Consumer Protection in Private Health Insurance: The Role of Consumer Complaints. 4. Grievances (internal complaints received by health insurance plans) are a potentially rich data source in examining the implementation of patient protections. In five of the six states regulators stipulate the framework for grievance data that insuranc


Table 10.4 outlines the management and reporting of grievances in the six states studied. The NAIC Consumer Complaint White Paper does not refer to grievances managed directly by insurance plans and hence is not included in this table. The term “grievance” is used in this report to mean any complaint made by a consumer directly to a health insurance plan, compared with a “complaint” made to an insurance regulator or ombudsman program. However, as can be seen in Table 10.4, two states (Maryland and New York) distinguish between different subsets of complaints received by health insurance plans.

Under Maryland’s new Appeals and Grievances Law which took effect from 1 January 1999, grievances are complaints filed by consumers directly with their health plan challenging a plan’s adverse decision to deny services on the basis of medical necessity. Consumers will obviously file other types of complaints with their health plans, but these are not included in the count of “grievances” in Maryland. In New York, however, the term grievance means almost exactly opposite what it means in Maryland. The New York Insurance Department collects data on two types of internal complaints received by insurance plans as follows:

  • Utilization review appeals – complaints filed by consumers with their health plan challenging decisions to deny medical services on the grounds of medical necessity or that services are experimental or investigational; and
  • Grievances – all other complaints filed by consumers with their health plans challenging their plan decisions (that is, excluding medical necessity, experimental or investigational services).

Four states (Maryland, Oregon, New York and Vermont) require health insurance plans to regularly report grievance data to the insurance regulator. In the two states without this requirement, insurance plans are still required to maintain grievance logs which may be examined by regulators during market conduct and quality of care exams. Texas regulators expressed skepticism about the value of collecting grievance data centrally, given the need for proper validation of such data, although interestingly the audit tools used by Texas to review grievance data held by plans seemed to be very comprehensive.

In five states the insurance regulator stipulates the data framework that insurance plans are required to use in collecting grievance data. (Note, in California the Department of Corporations stipulates the reporting framework for late grievance data, but the absence of a more general grievance data framework was not able to be confirmed with staff of the Department of Corporations. Staff at the California Department of Insurance indicated there was no grievance reporting framework for plans under their jurisdiction.)

Table 10.4: Management and Reporting of Grievances

Features California Maryland Oregon New York Texas Vermont
Definition of grievances Grievances are all complaints received by health insurers Grievances are complaints received by plans in response to adverse decision involving medical necessity Grievances are all complaints received by health insurance plans Utilization review appeals are challenges to plan decisions on grounds of medical necessity, experimental or investigational services. Grievances are all other challenges Does not use term grievances, refers to all complaints received by HMOs Grievances are all complaints received by health insurers
Insurance plans are required to maintain grievance logs Insurance Department - Yes, 5 years, may be examined in market conduct exams Not stated, but implicit in reporting framework Yes, may be examined in market conduct exams Not stated, but implicit in reporting framework Yes, may be examined by regulator in HMO quality of care exams Yes, required to keep written records and maintain for 3 years
Insurance plans are required to regularly submit grievance data to regulator No routine requirement for all grievances. However HMOs are required to file quarterly reports on late grievances with Corporations Department Yes, annually, applies to all commercial insurers Yes, annually, applies to all health insurers Yes, annually, applies to all HMOs and insurers offering "managed health care insurance contracts" No Yes, biennially, applies to all health insurers
Regulator provides grievance data framework to plans Corporations Department - Yes, but only for late grievance reports, no issue categories specified Yes, includes 11 issue categories, CPT and ICD-9 codes Yes, includes nine issues categories Yes, Insurance Department issued circular in 1999, but does not stipulate issue categories Yes, includes four issue categories Yes, includes ten issue categories
Data on outcome of grievances required Corporations Department - late grievances, no requirement for data on number and % upheld Yes, number and % upheld, overturned or modified by plan Yes, requires number and % of grievances reversed in favor of consumer by plan, also % closed at initial grievance, 1st and 2nd appeal Yes, includes number and % reversed in favor of consumer by plan Plans are required to keep information on "action taken" on each complaint in logs. No stipulation as to outcome categories Yes, includes number and % of adverse decisions overturned at first and second appeals by plan
Regulator publishes grievance data No Not in consumer report, first policy report released in April 2000 Available on regulator web site, but not published in comparative report Yes, in annual Consumer Guide with data on complaints received by regulator No No

