Consumer Protection in Private Health Insurance: The Role of Consumer Complaints. 1. Consumer Guide to Oregon Insurance Complaints



The major features of the Consumer Guide report are as follows.

Scope - the report covers consumer complaints filed against major insurers in six lines of business: automobile, homeowner, life, annuities, health and health care service contractors. Health Care Service Contractors (HCSCs) include HMOs or other types of health insurance plans that contract with doctors, hospitals and other medical providers to offer medical services on a pre-paid basis.

Coverage (size) - the report only includes companies or groups that earned at least $1m in premiums in Oregon or had at least 10 complaints. These exclusion criteria result in the report including data on 90% of health plan complaints and 92% of HCSC complaints.

Coverage (groups) - the report provides complaint indices and rankings for insurance groups, rather than individual companies. However it also includes raw data on complaints and premiums for individual companies, allowing consumers to check the performance of their particular company.

Complainants - While not directly specified, the report is based on consumer complaints as it has been the Division of Insurance policy since 1990 to only accept consumer complaints and not generally to accept provider complaints.

Complaint index - the index is based on complaints closed in a previous calendar year, with no distinction made between whether complaints are justified or not. The index denominator is the amount of premiums earned by the company. An index of 1.00 means that a group's share of all complaints is equal to its share of business, while an index of 3.00 means that a group has three times its share of complaints.

Other performance measures - the report also includes data on the actual number of complaints for both groups and individual companies. It includes a ranking of groups based on the complaint index where 1 is the highest performer.

Type of complaints - the report provides no breakdown of complaints according to categories such as rating, quality or policy administration.

Complaint categories - the Insurance Division uses the same complaint categories as the NAIC and was one of the first states to report to the NAIC Complaints Database System. This report does not, however, disaggregate complaints by reason for complaints.

Data analysis

Trends in total complaints - The last three annual reports with data for calendar years 1996, 1997 and 1998 were analyzed to produce Table 6.1 indicating trends in complaints. The two most significant findings are:

  • the substantial increase in complaints against HCSC between 1997 and 1998. Regulators believe this is largely attributable to greater public awareness following the implementation of the Patient Protection Act. Regulators also indicated that this trend had continued in 1999 (for which published data are not yet available), with about a 68% increase in complaints between 1998 and 1999. A further reason suggested by regulators may be the growth of managed care market share during this time period.
  • the higher complaint rate against traditional health plans than HMOs. It is interesting given the "managed care backlash" that the complaints rate against HMOs is less than half that against traditional plans. Regulators suggest that the lower complaints rate may indicate the integral nature of the appeals process for managed care plans. Regulators indicated that some of the large HMOs worked very hard to take care of dissatisfied consumers, resulting in lower complaints rate made to the Insurance Division. The absence of similar well-established complaints handling processes in traditional plans may account for the disparity in complaints rates. However as of 1998 Oregon law began requiring uniform grievance procedures for all types of health benefit plans.

Table 6.1: Trends In Complaints, Oregon, 1996-1998

Health Plans Total complaints % change in complaints Complaint rate per $100,000,000 premiums % change in complaint rate
1996 358 NA 52.0 NA
1997 352 -1.7% 42.4 -18%
1998 484 38% 48.6 14.6%
1996 379 NA 15.2 NA
1997 353 -7% 15.1 -0.7%
1998 595 69% 23.8 57%

Range of performance across plans - The complaints rates/$100,000,000 premium were calculated for HCSC for 1997 and 1998 (Figure 6.1). Within any year, there is substantial variation across plans in their complaints rate. There is also substantial variation between plans as to the growth rate in complaints; however this is not very meaningful without looking at the raw volume of complaints. For example, SureCare's 160% increase in the complaints rate is really about an increase in the number of actual complaints from 2 to 3.

Figure 6.1: Complaints Ratios for Health Care Service Contractors, Oregon, 1997 -1998Figure 6.1: Complaints Ratios for Health Care Service Contractors, Oregon, 1997 -1998

Assessment of the report

Broad aggregate snapshot - The annual report provides consumers with a snapshot of the comparative performance of health plans and HCSCs. However because it does not include data on the type of complaints (such as denial of care), it may be less valuable to consumers who want information on particular aspects of a plan's performance. It should be noted that this need is partly met, however, by the Oregon Complaint Report Part II which provides consumers with the option of obtaining detailed information on complaints type and disposition for individual companies.

Conceptual difficulty of an index - A complaints index may also be more difficult for some consumers to understand compared with a complaints rate, for example, based on the number of complaints/10,000 members. The absolute nature of an index makes it difficult for consumers to know their risk or probability of experiencing a complaint. Consumers have some familiarity with risks in other industries or situations, such as the risk of dying in a car crash compared with an airplane crash (expressed as say 1 person dying/40,000 miles).

No trend or industry performance data - Another problem with an index is that it provides no information on the relative performance of an industry or trends across time. While the complaints index allows consumers to compare the relative performance across health insurance groups, it provides no advice as to whether the overall industry complaints performance is at a level considered unacceptably high by some consumers.

Complexity of numerical rankings vs. average groupings - The use of rankings also makes the report overly quantitative and may encourage some consumers to place more importance on the relative rankings than is warranted (for example, is there a substantive difference between the insurers ranked 1-12 in the 1998 data, all of whom recorded zero complaints, but have been ranked according to their premium volume?). Regulators are aware of this problem and are considering removing the rankings on the basis of fairness. A numerical ranking is harder to understand for consumers than a simple grouping of insurers into "above average", "average" and "below average".

Future plans - Regulators are not currently considering including trend data in the Annual Consumer Guide. The Guide has been published since 1988 when it was an Interim Report. The other focus for the Consumer Advocate is working on developing a Company Profile report on the Web which could be done in a more timely fashion than the current consumer complaints report guide. This company profile report may contain: complaints statistics for the last three years, grievance data, NCQA indicators and financial information.