond to claims where ambulance services deliver enrollees to out-of-network facilities. Health plans may differ in how they pay for ambulance transport to and services provided by an out-of-network emergency room in the service area. In Colorado, HMOs are required to notify enrollees in brochures, contracts, policy manuals and printed materials distributed to enrollees about their option to use 911 services and prohibited them from discouraging enrollees from using 911 services or denying reimbursement for medical or transportation services. Regulators highlighted an example of a health plan practice that might discourage enrollees discovered during a market conduct exam. The health plan charged a higher co-payment for emergency services received from a non-network provider than that applied to in-network services. Because an enrollee may not have a choice of where the ambulance transports her, the agency concluded that the plan's policy might discourage her from using 911 services. In Colorado, HMOs must reimburse for emergency services obtained as a result of ambulance transport if the enrollee believes he needs immediate medical care to prevent death or serious impairment to his health.

Notice to Enrollees

Consumer education about this protection involves inherent challenges. Getting the general public to focus on this protection in advance of an emergency that may never arise also is difficult. And emergencies, when they do occur, may not present effective teaching opportunities.

Health plan member handbooks and other member materials are one important place to locate information for consumers. Some health plans have developed useful educational materials for enrollees with examples illustrating when emergency care might be sought prudently. Most people interviewed for this study, however, pointed out that very few people actually read these handbooks and are very unlikely to do so in an emergency. Some health plans have also adopted a “pay and educate” approach, advising their enrollees why an inappropriate emergency admission will be covered in the first instance but not in the future. Brochures published by regulatory agencies and consumer organizations may also include language to further explain the prudent layperson standard.

2. Network Adequacy

Network adequacy is a core reform in most state managed care reform laws. Several issues emerge as noteworthy from the implementation experience in the four study states.

Definitional/Interpretive Issues

State network adequacy laws also vary to a great extent in the requirements they set for health plans and their definition of what constitutes an adequate provider network. Of the study states, Colorado and Maryland statutes are very vague while New York and Minnesota laws are more prescriptive and detailed. Minnesota, for example, includes specific maximum travel and distance times in their definition of network adequacy. A network is adequate if all enrollees have access to a primary care physician within 30 miles or a 30-minute drive, and access to specialty care within 60 miles/60 minutes. In New York, health plan networks must meet time and distance and standards and afford enrollees a choice of 3 primary care physicians.

None of the study states have published additional regulatory guidance on how to interpret their statutory definition of network adequacy. Where additional guidance is necessary, it appears to be offered on a case-by-case basis.

Rural Exceptions Process

Regulators we interviewed had different opinions on the advisability of setting more detailed standards. Regulators in Colorado, for example, noted the sharp differences between health care markets in Denver and more rural areas of the state and the difficulty of applying an absolute standard for adequacy across all areas. They observed that patients in rural counties might not object to driving an hour to get care, while Denver residents might consider this a serious access problem. As a result, they urged flexibility and common sense in considering community expectations and the practical availability of physicians in determining adequacy on an area-by-area basis. Minnesota regulators also use a waiver process to exempt health plans from that state’s more prescriptive network adequacy standards in rural and other health manpower shortage areas.

Colorado also has established a special task force on rural access issues to monitor developments in these market areas and gather advice on the most appropriate regulatory responses. The Insurance Commissioner convened this task force to represent points of view from all key stakeholders. Its high level membership includes CEOs of prominent insurance carriers, presidents of the state hospital and medical associations, and representatives from employers, consumers, and insurance agents. The task force also advises the Commissioner on small group health insurance market issues. The most significant policy recommendations emanating from the task force to date have involved small group market issues, though it has recommended some administrative changes to ease paperwork burdens on health plans in rural areas. The task force continues to meet to consider issues and make recommendation for the next legislative session in 2001.

Unintended Consequences

One regulator expressed concern over an unintended use of the network adequacy requirement in her state. Doctors in one area appear to have tried to use the state’s network adequacy law to strengthen their leverage with a managed care plan and negotiate for more favorable contracting terms. The regulator worried that this could result in unintended premium increases in rural areas, where managed care plans can be difficult to establish in the first place.

Documenting Network Adequacy

Relating to the issue of network adequacy is the requirement that health plans make available to enrollees provider directories that are accurate and up to date. For a network to be adequate, providers must not only have contracted with a plan, they must be willing to take plan enrollees and enrollees must be able to find them. Two of the study states have spent significant implementation activity relating to provider directories. The state of Maryland has conducted investigations into the accuracy of health plan provider directories. Serious deficiencies have resulted in the Commissioner issuing corrective orders and fines. New York regulatory staff survey plans by posing as enrollees or prospective enrollees asking for a copy of the directory. They also call names in the directories at random to see whether these providers are, indeed, contracting with the health plan and accepting enrollees as new patients. Problems encountered through such surveys are brought to the attention of health plans and must be corrected to avoid further sanctions. In New York, consumer advocates published the results of their investigation on the adequacy of a plan’s provider network and the accuracy of the provider directory. This experience suggests that consumer organizations may serve as a useful resource for regulators. However, most of the organizations with whom we spoke cited lack of resources as a barrier to effective data collection efforts.

3. Continuity of Care

This protection enables a patient who is in a course of ongoing treatment to continue receiving care from a physician or other provider who is no longer in the plan network. The need for care continuity may arise because the physician leaves the managed care plan’s network. Of the study states, two — Minnesota and New York — also extend this protection when the patient changes managed care plans.

Definitional/Interpretation Issues

Beyond the statutory language, there is little in the way of state regulations or other forms of written guidance that defines further who is eligible for continuity of care and under what circumstances. In most cases, though, the state's statutory language is quite specific. Although narrow, Maryland's protection, until recently, only enabled enrollees to receive continuity of care when their primary care provider terminates from the network.2 Similarly, Colorado enrollees are eligible only when the health plan has failed to provide sufficient notification.3

In New York and Minnesota patient characteristics are key in determining eligibility for continuity of care but these states differ in the level of clarity they provide. New York's law applies to patients who are in an ongoing course of treatment or pregnant women in the second or third trimester, when the provider is terminating from the network. Minnesota's law, on the other hand, extends the right to those with "special needs" while leaving it to the health plans to define the term. Consumer advocates sought to have a more specific definition included in legislation but did not prevail. Interestingly, regulators, consumer advocates and health plans have been working together to create a more explicit statutory definition because lack of such detail has permitted broader health plan discretion in setting eligibility than many think is appropriate. The difficulty in understanding the scope of eligibility for Minnesota’s protections absent clearer statutory language or regulatory guidance can be illustrated by the following example:

Sam Hunter, a resident of Minnesota, learned four months ago that he has diabetes and needs ongoing care for his condition. His family, however, is unclear whether his diabetic conditions meets the standard of special medical needs because he is not in an acute phase of his condition. Sam argues that he has special needs requiring ongoing care an individual without a chronic condition does not have. However, after researching his current status, the health plan applies the law based on an evaluation of Sam's acute needs and denies his request for care continuity. Thi is not to say that another health plan in Minnesota might not approved Sam's rquest for care continuity because he is learning how to manage his diabetes.

In New York, Sam's protections are somewhat different. Because Sam is in an ongoing course of treatment and learning how to manage his diabetes, the health plan has approved his request for care continuity from the terminating provider for up to 90-days. Consistent with New York law, the provider has agreed to accept the plan's reimbursement level as payment in full and adhere to the plan's quality assurance requirements and other policies and procedures.

Notice To Enrollees

A clear understanding about who should be notified about care continuity and how they should be identified is an important component to making this protection work. However, lack of clarity about when enrollees are even eligible, such as in Minnesota, makes notice more difficult. While termination of a provider from a network is an obvious prompt that enrollee notification is needed, how health plans identify the enrollees to notify is a key question. In Colorado network providers are supposed to give health plans a list of patients they are seeing on a regular basis when leaving the network. However, a health plan representative commented that they often do not do so. Absent an effective system for identifying those eligible for care continuity, enrollees may fall through the cracks and only learn about their right to care continuity if they take the initiative and complain about an interruption in care.

