Consumer Protection in Private Health Insurance: The Role of Consumer Complaints. 2. There is a wide spectrum in the type of consumer assistance or ombudsman programs available to people with complaints about health insurance.


Table 10.2 identifies the different models of consumer assistance or ombudsman programs and their major features in the five states with such programs (New York being the exception). The NAIC Consumer Complaint White Paper is essentially silent on the role of ombudsman programs and is hence not included in this table.

There is immense variation in terms of the independence of ombudsman programs across states, a critical factor in determining the ability of such programs to undertake consumer advocacy. 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.

The “location” of the Vermont Ombudsman “outside” state government gives it greater independence than either the Maryland Health Education & Advocacy Unit or the Texas Office of Public Insurance Counsel. The assistance programs in these two states are still theoretically more subject to political influence as they are staffed by state government employees. However, in turn, both these agencies have greater independence than ombudsman programs which are internal to the state insurance regulator, as occurs in California, Oregon and also in Texas for the legislatively created (but not yet operational) ombudsman program. (Note that the Texas Office of Public Insurance Counsel is an ombudsman function for systemic consumer representation, while the yet to be established ombudsman program created under Texas legislation in 1999 is designed to assist individual HMO consumers in complaints and appeals).

Of the two states with “internal” ombudsman programs, the Consumer Advocate in the Oregon Department of Consumer and Business Services has a systemic role in examining complaint trends, monitoring the implementation of the Oregon Patient Protection Act 1997 and developing legislative concepts. In contrast, the internal Ombudsman programs in both the Department of Corporations and the Department of Insurance in California are more accurately described as internal quality improvement initiatives, rather than true consumer-focused ombudsman programs.

Another feature of the independence of ombudsman programs is the extent to which they are publicly accountable through the release of reports to either the legislature or the general public. None of the existing internal ombudsman programs in the California Departments of Insurance and Corporations and the Oregon Department of Consumer and Business Services produce publicly available reports. In contrast, all the “independent” ombudsman programs release reports to the legislature and/or the general public.

Table 10.2: Consumer Assistance and Ombudsman Programs

Features California Maryland Oregon Texas Vermont
Ombudsman “independent “ of Insurance Department Health Rights Hotline (HRH) in Sacramento area only Health Education & Advocacy Unit, Office of the Attorney General   Office of Public Insurance Counsel Office of the Health Care Ombudsman
Ombudsman “internal” to Insurance Department Office of Ombudsman in Department of Insurance and Ombudsprogram in Department of Corporations; and planned Office of Patient Advocate in new Department of Managed Care   Consumer Advocate in Consumer Protection Section, Department of Consumer and Business Services Ombudsman program created in 1999, but no funding, work currently subsumed into HMO Division of Department of Insurance, so essentially not operational  
Statutory basis No – Departments of Insurance and Corporations

No – Health Rights Hotline

Yes – new Office of Patient Advocate

Yes Yes Yes (both OPIC and the Ombudsman program) Yes
Advocacy for individual consumers Yes – HRH

Limited -Ombudsman in Department of Insurance takes consumer calls, but complaint handling actually handled by Consumer Services Division

Yes, includes inquiries, complaints, assistance with internal and external appeals, mediation No No – OPIC Yes, includes inquiries, complaints, assistance with external and internal appeals, fair hearings
Advocacy for systemic reform Yes – HRH, through policy reports, including recommendations for systemic improvements

No – Ombudsman in Department of Insurance has focus mainly on internal quality improvement

Limited – major focus on helping individual consumers, some role in recommending improvements to new Appeals & Grievances Law Yes, systemic examination of complaints trends, monitor Patient Protection Act 1997, develop legislative concepts Yes – OPIC develops consumer Bills of Rights and advocates for consumers at hearings of Department of Insurance Yes, through discussions with other state government agencies and legislative committees
Public reports Yes – HRH, consumer and policy reports on its operations and other policy reports