There is no consistency in grievance data collection requirements across the five states. Of the three states which define grievances most broadly and stipulate data collection frameworks, Oregon has probably the richest reporting framework for understanding the implementation of managed care patient protections. The Oregon reporting framework distinguishes nine different categories of grievances. Categories of particular relevance include: “denials based on medical necessity”, “denials based on other coverage issues, including denials based on the service being out of the plan, out of the area or not a covered benefit” and “emergency services”. As Oregon also requires plans to report on the outcomes of managing grievances by type of grievance, regulators can use this information to determine whether plans appear to be in compliance with patient protection legislation. For example, in this study a review of grievance data across the five largest HMOs found that 71% of grievances filed by consumers concerning emergency services were being reversed in favor of consumers, compared with 39% of all other grievances. Regulators commented that this was suggestive of plans failing to properly apply the “prudent person” standards required under Oregon legislation.

Analysis of grievance data can also be vitally important both for plans and regulators in identifying issues on which greater public education may be required. For example, across the five largest Oregon HMOs, only 1% of consumer grievances about access problems were reversed in favor of consumers. This suggests that consumers probably need better information about how managed care operates, including reasonable timeframes in which they can expect to see a primary care provider and the rules for accessing out-of-network providers.

Of the other two states which use a broader definition of grievances, Vermont requires plans to report separately on physical and behavioral health services grievances and also to identify whether expedited review is required, while Texas stipulates only four broad grievance categories (plan administration, benefit denial or limitation, quality, and enrollee services).

Of the two states with narrower (and opposite) definitions of grievances, Maryland stipulates a much more rigorous reporting framework than New York. Maryland’s reporting framework categorizes grievances into eleven service types (e.g. emergency room, mental health, pharmacy), with plans then also required to provide further information using CPT or ICD-9 codes for the five most common procedures or service items associated with each grievance category. Whether this level of regulatory enthusiasm, perhaps associated with the recency of the law, yields benefits and is complied with by plans remains to be fully tested. In addition, because of its concentration on service type rather than problem issue, it seems that the Maryland reporting framework will not be as valuable as the Oregon framework in monitoring the implementation of patient protections. Finally, New York does not require health insurance plans to do any breakouts of grievance categories, but simply requires plans to report the total number of grievances and utilization review appeals.

While the states in this study were selected on factors including the comprehensiveness of their complaints reports, only New York also includes grievance data in its annual consumer guide. The two Maryland agencies have recently released policy reports analyzing the impact of the grievances and appeal legislation, which include grievance data for the first year of operation. Oregon makes individual insurance plan grievance reports available electronically on its website, but does not currently produce any comparative reports on grievances. The lack of ready public access to grievance data in some states reduces the accountability of health insurance plans to their various stakeholders.

The New York consumer guide includes information on the total number of grievances filed and the rate at which grievances were reversed in favor of the consumer for each health insurance plan. However the New York report cautions readers that “the number of grievances filed may be higher for HMOs that actively promote the grievance process to their members as a benefit” and that “there is no ideal reversal rate”. It further explains that “ a high reversal rate may indicate that an insurer’s grievance process is responsive to needs of consumers. However an unusually high reversal rate may indicate that the HMO’s process for making initial decisions could be flawed”. As discussed previously in the section on complaints report cards, consumers are likely to experience difficulty in interpreting grievance data and understanding its implications.