While providers generally are not required by law to help notify their patients about their termination from the plan, they logically could play a key role in making this protection real. Even so, none of the study states explicitly enlist the use of the primary care providers and specialists to notify their patients when they are leaving the health plan. Notably, Maryland is the only state that requires plans to notify primary care providers about the termination of specialty referral service providers, though regulators are aware of no legal or contractual obligation on primary care providers to pass this information along to patients. Provider involvement in determining who should receive notification can be particularly important in cases that are hard for health plans to identify. While health plans may easily access a list of patients who are on a primary care provider's panel, health plans report that it may be more difficult for them to identify patients who are in an ongoing course of care with a specialist.

4. Standing Referral

Standing referrals allows enrollees with a serious or chronic condition who need ongoing specialty care to be seen by a specialist for a longer period of time (up to an entire course of treatment). This protection negates the need to get multiple referrals to the same specialist for a continuous course of treatment — a source of considerable frustration for enrollees with chronic conditions.

Definitional/Interpretation issues

In practice, each of the study states' laws applies to varying degrees to individuals who are chronically ill. As with continuity of care, there is some lack of clarity and guidance in exactly who is eligible for this protection. The lack of clarity on what circumstances make one eligible for a standing referral has proven problematic particularly in Minnesota for reasons similar to those discussed in the previous section on continuity of care. As a regulator and consumer advocate commented, while eligibility for a standing referral for a pregnancy is generally clear, other eligibility criteria are not. For instance, an incident in Minnesota highlighted that it was not clear to all health plans that an individual with HIV/AIDS had a medical condition that warranted a standing referral to a specialist with expertise in treating that medical condition. Several interviewees noted that letting health plans set their own policies on when someone is eligible for standing referral has not worked well in that state. In contrast, Maryland and New York laws indicate the population the law is trying to reach - enrollees whose medical condition requires ongoing specialized care.

The primary care physician in consultation with the specialist and enrollee decides whether a standing referral is warranted and develops the treatment plan in Maryland. New York health plans, on the other hand, are part of the team determining whether a standing referral is issued and developing the treatment plan for the standing referral. In Colorado, the health plan becomes involved only if the standing referral is for more than one year. Although the statute does not explicitly define a process in Minnesota, one health plan representative noted that the decision whether to issue a standing referral is typically delegated to the primary care physician. In each of the study states, health plans have the authority to deny a request for a standing referral. As with other denials, this can be challenged through the appeals process.

Another important issue with respect to this provision has been what providers can see enrollees under a standing referral. To limit the breadth of this provision's application, health plans have generally taken a strong position that the law should not require health plans to issue a standing referral to providers other than physicians. The laws in the study states do not require health plans to issue standing referrals to practitioners other than physicians although health plans may permit standing referrals to other practitioners on a case-by-case basis. In Minnesota regulators interceded to facilitate broader use of standing referrals. In that state, practitioners such as chiropractors and some mental health professionals expressed concern that primary care physicians were routinely not referring patients to them in favor of physicians. After sitting down with plan representatives, primary care physicians and specialists, regulators were able to facilitate a discussion that they believe has resulted in broader referral use. The state’s law, however, does not require that the plans do so and the plans’ cooperation may be designed to minimize the desire by others for such legislation.

A related reform is the ability of enrollees to use specialists to provide primary care services in Minnesota and New York. Under this protection the specialist and primary care physician agree that the specialist will manage all care related to the applicable condition. In New York, for example, an individual with HIV/AIDS is highly likely to have an infectious disease specialist serve as his primary care physician (PCP). In Minnesota, this protection is available to enrollees who are eligible for a standing referral while in New York the enrollee is eligible for this protection when he has a life- threatening or degenerative and disabling disease or condition requiring specialized care over a prolonged period of time. As with standing referrals, health plans in New York can be directly involved in determining whether a specialist provide primary care services.

5. Access to Specialists

Access to specialists laws require coverage for enrollees who seek specialized care out- of-network under certain circumstances. Access to out-of-network specialists is made when the health plan does not have a specialist appropriate for the enrollee's medical needs within its network. New York’s law specifically includes provisions that apply to decisions to refer enrollees to specialty “centers of excellence”.

Definitional/Interpretation Issues

By nature, this protection tends to be evaluated on a case-by-case basis and is a difficult topic on which to establish guidance and monitor. As with other consumer protections, regulators and health plans rely on experience to develop an understanding of the type of situations that result in access to specialists, including out-of-network specialists. Of particular concern is that enrollees have access to specialists with expertise and experience treating their medical condition. This concern is most notable when the health plan refers the enrollee to an in-network specialist but the enrollee thinks that an out-of-network specialist has more experience performing a particular service or procedure or prefers to see a different qualified specialist. A look at George, who requires a knee replacement, illustrates the interests at stake:

George’s health plan has approved a referral for him to receive treatment from an in- network specialist, Dr. Anderson, who is board-certified in orthopedic surgery and has treated 30 patients with knee injuries similar to George’s over the past five years. George has learned that Dr. Carter, who is not part of the plan’s network, has significantly more experience and a strong reputation for successfully treating this form of injury. George had requested a referral to see him. The health plan has denied his request to see an out-of-network specialist because it believes that it has a qualified specialist within its network.

The study states’ laws do not give enrollees a choice of specialists. They are referred to specialists chosen by the primary care physician and health plan. This scenario highlights the difficult balancing act managed care forces between cost containment and patient satisfaction. To facilitate its responsibility to contain costs, the health plan has preserved its authority to determine whether it has an adequate specialist within its network and where the enrollee should be referred. Health plans are required to refer enrollees out-of-network when they do not have an appropriate specialist in their network. However, they are not required or likely to do so on the basis that the enrollee wishes to see a different or more experienced specialist when the in-network specialist has adequate expertise and experience. Regulators may intervene, however, if the enrollee and provider seek their aid and can demonstrate that the in-network provider has inadequate experience in the particular area.

Notice to Enrollees

In all of the study states, this protection must be spelled out in health plan documents. As with the continuity of care and standing referral provisions, educating referring physicians is important since they would be most likely to inform enrollees that they have access to a specialist. The effectiveness of this protection is limited when the referring physician does not have up-to-date information about what specialists are in the network. Absent such information, enrollees may be referred to a specialist only to find that the physician is no longer a part of the network. Maryland seeks to address this issue by requiring health plans to inform primary care physicians when a specialist is terminated from the network.

Unanticipated Consequences

A dilemma in Colorado highlights the complexity of this area of the law. As in the other study states, when a health plan does not have in its network an appropriate provider for the enrollee’s medical needs, it must refer the enrollee to an out-of-network provider.. Colorado law requires the plan to hold the enrollee harmless when he is referred to an out-of-network provider because an in-network provider is not available. In areas where there is a lack of specialists, if the provider refuses to accept the plan’s rate, the health plan ends up paying the specialists’ billed charges to avoid the enrollee being balance billed. Colorado health plans argue that this scenario raises costs and premiums particular in rural areas. Regulators point out that this scenario can have licensure and solvency implications for the health plans because state law places a cap on the plan’s indemnification commitments. If the plan exceeds these standards its solvency and/or its license to operate could be in jeopardy.4

Another important consideration is the interaction between this law and other existing requirements — specifically, requirements that managed care plans offer a point-of- service (POS) option. Arguably, enrollees have unlimited access to out-of-network specialists if they are in a point-of-service plan. However, patient protection provisions usually include a prohibition on balance billing, while POS plans generally do not protect enrollees from balance billing when they go out of network. Depending on the balance billing amount, out of network access may not be a true choice for POS plan enrollees. In Maryland, at least one health plan has been informed by the insurance administration that the access to out-of-network specialist provision applies to all enrollees regardless of whether they have selected the POS option. Consequently, enrollees are not subject to balance billing when the plan does not have a specialist in its network appropriate for the enrollee’s needs.


