Consumer Protection in Private Health Insurance: The Role of Consumer Complaints. A. Jurisdiction and Responsibility for Consumer Complaints Systems


Texas is a state with an interesting history, a still evolving future and multiple layered arrangements for the management of health insurance complaints.

In summary, until September 1996 the Texas Department of Insurance (TDI) and the Texas Department of Health (TDH) shared responsibility for traditional health insurance and managed care complaints respectively. While TDI assumed responsibility for all types of health insurance complaints in 1996, it has continued the split responsibility with the current involvement of two divisions - the Consumer Protection Program which handles traditional health insurance and preferred provider organization (PPO) complaints; and the Life, Health & Licensing Program which handles HMO complaints. An independent government agency, the Office of Public Insurance Counsel, represents the interests of insurance consumers as a class with a major contribution being the publication of annual HMO complaint report cards. Finally in 1999 the Texas legislature mandated the establishment of an Ombudsman program to assist individual insurance consumers in their appeals and hearing process, although this office has yet to be established.

Texas Department of Health

Until 1996 the Department of Health monitored and examined HMOs with regard to quality, availability and accessibility of health services, while TDI had the primary regulatory role concerning licensing and financial and contractual issues. In FY 1996 a Senate Interim Committee on Managed Care was established to assess the adequacy of managed care consumer protections. Its report expressed concern about the dual regulation of HMOs by TDH and TDI, resulting in a staged transfer of responsibilities to TDI. From 1 September 1996 to 1 September 1997 TDI managed TDH's regulatory responsibilities under a delegated contract, although still needing final approval from TDH before initiating regulatory action on those matters. Under Senate Bill 385 responsibility for HMO quality of care regulation was formally transferred to TDI, including funding for ten nurses to assist in examining HMOs and to investigate quality of care complaints.

While no longer involved in private health insurance plan complaints, the TDH Bureau of Managed Care continues to have primary regulatory responsibility for Medicaid Managed care and is undertaking a CAPHS survey of Medicaid managed care plans, including HMOs.

Texas Department of Insurance

The Consumer Protection Program in TDI operates a 1-800 number and is the first point of contact for all health insurance complaints including those concerning HMOs. It receives complaints by phone, fax, electronically or in person. Where the intake staff can readily identify that a complaint concerns a HMO, it will be referred to the HMO/URA Division. However sometimes the Consumer Protection Program will begin investigating a complaint and only later discover that it relates to a HMO plan, at which stage it will then be referred.

TDI distinguishes between inquiries and complaints, where an inquiry asks a question and a complaint both expresses a grievance and requests that TDI take action. Data on the volume of inquiries and complaints is reported in Section E dealing with Agency Performance Measures.

In regard to ERISA plans, it is often unclear whether the plan is fully self-funded or not. The Consumer Protection Program handles about 300-400 self-funded type complaints each month, and routinely writes to such companies. On average, about half the companies respond, even though they are technically under no obligation to TDI. In January 2000 the involvement of the Consumer Protection Program resulted in more than $153,000 of financial returns to consumers due to self-funded trusts. Consumers are particularly appreciative when TDI becomes involved in these complaints as they understand there is no requirement for TDI action.

TDI operates an Early Warning System within its financial program which analyzes data including complaints data received by the Consumer Protection Program. Under this System changes in complaint patterns or certain triggers will be monitored to provide an early sign of problems with insurance plans, including solvency.

The Consumer Protection Program in TDI also works closely with both the legal and market conduct sections. Staff from the TDI programs Consumer Protection, Legal, Life, Health & Licensing, Financial, and Property and Casualty meet every two weeks to review actions involving complaints. Consumer Protection provides complaints data to the market conduct examiners which may initiate special examinations on the basis of complaints.

Office of Public Insurance Counsel

OPIC was originally established in 1987 as the Office of Consumer Protection, falling under the jurisdiction of the State Board of Insurance which was also responsible for hiring the TDI Commissioner of Insurance. Initially the Office had responsibility for only property and casualty insurance but this was extended to other insurance lines, including health, in 1991. At that time OPIC became independent of TDI and now reports directly to the governor and legislature.