While analysis of grievance data is likely to be most valuable to regulators, it is recommended that comparative grievance data be publicly available to enhance the accountability of health insurance plans to other stakeholders including consumers, employers, purchasers, policy-makers and legislators. Like complaints data, publication of grievance data will need to be accompanied by information to educate stakeholders about grievances and what constitutes “reasonable” performance by plans.

It is recommended that the following examples of best practice may be of value to federal and state regulators in improving regulatory oversight of grievances:

  • Regulators should design reporting frameworks for grievances which closely match the patient protections in the relevant jurisdiction and require plans to report on the process of managing grievances (e.g. closed at grievance, first appeal, second appeal) and the outcome (e.g. upheld in favor of plan, reversed in favor of consumer etc). One good example is the reporting framework stipulated by the Oregon Department of Consumer and Business Services (Oregon, Attachment 4).
  • Grievance data must be subject to audit to ensure validity. The Texas Department of Insurance HMO Quality Assurance Section has developed a particularly impressive audit tool (Texas, Attachment 1) which is used by the Department in examining the processes and procedures used by plans to manage grievances. Regulators need to ensure standardization across plans in grievance reporting.

There is a “hierarchy” of complaints handling, with state regulators seeing only the tip of the iceberg in terms of consumer complaints about health insurance plans. While surveys indicate that consumers are more likely to consult their employer benefits staff with problems about health insurance, three major employers included in this study did not maintain detailed complaints records for systemic analysis.

The previous discussion on the differences between “complaints” to regulators and “grievances” to health insurance plans raises the obvious question of the relationship between the two. What proportion of consumers only contact their health insurance plan if they have a problem? Or, how many consumers contact their state insurance regulatory agency, either before or after seeking resolution through their health insurance plan? Where are consumers most likely to turn if they have a problem with their health insurance?

In attempting to answer these questions, three data sources have been examined:

  • Complaints and grievances data from three states (Maryland, New York and Oregon) which publish or have released some data on both measures;
  • Surveys which address the issue of consumer actions taken in response to health plan problems; and
  • Interviews with three major employers concerning their role in complaints management about their employees’ health insurance plans.

Comparing Complaints and Grievances Data

Oregon uses the broadest definition of grievances as all complaints received directly by plans, compared with New York and Maryland which define grievances as subsets of plan complaints where the consumer is challenging an adverse decision by the plan on specific grounds. Given this, the Oregon data is likely to present the most realistic picture of the comparative volume of complaints received by plans and insurance regulators.

In 1998 the five largest HMOs in Oregon reported handling a total of 3,272 grievances, while the Oregon Consumer Guide recorded a total of only 461 complaints about these five HMOs made to the Department of Consumer and Business Services. In other words, for every one complaint about an HMO received by the regulatory agency, seven grievances were received directly by the health insurance plan.

Turning to New York, in 1999 the Departments of Insurance and Health received a combined total of 16,248 health insurance complaints. Health insurance plans reported closing a total of 44,753 grievances and utilization review appeals (both measures are included to more closely approximate the broader definition of grievances used in this paper). This equates to about one complaint received by the regulatory agencies for every three complaints received directly by health insurance plans. However it is important to note that New York has a prompt payment law requiring health insurers to pay within 45 days of receipt of a valid claim and that the Department of Insurance also accepts complaints from providers as well as consumers. Hence, of the 16,248 complaints to regulatory agencies, 10,871 (67%) were prompt pay complaints, many of which would have been made by providers. If these prompt pay complaints are excluded from consideration, the ratio of complaints made directly to health plans vs. regulatory agencies increases to 8:1.

In Maryland the relationship of a greater number of health insurance plan grievances than regulator complaints appears initially not to be sustained. Hence in 1999 the Maryland Insurance Administration received a total of 11,838 complaints across its two complaints handling units, while health insurance plans reported receiving only 4,785 grievances. However, there are several factors which might explain this apparent anomaly.