Regardless of the consumer protection, regulators, health plans and consumer advocates expressed consistent overarching themes about implementation challenges. These challenges relate to education, regulatory guidance and input, and coordination between regulatory agencies. Interviewees pursue a range of strategies to educate consumers about these protections from agency brochures and health plan materials to press releases, websites and public seminars but have found conducting an adequate consumer education campaign to be a challenging task. Albeit a smaller emphasis, education initiatives are also focused on health plans, providers and agents. Regulators also use multiple strategies to provide guidance on how these laws are interpreted. For a variety of reasons, they do not rely very much on regulations as might be expected but rely significantly on less formal communications to address issues as they arise. Irrespective of the strategy, the importance of ongoing communication to receive input from consumer advocates and regulated entities and to coordinate the activities of regulatory agencies about the implementation of these laws cannot be underestimated. In this section, we will focus on the challenges confronted in these areas.

Education of Health Plan Members, Staff and Network Providers

All of our interviewees acknowledged both the importance of and the significant difficulties they face educating consumers about these protections although some Colorado interviewees believe that they have made some headway in this area. Several factors present barriers to consumer knowledge. First, consumers are rarely directly involved in the development of these laws. They may become vaguely informed about them while skimming a newspaper article or listening to the evening news. But, they do not have an incentive to make sure they understand what the law means to them. Second, consumers rarely read the materials provided them by the health plan although they may read them when they become ill. Third, when they do read them, they may find the information difficult to understand. This problem is not limited to consumers who have a low literacy level. Consumers with high general literacy also struggle with the technical nature of the information. Fourth, consumers who are sick enough to need to use many of these protections may find their capacity to understand or act on the information is diminished. As a Minnesota health plan representative noted, it is the worse time for consumers to begin to read and try to understand these materials. Fifth, regulators feel that they need greater resources to conduct an adequate education initiative.

Consumer Education: Regulators’ education process largely consists of disseminating agency brochures and newsletters through a variety of public (e.g. libraries) and private settings (e.g. employers’ and physicians’ offices), issuing press releases and presenting to community organizations. The New York Attorney General’s Office Health Care Bureau hosted a series of public hearings and seminars across the state – some of which were televised. Agencies also prepare press releases and public service announcements as well as post information on their website. A Maryland consumer representative cautioned against relying too heavily on the internet to disseminate information because many consumers do not have access to or do not use it. Nevertheless, others noted that this medium is effective in disseminating information broadly, cheaply and quickly and should be part of an overall public education strategy.

Health plans have a legally defined role in the consumer education process. They must notify enrollees about these protections primarily through the member handbook. Health plans may be required to send notices directly to enrollees about a health plan consumer protection. Among the consumer protections we explore in this study, a requirement that enrollees receive a letter informing them of their rights is most applicable to the continuity of care provision. Plans may also be required to provide information to members or prospective members on request.

Colorado has worked especially hard at consumer education through other avenues. The state Division of Insurance has published several consumer brochures and staff engage in active consumer outreach through consumer and patient organizations, civic groups and others. Brochures are distributed through these groups and staff often attend meetings and speak at other public functions. Colorado also relies on a division newsletter – “The Regulator” — whose audience includes agents to educate the public on their health insurance rights.

Regulators and health plans agreed that enrollees in general were not informed about these protections. Nevertheless, several thought that the small numbers of enrollees who use the system frequently were well informed. Consumer groups who work with the chronically ill, on the other hand, stressed unanimously that consumers were poorly informed about these protections and that a coordinated and systemic education effort, including a consumer assistance infrastructure, was critical in this area. Similar to the efforts undertaken by regulators, these organizations develop brochures and conduct seminars for their constituency. Where available they also post information on their website. The efforts of consumer organizations are, however, limited, uncoordinated and hampered by a lack of resources.

Provider Education: Enrollees in need of continuity of care, a standing referral or access to a specialist often find out about those options and how to take advantage of them from their providers. Outreach to physicians is limited although several regulators and consumer advocates noted that they would like greater resources to do more. Because many of the new laws were initiated by or were developed with the significant involvement of the state medical society, regulator and health plan interviewees often assumed that physicians received educational information from their medical society. They also thought that media reports were an important source of information for providers. Health plans send notices, newsletters, and manuals to the providers in their networks. In addition, some regulators mentioned that they conducted presentations at medical association conferences. While recognizing the provider community’s importance in this education effort, regulators in several of the study states cautioned that financial incentives to reduce enrollee use of services and the antipathy some providers have towards managed care cuts against relying on them too heavily to inform enrollees about their rights.

Health Plan Education: There was more activity to educate consumers than health plans or providers, at the outset, about what these laws mean. Regulators assume that health plans are aware of and familiar with recently enacted laws. They do prepare letters and bulletins that apprise health plans of any relevant changes in the law. The New York Department of Health, for instance, disseminated a bulletin outlining extensively requirements under the new patient protection statute. The states have not, however, developed a structured education initiative to facilitate health plan understanding of the meaning of these laws prior to implementation. This may in large part be a function of resources but also may be due to a need to learn about what the law means in practice and what issues actually will require further guidance through the health plan’s application of it to varying circumstances.

The extent to which plan staff understand these health plan consumer protections can make a significant difference in the implementation of these protections. Lack of knowledge on the part of plan staff can result in misinformation to enrollees or prospective enrollees and violations of the law. Consumer advocates and the Attorney General's office expressed concern in studies on health plan information disclosure that some New York health plans were providing inaccurate information to enrollees. These reports contributed to the significant effort by the state Department of Health to ensure that the information in member handbooks and other materials were correct and disclosed to the public.

To educate their staff, particularly member service representatives, about consumer protections, health plans engage in a number of activities. They prepare bulletins and other written materials that are distributed to staff. They also conduct in-service training. Staff from the plan’s compliance division attend customer service staff meetings to talk about the laws and prepare scripts for member services staff to use when talking with consumers. Further, industry associations prepare materials for use by their health plans and provide training sessions for health plan staff as well. One health plan representative noted that these education efforts need to be continuous because of the significant turnover among member service staff. Despite these efforts, consumer advocates consistently criticized the lack of knowledge of plan member services staff about these laws. New York regulators note that the performance of member service staff has improved over time. In that state, health plans are surveyed through focused telephone calls on a regular basis to assess, in part, the accuracy of the information provided to enrollees by member services staff.

Forms of Regulatory Guidance

Regulations: The states have made limited use of the formal rulemaking process to provide regulatory guidance on these and other implementation challenges. Colorado and Minnesota are the only study states that issued rules for some of these provisions.5

The Minnesota Department of Health amended existing rules to bring them into compliance with the state’s health plan consumer protection statute. These rules have, in part, been used to strengthen the effect of their standards. Although the state’s law still permits prior authorization of emergency care, by requiring health plans to pend claims – not deny them – until they have adequate information to make a decision under the reasonable layperson standard, Minnesota regulators believe their law is strengthened while at the same time allowing health plans some operational flexibility. All of the study states, however, have largely relied on less formal means to communicate agency interpretation for these protections. The sparse use of rules can be partially explained by resource considerations, political culture and desire for flexibility.

The resources available to an agency play into the level of priority given to drafting regulations. If a state agency determines that the language is self-implementing and does not require further clarification it will not automatically draft a regulation in response to a new statute. As one regulator noted, the more specific the statutory language, the less need for regulations. Since the drafting process requires more time and staff resources than are available, regulators often rely on other ways to issue guidance on an as-needed basis (see below). In New York, which has undergone a well- publicized regulatory streamlining initiative, efforts were made to draft the statute in sufficient detail in order to avoid the development of rules.

Regulators cautioned that developing prescriptive rules sometimes limits flexibility to address market dynamics. In Colorado, for instance, regulators originally intended to develop rules on network adequacy but ultimately decided not to do so. Of particular concern was the lack of flexibility rules may allow in determining the adequacy of a network in the state’s largely rural geography. We noted that where states developed regulations, most of the rules did not noticeably expand upon the statutory language nor were they detailed and specific. One regulator explained that when the agency drafts rules that are very prescriptive health plan attorneys argue that the rules should be read narrowly and literally. The plan uses the omission as a defense, arguing that the otherwise specific rule would have included the issue, had it applied.

