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


Research Objectives

In 1999 the U.S. House of Representatives and the U.S. Senate passed legislation addressing patient protections under health care plans, with the bills now being considered in Conference Committee. This followed the passage of comprehensive patient bills of rights in some 39 states between 1994 and 1998, in response to growing consumer concerns. While there is a perceived managed care backlash, consumers generally report high satisfaction levels with their individual health care providers and plans, with limited quantitative data available on the comparative problems faced by people in indemnity health insurance and managed care respectively.

This study provides background lessons for federal regulators who may be required to implement federal patient protection legislation by focusing on consumer complaints about private health insurance in a sample of selected states and major employers. Specifically, the study seeks to identify the agencies responsible for health insurance complaints and the availability of complaints data, to review the status of complaints "report cards and to analyze complaints data as a tool in understanding the implementation of patient protections.

Study Design

A sample of six states (California, Maryland, New York, Oregon, Texas and Vermont) was selected based on a review of the web sites of all 50 states and discussions with experts in health insurance regulation. The six states were selected to represent a range of jurisdictional responsibility for health insurance complaints and the existence of ombudsman programs, together with states representing best practice in publication of health insurance complaints report cards. In four of the six states (California, Maryland, Texas and Vermont) ombudsman programs operate independently of the insurance regulatory agency. Four states (California, Oregon, New York, Texas) publish health complaints report cards for consumers which provide comparative data across health plans.

Using standard questionnaires, telephone interviews were conducted with 22 state officials and staff of ombudsman programs involved in the management of complaints and/or the production of report cards across 10 agencies. Interviews were also conducted with the employee benefits staff of three major employers (Caterpillar, DaimlerChrysler and Motorola) to ascertain their role in complaints management.

Relevant written materials were identified and analyzed including a position paper on consumer complaints by the National Association of Insurance Commissioners (the peak association for state insurance regulators), materials produced by state regulators including complaints report cards, annual reports, circulars, data collection reporting frameworks and press releases, and the academic literature on consumer comprehension of report cards.

Principal Findings

Jurisdiction over private health insurance complaints varies across states, with responsibility for indemnity health insurance, managed care and quality complaints often split within or between state agencies. The lead role is usually taken by state insurance regulatory agencies, with the contribution of state health agencies declining in several states in recent years. While some states split regulatory responsibility according to type of insurance (e.g. indemnity, managed care), this is unlikely to be advantageous in the long term given the fluidity of the health insurance market and the potential for the market to evolve in response to different regulatory incentives.

There is also a wide spectrum in the type of consumer assistance or ombudsman programs available to people with health insurance complaints. Across the six states studied, Vermont, Maryland, Texas and California operated some ombudsman programs "independently" of the insurance regulatory agency, while California, Oregon and Texas also operated some ombudsman programs "internally" to the insurance regulatory agency. The Office of the Health Care Ombudsman in Vermont is the most independent public sector model across the studied states, having its own statutory basis including legislative protection for undertaking consumer advocacy and dedicated funding through a contract, with the authorizing legislation specifying that the contract be awarded to a non-profit organization.

According to an NAIC survey, only 26 states affirmatively publish complaints information. The five report cards produced in the studied states varied in features such as whether they included consumer and/or provider complaints, whether they included justified or all complaints, the complaint categories used, and the breakout of complaints by health insurance plan types. While there are some examples of best practice in complaints report cards, many reports are overly complex and provide insufficient guidance to consumers, suggesting that currently they are of most value to regulators in top-down accountability.

Grievances are internal complaints received directly by health insurance plans. In four states health insurance plans are required to regularly report grievance data to insurance regulatory agencies, with five states specifying the format for collection of grievance data. However there is no consistency in grievance data collection requirements across the states. Publication of grievance data is limited, with only New York publishing grievance data in its annual consumer guide, while Oregon makes grievance data available on its web site.

There is a hierarchy of complaints handling, with state regulators seeing only the tip of the iceberg in consumer complaints. A Californian survey found that 37% of people with a complaint called their health plan, but only 4% contacted a state or local agency for assistance. Across three states for which data were available, the volume of grievances received directly by plans was about seven to eight times greater than the volume of complaints received by state insurance regulatory agencies. While 17% of people contact their employer about health insurance problems, the three major employers studied did not maintain detailed complaints records for systemic analysis.

The level of complaints about managed care plans relative to indemnity insurance varies across the states, being lower in Oregon, higher or the same in New York depending upon the for-profit status of indemnity plans and essentially equivalent in Vermont. Hence, in these three states evidence for the managed care backlash, as measured by consumer complaints, is decidedly mixed.

Some data on complaint categories relevant to understanding patient protection issues are available in California, Maryland, Oregon and Texas. Of particular interest is the rate at which grievances are overturned in favor of consumers. In Oregon the best outcome for consumers was for grievances relating to emergency services (71% overturned) and the worst outcome was for grievances about access (only 1% overturned). In Maryland the best outcome for consumers was for grievances relating to pharmacy services (85% overturned) and the worst outcome was for grievances relating to mental health (only 28% overturned).

Policy Implications and Recommendations

The multiplicity of agencies involved in oversight of health insurance complaints makes it difficult to develop a comprehensive picture of how well insurance plans are performing on consumer complaints. However, the pursuit of uniform models of health insurance complaints management is not recommended at this time. Instead, it is recommended that strategies be developed which clarify responsibility, facilitate communication and enhance the knowledge and experience of regulators in complaints management. Strategies which have been identified at state level include the use of a Memorandum of Understanding to clarify responsibility where there is shared authority, periodic meetings of federal and state regulators and the development of a single entry point for consumer complaints about health insurance.

Independent ombudsman or consumer assistance programs are essential in ensuring accountability of state insurance regulatory agencies and in providing an alternative, more approachable forum for consumer complaints. They can also play a vital role in resolution of consumer complaints through mediation and in undertaking systemic advocacy based on complaints analysis. The independence and accountability of ombudsman programs needs to be fostered through statutory authority, dedicated funding and a requirement for reporting to the legislature and general public.

Comparative complaints and grievance data should be more widely publicly available to enhance the accountability of health insurance plans to all stakeholders including consumers, employers, purchasers, policy-makers, legislators and regulators. Complaints report cards can be improved through design features including: the presentation of complaints data as part of a suite of performance measures and in conjunction with contextual information on the health insurance market; the incorporation of consumer-friendly performance measures and presentation formats such as grades and simple graphical formats; and the use of decision-support methods and expert global advice.

Grievance data provide a potentially rich source of information in understanding the implementation of patient protections. Analysis of grievance data, including the rate at which grievances are reversed in favor of consumers, can be used to identify areas where public education may be required, new legislative protections may be needed or improvements in monitoring health insurance plan performance may be warranted. However variations across states in how complaints are measured, the legislative environment and the complaints handling system mean that these analyses are likely to be of most value to regulators within states, rather than in developing a national picture. It is recommended that regulators design reporting frameworks for grievances which closely match the patient protections in the relevant jurisdiction and that grievance data are subject to audit to ensure validity.