Firstly, the Appeals and Grievances law only took effect in Maryland on 1 January 1999, suggesting both that consumers may only be beginning to understand their rights to file grievances with health plans and that health plans may still be on a learning curve in reporting grievances. For example, staff at the Health Education & Advocacy Unit in Maryland indicated that plans sometimes attempt to find contractual reasons to deny care, rather than attributing it to lack of medical necessity, to keep denials out of the grievance process. Second, like New York, Maryland has a prompt pay law and regulators at the Maryland Insurance Administration noted that the vast majority of general health insurance complaints are provider-driven. Third, the definition of grievances used in Maryland is very narrow (complaints challenging a health plan’s decision to deny services based on medical necessity) and represents only a subset of all complaints lodged by consumers directly with their health insurance plan. For example, in Oregon which records all grievances received by plans, only 11% of grievances concerned medical necessity. When these three factors are taken into consideration, it is likely that the situation in Maryland is quite similar to the Oregon and New York experiences.


Several surveys attempt to measure the extent of consumer problems with their health insurance plans, with some surveys also indicating the action taken by consumers in this situation. These include:

  • The Consumer Assessment of Health Plans Study (CAPHS) 2.0H survey used in Maryland and New York in 1999; and
  • Two surveys undertaken in California in 1998 and 1999.

The CAPHS 2.0H survey asks health plan members “in the last 12 months, have you called or written your health plan with a complaint”. In Maryland 26% of surveyed consumers responded in the affirmative, ranging from a low of 15% to a high of 35% across individual HMOs. When asked whether the complaint was resolved to their satisfaction, 56% said yes, 21% said no and 23% said the complaint had not yet been settled. In New York 21% of surveyed members reported contacting their health plan with a problem in the last 12 months.

In 1998 the Californian Managed Health Care Improvement Taskforce commissioned a survey to document the extent and nature of difficulties Californians report with their health insurance plan. In total, 42% of insured Californians reported having had one or more problems with their plan in the last 12 months. However not all these problems were severe, as evidenced by the fact that even about 25% of Californians who were “very satisfied” with their health plan also reported having had a problem in the past year.

Of most interest, however, were the findings indicating what action people took to resolve their problem, with the survey allowing multiple responses. The vast majority of people contacted their health plan – 37% called the plan for information or assistance, 31% referred to plan documents and 12% wrote to the plan. The next most popular option was to contact the physician or other health care provider, a strategy adopted by 37% of people. The third most common response (17%) was to contact the employer benefits office, closely followed by asking a friend or family member for help (16%). The least likely actions were to contact a state or local agency for assistance (4%), an elected official (3%) or a lawyer (3%).

While not all these contacts result in filing formal complaints with the regulator or grievances with the plan, it can be seen once again that the volume of problems lodged directly with health insurance plans dwarfs the assistance sought from regulatory agencies. However, like the Maryland CAPHS survey, only 52% of people reporting a problem with their health insurance plan in the last year indicated that the problem had been resolved. Of people contacting their health plan, 29% of people were either dissatisfied or very dissatisfied with how the plan handled their complaint. Also of interest is the fact that 3% of people with a problem contacted an elected official, equivalent to about 200,000 Californians in 1998. No doubt, this is contributing to the “push-back” on managed care, including the strong stance taken by most state governments to create tighter legislative frameworks.


Given the prominent role of employers in private health insurance, staff of three major employers, Caterpillar, DaimlerChrysler and Motorola, were interviewed to understand their role in complaints management. None of the employers interviewed was able to provide complaints data which might shed some light on the pattern and volume of complaints, including the range of complaints related to patient protections. Complaints about health insurance were most likely to be used by the employers in this study to reassess coverage decisions.

Complaints data were not a major factor in employer decisions concerning plan and provider selection or disenrollment. However the employers surveyed may use complaints to drive systemic quality improvement. For example, Caterpillar holds regular meetings with providers to seek how to improve practice, including consideration of employee complaints, while DaimlerChrysler may conduct on-site audits of plans in response to unusual patterns of complaints, albeit infrequently.