Authorized under the Texas Insurance Code Article 1.35A, OPIC is statutorily required to represent and advocate for the interests of consumers as a class. According to OPIC staff, Texas was the first state to establish an office with this function separate from the insurance regulator, a model which has recently been adopted by Georgia. The establishment of OPIC occurred during a period of tort reform in Texas. Its creation was seen as a compromise as the legislature wanted to ensure that there would be an agency acting on a consumer advocate basis to balance the insurance industry's arguments for insurance rate increases.

OPIC works closely with TDI, referring on any complaints it receives directly from individuals. OPIC and TDI will discuss the complaint categories used in the TDI database and whether the categories need to be changed to reflect emerging issues.

  • Major activities undertaken by OPIC relevant to health insurance complaints include:
  • Development of a consumer Bill of Rights;
  • Publication of special reports including HMO Report Cards; and
  • Advocacy on behalf of consumers before TDI.

Consumer Bill of Rights - The Texas Insurance Code Article 1.35A Sec 5 (b)(8) authorizes OPIC to submit to TDI for adoption a consumer Bill of Rights for each insurance line. The process is that OPIC will draft a Bill of Rights and informally request input from TDI and other interested parties. The TDI will publicize it in the Texas Register with a specified time available for public comment. TDI will notify the public of the opportunity to attend a public hearing, while OPIC will also generally circulate it to various public interest groups, health plans and HMOs. Ultimately, the Commissioner of TDI then adopts the Bill of Rights and takes responsibility for ensuring that plans distribute them to consumers. OPIC will also publicize information about the Bill of Rights on its internet site and through other public media. However it should be noted that the various Bills of Rights do not create new rights; instead OPIC's role is to inform consumers of their existing rights through this process of consolidating and publicizing rights.

While OPIC has produced Bills of Rights for Homeowners and Renters Insurance, and Personal Automobile Insurance, there is not yet an Health Insurance Bill of Rights. Currently OPIC has a draft health insurance Bill of Rights lodged with TDI for which they had filed a petition for its adoption. However OPIC has recently asked TDI to defer adoption of this Bill while OPIC makes various amendments. This Bill will cover all health insurance, including traditional indemnity insurance and HMOs. The Bill of Rights is based not only on statutes, but also rules and regulations adopted by TDI. If relevant, it could theoretically also include common law determinations, although regulators were not aware of any relevant case law for the Health Insurance Bill of Rights. Although the Health Insurance Bill of Rights is yet to be formally adopted by TDI, OPIC staff pointed out that the legislature has already adopted various protections which often involve HMOs or health plans informing consumers of their rights (e.g. external appeal of health plan decisions).

Publication of reports including HMO Report Cards - OPIC provides operating reports to the Governor and legislature covering standard performance and budget reporting issues. It also creates special reports or research documents to respond to Executive or Legislative requests or to highlight important or timely insurance issues. For example, OPIC submitted a report on health insurance coverage in Texas to the Senate Interim Committee on Children's Health Insurance in July 1998. However OPIC notes that it has "dramatically limited its consumer publications" in the last several years. This has involved eliminating duplicative publications and reducing its distribution channels.

The major focus of OPIC's publication activity is the production of the annual "Comparing Texas HMOs" guide. This report is discussed in greater detail in Section C on Complaints Reports.

Advocacy on behalf of consumers by OPIC before TDI - One of OPIC's key functions is to represent consumers as a class in hearings before TDI on issues such as insurance rates, rules, policy forms and other issues. For example, OPIC may file petitions with TDI on lower insurance rates and rules that are advantageous to consumers. As such petitions become public documents, OPIC receives comments back from the insurance industry and interest groups. OPIC staff noted that generally the majority of comments on such petitions are received from health plans and HMOs, rather than interest groups representing consumers. Health plans and HMOs may often provide suggestions for amendments or suggest a correction to an interpretation made by OPIC. In its advocacy role, OPIC often examines patterns of complaints.


In 1999 the Texas legislature passed HB3021 creating an Ombudsman program to assist HMO consumers in complaints or appeals and to act as a statewide clearing house for consumer information. This role is intended to be quite different from OPIC which is authorized to represent consumers as a class, rather than deal with individual consumers.

However the legislation contained no funding to establish this new program. Consequently, this function has been subsumed into the work of the HMO Division in TDI. TDI staff noted that the advocacy role required of the Ombudsman program may not fit well with TDI's statutory mandate to enforce the Texas Insurance Code. Accordingly, TDI has commenced discussions with some non-profit groups as to whether they could take on this role, but funding still remains an issue.