Consumer representatives in the study states differed in whether they thought the sparse use of formal rules significantly hindered implementation. In two study states, they believed that a lack of rules and insufficient review of plan procedures hindered implementation and education efforts. In another state, however, a consumer advocate thought that regulations took too long to develop and that resources could be better used by an insurance commissioner to actively monitor and enforce the law. That consumer representative favored informal guidance. This strategy, however, presupposes a consistently proactive insurance commissioner which is unlikely to be the case given the turnover in and the varying personalities appointed or elected to that position.

Other Forms of Guidance: Written guidance is often provided in the form of an advisory bulletin, letter, or article in a newsletter. These documents summarize laws that are soon to go into effect, provide reminders of certain requirements or respond to questions posed by health plans or others. A bulletin recently issued by the Colorado Division of Insurance on an issue related to these consumer protections serves as an example. The bulletin was drafted in response to the DOI becoming aware that some health plans were retroactively denying coverage for services they had previously authorized. The bulletin highlighted the statutory requirement and emphasized examples of circumstances that would constitute a violation of the law. This bulletin makes clear that a health plan cannot approve a referral to a specialist for a particular treatment, for example, and then retrospectively deny coverage for the service, once it has been delivered, because the health plan realizes that the treatment was not a covered benefit.

Traditional agency activities are a principal mechanism through which agencies provide regulatory guidance. Besides answering specific implementation questions, responses to consumer complaints are viewed by regulators as a useful opportunity to educate health plans about whether they have appropriately implemented a certain provision of the law. Additionally, plans develop an understanding of agency interpretation of a provision through verbal and written feedback from targeted agency audits of their operations and comprehensive market conduct examinations. New York regulators, for instance, are noticing fewer denials based on the prudent layperson standard. They believe this is so because they are requiring health plans to modify inadequate internal guidelines and change inappropriate denial decisions as a result of complaints to the Department of Health and the state Attorney General's Health Care Bureau. The Minnesota Department of Health also notes that it has witnessed a steady decline in complaints related to emergency services since the promulgation of regulations in 1994. Between 1993, before the rule went into effect, and 1995, the number of complaints the agency received from HMO members decreased from 66 to 30. In 1997, when the rule was codified in statute, the agency received 16 complaints and by the end of 1999, the agency received only 14 complaints. A partial explanation may be a practice by some health plans to approve almost all emergency service claims as a matter of practice in response to the media backlash for emergency service denials.

Input Into the Development of Regulatory Guidance

In all of the study states, interviewees emphasized the importance of involving interested parties in the development of rules and other guidance. Communication with health plans and consumers about their respective interpretations of the law prior to implementation was identified as an important strategy for effective implementation. A New York regulator thought that the state could have avoided some implementation challenges if the agency had met with health plan and consumer representatives soon after enactment of the patient protection statute to iron out differences in their interpretation of the law and to communicate the agency’s interpretation. Colorado has recently tried a new approach to increase external input into the regulatory process. It does so by meeting with health plans, providers and consumer groups before drafting rules. While the agency meets separately with each of these groups, the minutes of each meeting are shared with all participants. To the extent that they can, agency officials incorporate the suggestions made at these meetings. The meetings provide an opportunity for plans and consumer groups to buy-in to the regulations and to inform regulators about operational or policy issues of which they may not be aware.

Health plan representatives and consumer advocates also emphasized the important role they can play on an ongoing basis informing regulators about the operational implications of proposed standards, implementation problems and gaps in statutory language.

Coordination Among and Communication with Multiple State Agencies

The study states illustrate well that differing state agencies can be involved in overseeing the implementation of these health plan standards. In all of the states we interviewed there is joint jurisdiction between the insurance and health departments. Moreover, the states are not consistent in the basis on which this responsibility is divided. In Maryland, as in many other states, for instance, responsibility is divided based on the area or function while in Minnesota responsibility is divided based on type of health plan. The Maryland Insurance Administration has responsibility for the contractual and financial aspects of HMO operations (as well as appeals of denied claims based on medical necessity) while the Department of Health and Mental Hygiene oversees network adequacy and all other quality of care issues. In Minnesota, the Department of Health has responsibility for HMOs and the Department of Commerce has responsibility for indemnity and Blue Cross Blue Shield plans. In some states, such as Maryland and New York, the Attorney Generals office may also be actively involved.

Each of the study states has found that structured communication strategies are necessary to keep one another informed during the implementation and enforcement process. In Minnesota, the Department of Health and Department of Commerce speak regularly to coordinate consistent responses on issues. When staff in one agency becomes aware of an implementation problem, they contact their counterpart in the other agency to coordinate their response. In New York, staff from key agencies meet monthly and otherwise talk by phone and email. The meetings are more frequent in the earlier stages of the implementation process.


State regulators’ efforts to ensure compliance with these standards is largely driven by complaints that they receive from consumers, advocates, agents and providers. Complaints information is supplemented by violations discovered through periodic audits of specific areas of health plan operations (such as emergency claims denials) and comprehensive market conduct examinations. Regulators monitor implementation through the prior review of contracts and network adequacy plans. To a lesser extent, they do so when approving plan policies and procedures or collecting data from health plans. Very few of these monitoring activities end in formal enforcement actions such as orders and fines. Violations of state law are more likely to be resolved with health plans through informal intervention before regulators finalize a legal enforcement proceeding. In this section, we review the ways in which regulators become aware of violations of the law, highlight some of the violations that have prompted state enforcement actions and discuss how state regulators responded to them.

Monitoring of Health Plan Market Conduct

Complaints to Regulatory Agencies

Our interviews indicated that a pattern of complaints from plan members and providers typically triggers a compliance investigation by regulators. While one complaint could trigger an investigation into plan policies and practices in some states such as New York, 10-20 complaints of a similar nature about a specific health plan in a short period of time are more likely to do so. On noticing such a pattern, regulators will contact the health plan to seek an explanation and require the health plan to report back to the agency on how it will rectify the problem.

Regulators noted that agents and providers have been a repeated source of information about potential health plan violations as well.

Targeted Audits

Regulators in each of the study states noted that multiple complaints or other indications that a plan may not be complying with the law may also lead to more extensive investigations into specific aspects of the operations of one or all health plans in their state. In Colorado these examinations, called desk audits, may be used when the Division of Insurance identifies a systemic problem within one or more health plans. The agency asks the plan to pull and review the files on all related situations, rectify the problem and prove to the agency that it has done so. If the plan has not made proper modifications, the agency may proceed with enforcement actions. Information from the desk audit is forwarded to the agency’s market conduct examiners so they can look closely at this area when conducting their review of health plan operations. Through a desk audit of one Colorado managed care plan, for example, regulators discovered systematic violation of the state’s prudent layperson standard for paying emergency room claims.

For the most part, these targeted audits are conducted following a pattern of complaints. The New York Department of Health, however, has taken the targeted audit concept one step further. In addition to activities to assess health plan practice during the annual survey, such as the selection of a random sample of complaints cases to determine whether the plan responded accurately and timely, the agency also conducts ongoing focused surveys of plan activity that are unrelated to complaints and violations. For example, its staff calls health plan member service lines to ask them questions and assess their responsiveness. They also conduct semi-annual provider directory calls to a random sample of the physicians on the plan’s list. During these calls, they inquire whether the provider participates in the plan and is taking any new patients. Also, provider directories are reviewed to ensure that all required information is included.

In addition to investigations about specific health plan activities, the monitoring process could prompt an agency to develop rules, advisory bulletins or other forms of guidance. The letter sent to New York health plans in response to assessments that plans were not in compliance with disclosure laws about these and other health plan consumer protections is an example.

Comprehensive Surveys or Market Conduct Examinations

Every state performs periodic market conduct examinations of health plans.6 During market conduct examinations, regulators undertake detailed review of plan documents such as contracts, procedures, complaint logs and provider directories. Regulators may also try to delve into plan practice by surveying providers or enrollees. In each of the study states, market conduct examiners review the status of corrective action plans developed in response to desk audits and targeted investigations conducted by the agency. The agency assesses the health plan for the expenses associated with the market conduct examination. The Colorado Division of Insurance posts market conduct examination reports and orders on its website.