In terms of the role of employers, DaimlerChrysler stressed the importance of clear communication in helping to prevent complaints and the necessity for both employers and plans to maintain good internal appeals processes in order to limit the volume of complaints that might otherwise go to external review.

Hence, while the Californian survey indicated that employers were frequently contacted by employees with health insurance problems, this study found that employers did not appear to provide a good source of complaints data, either in aggregate, or specifically for use in understanding the implementation of patient protections.

Policy Implications

This analysis has highlighted the importance of health insurance plans, both as the most common destination for consumers with health insurance complaints and as a much better repository of complaints data than other groups such as employers. Based on Oregon and New York, it is likely that the volume of grievances received directly by health insurance plans is between seven to eight times greater than the volume of complaints received by state insurance regulatory agencies.

These findings reinforce the previous recommendation that it is vitally important for regulators to require accurate reporting and to monitor grievances received directly by health insurance plans. Health insurance complaints received by regulators provide an incomplete picture in determining the need for legislative changes, public education or enhanced regulatory oversight. Policy-makers, purchasers, consumer advocacy groups and legislators are all potential audiences for grievance data.

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).

The analysis to date has indicated the patchwork nature of complaints data, with the involvement of multiple agencies in several states, differences across states in the type and categories of complaints data included in published report cards and variations across states in grievance reporting frameworks.

Against this backdrop of variation, it is nonetheless of interest to examine what the complaints data reveal. Are complaints about managed care plans more common than complaints about indemnity insurance? What is the frequency of complaints relating to managed care patient protections that are of most interest to legislators and regulators? How often are complaints upheld in favor of consumers?

The following analysis attempts to provide some partial, illustrative answers to these questions. As with any analysis of state-based data, the findings cannot be directly extrapolated nationally and are likely to reflect the specific environment of individual states. For example, states with prompt payment statutes will generate a different pattern of complaints than states without such statutes. The complaints management system will, itself, substantially impact on the volume and type of complaints received by regulators. For example, a requirement that consumers exhaust health insurance plans’ internal appeals processes before making a complaint to regulatory agencies will influence the level of complaints observed by regulators.

Complaints About Managed Care and Indemnity Insurance

Comparisons between the level of complaints for managed care and indemnity insurance need to adjust for market share through, for example, using complaints rates which are based on premium volume or number of enrollees. Three of the six states studied (Oregon, New York and Vermont) reported data in a manner which allowed some views to be formed about the relative incidence of complaints about managed care and indemnity insurance.

In Oregon the complaint rate for indemnity health insurance was 48.6 complaints per $100m premiums in 1999, compared to a complaint rate of only 23.8 for managed care plans. This two-fold greater rate of complaints about indemnity insurance than managed care plans initially seems at odds with the managed care backlash. Several factors might help explain the apparent dissonance between public perceptions of a crisis in managed care and the reality, at least in Oregon, of a much lower complaint rate for these plans.

Firstly, complaints about managed care are growing much more rapidly in Oregon (a 57% increase in the complaint rate between 1997 and 1998) than complaints about indemnity insurance (15% increase). This high growth in managed care complaints may be associated with increases in market share. When people move from indemnity insurance to managed care, their unfamiliarity with how managed care works might prompt this higher growth in complaints. If this is true, the mismatch between consumer expectations and the reality of managed care protocols (such as use of gatekeepers and authorization procedures) may diminish over time, together with the growth rate of complaints.

A second more compelling argument espoused by Oregon regulators is that lower complaints rates may reflect the integral nature of the appeals process for managed care plans. If managed care plans have better well-established internal grievance handling processes than indemnity insurance, this will result in the observed finding of lower complaints rates for complaints made to regulatory agencies. The Oregon finding should again serve notice that regulators are seeing only a small fraction of all consumer complaints. Regulators commented that historically some of the large HMOs have invested substantial efforts in internal complaint resolution and consumer satisfaction. In 1998 Oregon began requiring uniform grievance procedures across all types of health insurance plans which may over time, reduce the disparity in complaint rates observed by regulators.