No – Ombudsman in Department of Insurance

Yes, HEAU produced policy report on appeals and grievance law No separate reporting either to consumers or to legislature OPIC produces HMO report cards and reports to legislature Yes, to legislature, no consumer reports
Public education Yes – HRH, includes brochures, TV, postcards, newsletter, community events

No – Ombudsman in Department of Insurance

Yes, brochures, meetings with consumer groups and other groups Currently limited, but plan is for more consumer outreach Limited education directed to consumers, with exception of HMO report cards; Major focus is systemic advocacy and reports Yes, brochure, poster, TV, meetings

In considering the relative merits of ombudsman programs, it should be noted that even in states with “independent” ombudsman programs, state insurance regulators still believed that it was vitally important for their agencies to also provide a consumer complaints function. For example, the Vermont Division of Health Care Administration noted that their complaints function provided “a pulse on the market”. The information gleaned from consumer complaints is considered integral to many other functions undertaken by insurance regulatory agencies including monitoring financial solvency and analyzing the impact of changes to the regulatory framework.

However ombudsman programs can play a vital, complementary role to the complaints functions of state regulatory agencies. One key distinction between the two is the necessary focus on adjudication and enforcement by state regulatory agencies, compared with a stronger focus on mediation and consumer advocacy by ombudsman programs. Traditionally, state insurance regulatory agencies have defined one of their key missions as the administration and enforcement of the state insurance code. Hence, staff of the Maryland Insurance Administration described their role as determining whether insurance plans are in compliance with statues and their contractual obligations, with one advantage of this role being the ability to take enforcement actions including issuing penalties.

In contrast, ombudsman programs can serve consumers through providing assistance for complaints and problems that do not necessarily involve breaches of the insurance code. For example, the Health Education & Advocacy Unit in Maryland described one of their strengths as being able to work creatively with insurance plans to seek satisfactory resolution of consumer problems through mediation, even in the absence of specific legislative breaches. Similarly, staff at the privately funded Center for Health Care Rights in Sacramento, California, expressed confidence at their ability to provide effective assistance to consumers, despite lacking direct regulatory authority over plans.

Another important contribution of ombudsman programs is to combine individual consumer assistance with advocacy for systemic reform. Of the states studied, the Vermont Health Care Ombudsman and the Sacramento Center for Health Care Rights are strong examples of the value of using casework to drive policy advocacy, which can most readily occur in independent ombudsman programs. For example, the Vermont Health Care Ombudsman participates in the Vermont Health Access Oversight legislative committee, where she can present views independently of the Vermont Health Care Administration on problems facing Vermont consumers. The Center for Health Care Rights is particularly active in using information derived from its consumer hotline to undertake what it calls “evidence-based advocacy”. Hence the Center publishes policy reports with concrete recommendations directed at health plans, providers, policymakers and regulators on reforms necessary to improve the health system. Staff at the Center for Health Care Rights challenged the view that the primary function of ombudsman programs should be to assist individual consumers, arguing that this was a bottomless task, with the goal instead being to use examples of individual consumer problems to drive systemic reforms for all consumers.


It is recommended that ombudsman programs should be considered as a vital, complementary function to regulatory consumer complaint functions. Ombudsman programs can make important contributions in resolution of individual consumer problems through mediation and in undertaking systemic advocacy.

It is recommended that the following examples of best practice may be of value in developing or enhancing consumer assistance and ombudsman programs:

  • Independence of ombudsman programs can be enhanced through legislative authority and dedicated funding. For example, the Vermont Health Care Ombudsman has legislative protection “to speak on behalf of consumers…without being subject to any retaliatory action”. The Vermont Health Care Ombudsman also has funding guaranteed under a contract, in contrast to the absence of funding in the authorizing legislation for the ombudsman program in Texas.
  • Accountability and independence of ombudsman programs are also fostered by requirements for such programs to produce regular reports to the public and legislature. The privately- funded Center for Health Care Rights in Sacramento makes “the voices of health care consumers count” through regular published reports on consumer problems and suggested remedies (see California, Attachment 5).