The primary mechanisms which prompt an investigation depends on consumers understanding that their rights have been violated and making a complaint or regulators discovering violations through periodic market conduct examinations. To a lesser extent, regulators use different types of strategies that require plans to submit information to them and that can yield valuable information.

Filings of Plans, Policies and Procedures

Filings of plan contracts, policies, and provider networks provide an opportunity for regulators to assess how well health plans are implementing these health plan consumer protections. However, with the exception of New York and limited filing requirements in Maryland, the laws in the study states do not require health plans to submit information to regulators on their policies and procedures for many health plan consumer protections. Regulators in Maryland and Minnesota also review revisions to plan contracts to ensure that they are in compliance with the law. Absent prior review or approval authority, the regulatory agency first sees a policy when it is responding to a complaint or conducting a market conduct examination.

Health plans are usually required to submit information on their provider network. In Colorado, for instance, access plans must be filed when the health plan applies for a license. The filing must be updated annually and when any material changes have been made. Minnesota HMOs have to notify the Department of Health within 10 days after any provider termination so that the agency has an opportunity to determine whether it will have any effect on the adequacy of the plan’s network.

Health Plan Data Collection

Of the study states, only the New York Department of Health asks health plans to keep and collect data on requests for and denials of these access provisions. Other state agencies may collect data from health plans related to complaints and appeals. The information, however, is not categorized in a way that enables them to track the use of each of these protections.7 Although regulators from the Minnesota Department of Commerce and Maryland Insurance Administration noted that their agency can and has added categories to its database when agency staff notice a pattern developing.

Regulatory Responses to Violations

While regulators and health plans note that overall compliance with these provisions is good, there are some instances where plans have failed to implement these laws properly. With the exception of Minnesota, we noted consistent mention in the study states of violations related to emergency services. Examples of violations that interviewees discussed or we noted involved inappropriate denials of emergency services based on the prudent layperson standard, improperly requiring enrollees to obtain prior notification for emergency services and failing to provide 24-hour access to emergency physician services. Other violations noted include failing to inform enrollees about their rights to continuity of care, standing referrals and emergency services or to honor referrals to specialists. It is difficult to tell, however, the extent to which plans are not in compliance with these laws for two reasons. First, as mentioned above, regulators do not necessarily record complaints by consumer protection. While states are more likely to have data on complaints regarding denials for emergency services, the category may not specify what the particular problem was with respect to the emergency service. Second, not all agencies maintain comprehensive data on the violations they have resolved informally. Consequently, while regulators have internal knowledge from their day-to-day interaction with plans that help them understand what problems exist with implementation, data documenting the extent of the problem may be limited.

Interviews indicate that, with a few exceptions, regulators handle most violations on a case-by-case basis and usually do not pursue formal enforcement actions — those resulting in an order sometimes accompanied by a fine. Particularly when regulators are investigating complaints, the agency’s intervention can encourage a quick, informal resolution to the problem. Maryland has some data that illustrates this point. In 1999 the MIA investigated 200 complaints involving a plan’s adverse decision. Of the 200, 109 of the complaints were resolved when the health plan reversed its decision during the agency’s investigation. Notably, the health plans reversed their decision in 16 of the 21 emergency service complaints before the MIA concluded its investigation. The agency noted that plans often do so when they obtain additional information from the provider or enrollee.8 In Maryland, as in many other states, it is far more likely that an order and a fine will be imposed directly when a health plan exceeds the target error rate threshold (5-7 percent) during its market conduct examination.

While most of the agencies noted that they rely on informal intervention to respond to most violations, Colorado and New York illustrate the broad range of approaches to enforcement that states can use. In Colorado, the Division of Insurance works to resolve the problem with the health plan before it initiates any stage of the formal enforcement process. If the plan does not correct the problem, the agency will initiate an enforcement proceeding and may fine the plan. To address one Colorado health plan’s systematic violation of the state’s prudent layperson standard, for instance, the Division of Insurance engaged in a desk audit of its emergency services processes and claims. The health plan was denying coverage for emergency services based on examinations instead of on the prudent layperson standard. The agency worked with the plan for approximately six- months to modify their internal system for evaluating emergency service claims. The investigation closely approached but did not conclude in any formal enforcement action.

In contrast, the New York Department of Health begins the process at the outset when it discovers a violation by issuing a statement of deficiency. Plans are provided an opportunity to develop and implement a corrective action plan, however, before the agency initiates a process for fines. If the corrective action plan is implemented adequately the agency may waive the fine. The Maryland Department of Health and Mental Hygiene follows a similar process.

The regulators’ enforcement authority is a powerful tool and has been used by the study states to enforce compliance with various consumer protections in a relatively few instances. Orders and fines serve several purposes but are primarily used to ensure that health plans change their practices and come into compliance with the law. An order and a $25,000 penalty, the maximum permitted the health commissioner, was applied to one Minnesota health plan in February 2000 for violations of continuity of care and standing referral laws. The case involved the termination of a Minnesota clinic from a health plan’s provider network. Upon termination, seventeen HIV/AIDS enrollees of the health plan’s SeniorCare plan disenrolled from the health plan and joined the state’s high-risk pool. The health plan states that it did not encourage these enrollees to terminate their membership. However, an enrollee claimed and the agency concluded that a health plan member service representative provided inadequate information about the enrollee’s eligibility for continuity of care or a standing referral to a provider qualified to treat his medical condition. The health plan contends that this staff representative was inexperienced and provided incomplete information to the enrollee. As a result, the agency required the health plan to:

  1. make a $25,000 contribution to a charity or charities approved by the agency in lieu of the administrative penalty,
  2. ensure that all similarly situated enrollees receiving services from the terminated provider receive written information about standing referrals, continuity of care and providers with expertise treating HIV/AIDS;
  3. allow these enrollees to receive a standing referral, upon their request, to network providers with experience and expertise in this area;
  4. allow any enrollee who disenrolled to reenroll with the health plan; and
  5. clearly inform its staff and providers that HIV/AIDS qualifies for a standing referral.

However, fines do not always accompany orders. In Maryland, the insurance commissioner can levy fines up to $125,000 per violation unless a statute or regulation specifies otherwise and has used this discretion assertively in a range of circumstances.9 Nevertheless, in some instances, the agency may only require the health plan to pay for the service denied. When the Maryland Insurance Administration entered an order against three health plans in 1999 because they had wrongly denied payment under the prudent layperson standard, for instance, the agency required the health plan to pay for the services but did not impose a fine. Another order in which the agency required the plan to pay for the enrollee’s emergency room visit involved an instance where the plan had not provided the enrollee with 24-hour access to a physician. There are other circumstances when an agency may waive a fine. When a law is very new, or when the plan has small enrollment and/or may be in poor financial condition.

Similarly, the Minnesota Department of Health issued a cease and desist order when a health plan refused to honor an authorized referral. Under the agency’s rules a referral is defined as a written authorization that specifies the number, frequency and duration of the services to be covered as a benefit and the provider to which the enrollee was being referred. The plan subsequently realized that the services for which the referral was provided were not covered benefits under the plan contract and refused to pay for the services. The agency agreed that the contract did not include the benefit but insisted that under agency regulation authorization of a referral confers a benefit that may not otherwise be available under the contract. The Commissioner of Health required the plan to pay for the services authorized under the referral. Under the order, the Commissioner also required the plan to change internal policy language that gave plans authority to disapprove authorized referrals under certain situations and pay any claims it had denied since the law went into effect for services that had been received pursuant to an approved referral. In both the Maryland and Minnesota examples, the regulators focused on making the enrollee whole and changing plan practice as opposed to imposing a financial penalty.

While fines are not always used, regulators say that there are circumstances that almost always result in a fine. Fines are frequently used when the patient is in imminent harm or the situation is egregious. Fines are also frequently used when the agency determines that the plan is out of compliance with a range of rules or the violation represents a business pattern or practice. A recent Colorado Division of Insurance enforcement action illustrates this point. Through a market conduct examination, the agency uncovered, among other violations, a pattern of more than 38 infractions in an HMO's policy forms. These violations ranged from inaccurate definitions of emergency services to unacceptable utilization review procedures. The HMO was fined $77,250. Further, the commissioner ordered the health plan to audit its denied claims to determine if the policy violations have resulted in far-reaching inappropriate claim denials.