In New York the Department of Insurance measures complaints rates adjusted by premium volume for HMOs, commercial indemnity insurers and non-profit indemnity insurers. The highest complaints rates were recorded for commercial insurers (0.329 complaints per $1m premiums) and HMOs (0.302), with the lowest complaint rate for non-profit indemnity insurers (0.119). Hence in New York, managed care plans have about the same complaint rate as commercial indemnity insurers, but about two and a half times the complaint rate as non-profit indemnity insurers.

Finally, in contrast to both the Oregon and New York findings, regulators at the Vermont Department of Banking, Insurance, Securities and Health Care Administration noted that complaints about managed care and indemnity insurance were in proportion to their market share. Hence, in 1997/98 the Department received 290 complaints, of which 67 (23%) related to managed care plans which have a market share of about 20% in Vermont.

Complaints About Specific Managed Care Patient Protection Issues

In four states (California, Maryland, Oregon and Texas) there is some breakout of either complaints or grievances data relevant to understanding patient protection issues.

In California the Department of Corporations records the distribution of HMO complaints in 1998 as being: quality (64%), claims (34%), benefits and coverage (24%) and accessibility (7%). Within the subset of quality complaints, the most common complaint reasons across the six largest HMOs include inappropriate care (43%), denial of treatment (33%) and refusal to refer (19%) (Figure 3.2). The California Department of Corporations does not record whether complaints are justified or upheld in favor of consumers, nor does it require the reporting of grievance data collected by plans, so missing an opportunity to learn more about specific patient protection issues.

In Oregon and Maryland regulatory agencies report some grievance data relevant to patient protection issues. In Oregon an analysis of grievances for the five largest HMOs (Figure 6.2) revealed that 46% of all grievances concerned “other coverage/not covered” issues, while other significant grievance categories included medical necessity (11%), quality of care (9%), referral issues (9%), administrative issues (8%) and emergency services (8%). In contrast, Maryland uses service type categories in recording grievances, with the only parallel with the Oregon categories being the Maryland category of “emergency room” grievances. Emergency room grievances accounted for 17% of grievances in Maryland, compared to only 8% for emergency service grievances in Oregon.

Comparisons showing the rate of grievances overturned in favor of consumers are also of interest with such data being available for Maryland (Figure 4.2) and a sample of the five largest HMOs in Oregon (Figure 6.3). The grievances most likely to be decided in favor of consumers differed across the two states. In Maryland consumers were most likely to receive favorable outcomes for grievances concerning pharmacy services (85%), skilled nursing facility and rehabilitation facility care (75%) and emergency room services (65%). In Oregon the best outcomes for consumers were for grievances relating to emergency services (71%), other coverage/not covered (47%), referral issues (44%) and medical necessity (41%). Grievances which were least likely to be reversed in Maryland were mental health (28%) and podiatry, dental, optometry and chiropractic (38%). In Oregon grievances which were least likely to be reversed were access problems (1%), quality of care (4%) and quality of plan services (4%).

Finally Texas, like California, has some data on categories of complaints received by the regulatory agency, but does not require reporting of grievance data. In 1999 the most common reasons for HMO complaints were delays in claims handling (47%), denial of claims (20%), and claims reimbursement or balance billing (17%). For indemnity health insurance, the most common reasons for complaints were delays in claims handling (53%), denial of claims (19%) and unsatisfactory offer (19%).

Policy Implications

While there is much variation across states, complaints and grievances data are of value in examining the relative level of complaints about managed care and indemnity insurance plans. Regulators can also track changes in the distribution of different complaint categories and in the share of complaints upheld in favor of consumers 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.