When a health plan failed to follow the statutory procedures governing adverse decisions in the external review of an emergency services appeal by an individual plan member, the MIA fined the plan $5,000. Maryland regulators noted that when the review organization for external appeals cases states it was obvious that the treatment was medically necessary, a fine also always accompanies those orders. In some instances, the MIA may require a plan to apply a portion of its fine to support consumer education activities in coordination with the agency.

Enforcement actions are limited to violations related to enrollees of health plans under state jurisdiction. The MIA, for instance, found that of the 1063 complaints regarding medical necessity denials it received in 1999, 220 involved enrollees covered by the Department of Labor, Office of Personnel Management (OPM) or Medicare. The study states do not have the authority to assist enrollees of self-funded health plans covered by the Employee Retirement Income Security Act or other federally funded programs such as OPM or Medicare. The Minnesota Department of Commerce may lend informal assistance to ERISA enrollees since it licenses third-party administrators (TPA) and has relationships with TPA staff. Otherwise, the agencies refer enrollees of self-funded plans to the U.S. Department of Labor and other enrollees to the appropriate federal or state agency.


The federal government is fortunate to have the opportunity to learn from the states' experience implementing and enforcing these and other consumer protections. Not only does the state experience provide a range of approaches that federal regulators can consider when deciding how to implement these laws. The states also provide potential solutions to implementation challenges that have worked and insight into practices federal regulators may want to avoid because they have not worked well at the state level. In this section, we discuss overall lessons and policy recommendations as well as those associated with specific consumer protections. These recommendations are based on our study of only these four state's implementation and enforcement experience.

1. Guidance on how to interpret and apply laws is important but difficult to convey.

Very little guidance on these consumer protections was provided through regulations. As previously discussed, the sparse use of regulations could be explained by a number of reasons. In some cases agencies viewed the statutory language to be clear and self- implementing, decided that limited resources would be better spent on monitoring and enforcement, or sought to reserve flexibility.

While they did not develop rules, most states have used other ways to provide needed guidance informally and on an ongoing basis. Our interviews indicate that advisory bulletins are a favored alternative vehicle for communicating information in response to concerns about widespread violations or misunderstandings about the law. These documents are similar to the operational policy letters distributed by the Health Care Financing Administration for the Medicare and Medicaid programs or the bulletins published to provide guidance on the Health Insurance Portability and Accountability Act. Another example of federal approaches to guidance that serve as alternatives to the rulemaking process is the advisory bulletins produced by the U.S. Department of Labor Pension and Welfare Benefits Administration. While they do not have the force and effect of law, each of these documents carry significant weight with the entities to which they apply as well as courts.

While the study states did not rely heavily on rules to provide such guidance for a number of reasons, this aspect of their approach may not provide a useful model for the federal government. First, the state’s experience with these provisions was dependent on how the statutory language was drafted. The way in which Congress drafts these provisions may result in different needs for regulatory guidance. Second, the federal government may have a larger number of health plans to which it must provide guidance arguing for a much more formal communication process. Third, the federal government will have the additional responsibility of providing guidance to state regulators who may be partially dependent on federal decision-making before they can confidently perform their responsibilities. Fourth, federal regulators may be faced with the additional challenge of overseeing the implementation of federal standards that differ, in actual language or interpretation, from that already applied at the state level. Formal rules may be the only way to foster adequately more consistent implementation of federal standards across the states.

Even so, these consumer protections are very difficult to address through prescriptive rules. Over time, however, a tracking of the interpretive guidance provided on a case-by- case basis can help identify circumstances where illustrative guidance through bulletins or as examples in regulations might be helpful to all health plans, providers and consumer advocates. It can also serve as a source of information on inconsistencies in implementation and new issues that need to be addressed.

Because of the difficulty in providing guidance on these protections, responsiveness on an ongoing basis from federal regulators can be extremely helpful to state regulators and health plans during implementation. We should note, however, that one health plan representative strongly cautioned against the issuance of evolving standards that require health plans to make repeated internal systems changes over time. As he put it, “Do the regulations once and then leave them alone for a while.” Continued alterations to regulatory standards even those that are minimal, he noted, can increase costs to health plans because of changes that need to be made to internal systems and materials disseminated to enrollees. It can also result in confusion for those enrollees.

Further, flexibility is important as well. As markets and health plan structures evolve, medical practice and patient needs change, regulators need to the ability to be responsive to these changes. Flexible network adequacy standards, for example, are critical to accommodate the unique circumstances health plans may confront in a rural area.

Policy Recommendations:

—Track the issues regulators are handling through informal communications with health plans to assess the full range of implementation challenges which could be addressed through some form of written regulatory guidance.

—Where prescriptive and specific regulatory guidelines are inappropriate or undesirable, consider using illustrative guidance through examples in regulations, bulletins and newsletters that reach a broad audience. For example, an agency could review the complaints or actions resulting in enforcement and communicate its interpretation of how some or all of them should be handled by the health plan on a periodic basis.

—Post regulations, bulletins, newsletters, market conduct examination reports and enforcement actions on the agency website to help educate health plans and others about the law. An example of this approach can be found on the Colorado Division of Insurance's website. The Maryland Insurance Administration has also begun a similar approach with its website.

—Receive input from interested parties such as health plan representatives, consumer advocates and providers prior to implementation to identify early misunderstandings in interpretation of the new law and solutions to resolving those misunderstandings as well as to communicate agency interpretation that will be applied during the implementation process.

—Be mindful of the impact of repeated changes in regulatory guidance, even minor, on health plan and state agency operations, particularly when those changes will require the plan or agency to make significant internal systems changes or the consumer to learn a different process or standard for accessing services.

—To the extent the statute allows, avoid broad health plan discretion in establishing the population of enrollees eligible for a consumer protection.

2. Resources for implementation and enforcement are essential.

Regulators have received a continued increase in responsibility without commensurate increase in funding. This results in very real resource constraints that affect the scope of implementation and enforcement activities. Most regulators noted that they absorbed the responsibility for overseeing the implementation of these additional consumer protections by reallocating staff and/or increasing the workload of existing staff members and could benefit from additional resources for market conduct examinations. The Maryland Insurance Administration did create a position titled Managed Care Compliance Coordinator in response to increased managed care regulation in that state. This person is responsible for coordinating the agency’s targeted enforcement and market conduct activities in the managed care area.

In general, agency resources have been used to plan for implementation, conduct oversight (draft rules of bulletins, review policies, coordinate with other agencies, communicate with industry and consumer representatives, etc.), create or revise educational materials, and answer questions and requests for information about these laws. Without adequate resources, there are limits to what implementation and enforcement activities can be performed. Should Congress enact health plan consumer protections, effective implementation and enforcement by the federal government will require additional resources at the central and regional offices to provide regulatory guidance, provide staff training and public education, and respond to public inquiries.

Policy Recommendations:

—Administrative resources are needed for the following key activities:

  • Rulemaking and policy guidance
  • Public education
  • Oversight
  • Data collection and analysis
  • Public assistance
  • Interagency coordination and liaison activities
  • Enforcement

—Assess the resources available and needed to perform adequately the full range of implementation and enforcement activities at both the central and regional offices level.

—Earmark funds from enforcement actions to supplement funds available for public education, monitoring and enforcement.

3. A proactive monitoring role is critical but needs to be varied and take into account the nature of the consumer protection at issue.

Regulatory guidance and enforcement activities are frequently prompted by complaints made to regulators. Since regulators cannot (and would not want to) physically monitor every decision health plans make, complaints to state agencies are a very important and logical source of information about plan compliance. A pattern of complaints, or even one complaint, can trigger an investigation into health plan practices. Yet there are real limitations to reliance on complaint data for monitoring. First, consumers are generally not aware that they have a protection that has been violated. While they may be distressed, they are unlikely to complain to health plans or regulators. Second, regulators receive very few of the complaints that are made to health plans.10 Third, although a critical monitoring tool, market conduct examinations of health plan complaint data typically occurs periodically. Fourth, the data collected by regulators are generally not categorized according to these consumer protections.

Nevertheless, effective monitoring strategies beyond complaints differ depending on the type of provision and pose their own unique challenges:

—Some of these protections are more straightforward to monitor through means other than complaints because they leave a paper trail that can be reviewed in the targeted examinations that regulators conduct. For example, violations of the prudent layperson standard can be assessed through a review of internal guidelines and emergency claim denials. Reviewing access plans and checking the accuracy of provider directories can often bring to light violations of the network adequacy standard. Rules governing the plan’s disclosure of information about these protections to enrollees are relatively straightforward to monitor. As in New York, regulators can determine whether health plans are responsive to requests for information by calling plans at random. And they can evaluate the content of plan materials by reading them. However, this monitoring approach is time-consuming and labor-intensive requiring resources sufficient to train agency staff and conduct effective reviews. These are resources not all state agencies may have available.

—Not all consumer protection provisions generate a readily accessible paper trail. This poses a challenge to effective monitoring. Regulators are unlikely to be able to tell whether a plan has denied a request for a standing referral by reviewing a claim for example. These types of provisions call for a different monitoring approach. New York’s requirement that health plans collect data on requests and denials for these provisions serves as a useful example. For data to be reliable, however, there needs to be consistency across health plans in how the standards are applied and how the plans collect the data. Federal and state regulators may need to work with health plans for several years before these objectives are achieved and data are especially useful.

Policy Recommendations:

—Encourage collection of data by health plans and state regulatory agencies that measures, in a consistent manner, the number of complaints related to these consumer protections as well as the number of requests and denials for these consumer protections.

—Supplement comprehensive market conduct examinations with targeted audits of health plan policy and practice with respect to these consumer protections as is done by the study states. Consider, however, to the extent resources permit, conducting targeted audits in areas not identified through a pattern of complaints as well.

—Work collaboratively with knowledgeable consumer advocates on initiatives that assess how their constituencies are faring under these protections.

4. Consumer awareness and understanding is low.

Many of the monitoring strategies previously discussed presume that enrollees know that these rights exist but almost all interviewees stated that consumers are ill informed about these protections. From their experiences with the Medicare and Medicaid programs, federal regulators are quite familiar with the enormous challenges associated with educating consumers about their health insurance rights and responsibilities. Some of the lessons learned in those contexts may be applicable to this one.

Consumer education should be pursued through multiple and redundant strategies. Colorado’s experience demonstrates the importance of commitment from the head of the agency to consumer education. Colorado interviewees believe that the tone set by the previous and current commissioner in this area has helped make inroads into improving consumer’s knowledge about these protections. The commitment is demonstrated in the form of devoting staff resources to creating and participating in education initiatives as well as developing and disseminating appropriate materials. The New York Department of Health has gone to great pains to ensure that enrollees are informed about consumer protections in member handbooks and receive accurate information in notices and on request. A consumer representative acknowledged that because of this effort enrollees have a better chance of getting the information that they need from their health plan and a better chance that that information is accurate although there is still much room for improvement. While it is vital that the member materials contain accurate information, however, this effort needs to be part of a much broader educational strategy given the general belief that most plan members do not read their handbook or other plan materials.

When developing a broad education strategy federal regulators need to include outreach to providers and agents. These are two groups who enrollees rely on to learn about the options available when they have a problem. Effective training of health plan staff is another critical component necessary to curtail misinformation and confusion for consumers. To be effective, the education strategy should begin early and be redundant and ongoing.

Many states are exploring the use of consumer assistance initiatives such as ombudsman programs to not only assist consumers in handling complaints against health plans but in educating them about their rights. Further, the attorney generals offices in Maryland and New York have established health care bureaus to help consumers with their complaints. Even so, consumer advocates and others, including the New York Attorney General's office, have advocated for an adequately funded statewide Managed Care Consumer Assistance Program (MCCAP) to provide additional assistance to consumers.

Policy Recommendations:

—Monitor member materials for completeness and accuracy. Where possible encourage that member materials include useful and appropriate illustrative examples of what constitutes a prudent layperson standard, when to seek a standing referral, etc.

—Work closely with health plan associations to educate their members about the meaning and interpretation of the law and encourage health plans to conduct ongoing training. Require them to demonstrate competence by key staff (in member services, utilization review, claims payment) regarding patient protections.

—Work closely with hospital, medical and nursing associations as part of a coordinated strategy to educate their members about the meaning and interpretation of the law before and during implementation.

—Work with patient organizations to target patient education efforts about protections likely to be especially relevant to people with certain chronic conditions.

—Conduct a broad consumer education strategy that is redundant and ongoing.

—Encourage the development of consumer ombudsman programs whose mission includes ongoing public education.

5. Rules and processes should be as consumer friendly as practicable.

Because consumers have a low level of awareness and usually need these protections when they are sick and vulnerable, rules that facilitate easy access to these protections is important. Exceptions for people who fail to meet certain plan requirements because they are seriously ill should be considered. Colorado and Minnesota law, for instance, creates an exception from health plan rules that require enrollees to notify them within a certain period of time after receiving emergency services. Health plans must waive this rule for enrollees who cannot meet that deadline due to their medical condition.

Making the process for obtaining assistance from regulators consumer friendly may also be helpful. Many state agencies typically require enrollees to register their complaints in writing. However, an agency may also facilitate this process by taking information over the phone and sending the form to the enrollee for signature, abandoning that requirement altogether or making exceptions in certain circumstances. The involvement of multiple agencies in regulating this area creates confusion as to where an enrollee should turn for assistance. Clarity in what agency they should call in their health plan materials and agency brochures is important. Further, enrollees can be deterred from seeking regulatory assistance when they are not offered a toll-free telephone number. One state regulator noted that she noticed this problem when the COBRA law was first enacted.

Policy Recommendations:

—Encourage the development of ombudsman programs. Even if consumer education efforts are well funded and very successful, the complexity of health insurance will continue to overwhelm many individuals, especially when they are sick, and even if they are well informed of their rights and responsibilities. An adequately staffed and trained ombudsman program can provide one-on-one assistance to people who need help resolving problems or navigating the health insurance system.

—Require health plans to create appropriate exceptions from requirements enrollees cannot comply with because of their mental or physical health status.

—Make exceptions to agency rules that present barriers to seeking agency assistance such as submission of written complaints (without accompanying agency assistance).

—Clarify in all relevant agency and health plan materials the telephone numbers enrollees can call or websites enrollees can access for assistance.

—Provide toll-free telephone numbers for enrollees to call.

6. Be mindful of interactive effects.

How the legislation is drafted may affect the availability of some potential sources of information for monitoring. The external review process, for instance, can be used to monitor implementation. However, how eligibility standards are defined can have implications for external review. In all of the protections discussed in this report, enrollees in each of the states can use the health plan’s internal process to appeal an applicable plan decision. In at least one instance, however, external review may not be available. In Maryland, a plan’s decision to deny a request for continuity of care is not subject to the external review process because external review in that state is limited to medical necessity decisions and eligibility for care continuity is not related to the patient’s medical needs. Enrollees can still seek assistance, however, from other MIA complaints staff.

Policy Recommendations:

—If state or federal laws limit external review to medical necessity decisions, clarify that other decisions with clinical implications, such as continuity of care, would be subject to the external review process.

—Monitor federal administrative simplification efforts to ensure the development of standardized forms and data forms that are consistent with data needs for the implementation of patient protections.

7. Enforcement is key.

Regulatory authority to monitor implementation and impose orders and fines when violations are discovered is a necessary and powerful tool for encouraging effective implementation. Regulators believe, and plan representatives concur, that health plans have strong incentives to avoid orders and fines. In addition to the expense of paying the fine, enforcement actions accompanied by a press release bring media attention to the plan’s violation. Further, in states such as Colorado and Maryland, enforcement actions are published in the agency newsletter. Fines are reported to the National Committee on Quality Assurance (NCQA), an industry accreditation agency, as well as the National Association of Insurance Commissioners.

Orders and fines imposed by one state can subject health plans to closer scrutiny in other states. The applicable regulatory agencies in the other states in which the health plan is licensed must be notified about these enforcement actions and may start looking at the health plan’s activities in their state as well. A Minnesota regulator shared an example of how this can affect health plans. His state became aware that South Dakota was investigating a potential violation by a plan that also operated in Minnesota. This knowledge contributed to a decision by Minnesota regulators to investigate that plan as well. As a result of their investigation the plan was fined. These state's investigations prompted, at least in part, two other states to take a closer look at that plan’s activities resulting in additional fines for that plan from those states. Further, as the regulator also noted health plans also have incentives to comply in order to avoid further and more stringent legislation in the future.

Policy Recommendations:

—Use enforcement authority — to alter violative health plan policies and practices, ensure appropriate coverage for health care services and educate health plans about how to come into compliance.

—Impose fines automatically when external reviewers note that it was obvious that a service was medically necessary.

—Encourage consumer advocates and providers to share concerns about implementation. State regulators who were responsive to reports and data gathered by consumer advocates and providers and conducted a balanced assessment of the potential problems, were able to address areas where plans were in violation or facing unanticipated implementation challenges.

—Publicize orders and fines on websites and newsletters .

—A system of inter-agency/interstate notification of enforcement actions will alert other regulators to problems that may arise in their jurisdiction and support more consistent application of rules.

8. Coordination between regulatory offices minimizes inconsistency in interpretation and implementation.

This area of managed care law is often regulated by multiple agencies at the state level and may involve multiple agencies at the federal level as well. Fragmented authority, while unlikely to change, poses barriers particularly when there are unstructured lines of communication about how to handle implementation and enforcement issues. If Congress enacts health plan consumer protections, in many states federal regulators will interact with staff from more than one state agency to implement the federal law. Mechanisms to enhance communication between federal regulators and the range of relevant state officials would be useful. Periodic meetings with state health and insurance department officials at both the national and regional levels may help with coordination. Frequently, issues are discussed at the national level during meetings of the National Association of Insurance Commissioners (NAIC). However, one regulator noted that not all of the information discussed at the NAIC trickles down to the state agency staff level. Additionally, not all of the relevant agencies participate in that organization’s deliberations. A broadly disseminated, periodic publication dealing with a range of federal-state regulatory issues might help reach a broader audience of state officials. Through these mechanisms, federal officials can develop relationships and encourage state regulators to share the implementation issues that they are confronting.

Policy Recommendations:

—Create mechanisms to communicate regularly with relevant state agency officials about implementation challenges such as through regional policy coordination meetings or other venues.

—Create mechanisms such as newsletters and websites that can inform a wide range of relevant individuals such as complaints staff, external review staff and market conduct investigators, about policy issues applicable to the implementation of these and other provisions.

—Establish a process for agencies to share information about complaints so that patterns can be assessed for patterns that may suggest implementation problems.

9. Consistency in application of these laws - if that is the federal goal - will be difficult to accomplish in the short term.

It is unclear whether a federal patient protection law would largely preempt state law, serve as floor, or coexist with state law. Regardless, the existing framework in the states will impact the application of any federal law that Congress enacts.

States apply their laws to different types of health plans. Consequently, some health plans may have established internal systems in place while others will be starting from scratch to integrate these standards into their internal operations. It will take time for those health plans that have not had to comply with these standards to establish systems to do so. Further, it will take time for plans subject to these laws to adapt to any different interpretations accompanying federal standards.

Given the differences among the states, consistent application to federal law, while a goal, may not be practical in the short-term. Where federal law becomes the state standard, it will take some time for health plans to revise materials, make administrative changes to internal systems and educate their staff. It will also take time for health plans and state regulators to change the way state regulators and health plans are use to interpreting the meaning of these laws to conform to federal law. One state regulator noted that ideally the states should have at least one year after promulgation of federal regulations to work with their legislators and health plans to bring the state into compliance with the new law.

Policy Recommendations:

—To the extent the statute permits, allow sufficient time for state regulators and health plans to make the proper adjustments to their laws, policies, publications and other materials.

—Establish formal structures for federal and state regulators to communicate and interact regularly — periodic conference calls and meetings); establish contacts for information and problem-solving — so that greater consistency in application can be gained over time.

10. The states' experience with specific consumer protections provides insight into how to avoid or respond to potential implementation challenges.

The implementation challenges confronted at the state level offer a number lessons for federal policymakers about how they might head off some of the problems confronted at the state level. Federal regulators may want to consider some of the following recommendations drawn from these states' experience implementing each of the consumer protections.

Policy Recommendations:

Emergency services:

—Ensure that claims forms are updated to reflect accurately the information health plans need to make decisions appropriately.

—Explicitly require health plans to conduct a reasonable investigation into presenting symptoms before denying claims for emergency services.

—Establish the minimum time period health plans can require enrollees to notify them by after receiving emergency services and require an exception for enrollees who cannot meet the post-notification requirement due to their health condition.

—Prohibit health plans from discouraging use of 911 services when enrollees are experiencing an emergency.

Network Adequacy:

—Reserve flexibility for assessing the adequacy of a health plan's network in rural and other health manpower shortage areas on a case-by-case basis.

—Evaluate provider directories on an ongoing basis to ensure that they reflect accurately the providers who are part of the health plans' network and who are accepting patients. The Internet may be one practical tool for updating directories on a real-time basis.

—Require health plans to collect data on requests for out-of-network access. Compiling case findings of external appeals on out-of-network denials also will yield data on the application of this provision.

Continuity of Care:

—Spell out process for identifying who needs to be notified.

—Solicit the involvement of providers in the identification and notification process.

—Require health plans to collect data on requests for standing referrals.

Standing Referrals and Access to Specialists:

—Require health plans to notify primary care physicians when a specialist is no longer with the plan's network.

—Prohibit retrospective denials for pre-authorized treatments, including those received as part of a standing or single referral to a specialist, except in cases such as fraud, misrepresentation or nonpayment of premiums.

—Clarify how referrals made to out-of-network specialists because the health plan lacked an appropriate provider to treat the enrollee's medical condition are handled when the enrollee is a member of a point-of-service plan.

1 Maryland Insurance Administration’s Report on the Healthcare Appeals and Grievance Law 20, 27, 32 April 2000) [hereinafter referred to as MIA Report]. See also page HB3 in Appendix G. It is interesting to note that not all health plans report grievances in this area while others report significant numbers.

2 The Maryland legislature recently enacted a law, effective October 1, 2000, that extends continuity of care protections when any provider terminates from a health benefit plan’s provider panel, not just primary care physicians.

3 As is true in other states, Colorado also has a separate continuity-of-coverage requirement that protects individuals who lose health coverage while they are an inpatient in a hospital or other facility. Under this protection, the health plan must continue to pay for inpatient care for such individuals until they are discharged from the facility. This protection does not apply to individuals who lose coverage because of their own failure to pay premiums.

4 Colorado’s Task Force on small group and rural access issues may make further recommendations relating to this protection.

5 Although not the subject of this report, most of the study states have developed regulations implementing related laws governing utilization review and/or external review.

6 During these examinations, regulators review the health plans’ procedures to ensure that they comply with relevant laws. State agencies vary in the frequency of these exams ranging from once a year to once every five years. The New York Department of Health, for instance, reviews HMOs annually for quality and access. In Minnesota, the Departments of Health and Insurance perform market conduct examinations every two to three years. The Maryland Insurance Administration conducts market conduct examinations of domestic health plans every five years but may do so more frequently if the agency is concerned that a health plan is having a problem with compliance.

7 Sharon Willcox, Consumer Protections in Private Insurance: The Role of Consumer Complaints (June 2000).

8 MIA Report at Appendix E.

9 As a result of a targeted audit of provider directories, the MIA recently fined 11 HMOs $50,000 each for failing to provide enrollees and prospective enrollees with complete provider directories on an annual basis as required by law.

10 Willcox at 142.