Consumer Protection in Private Health Insurance: The Role of Consumer Complaints. National Association of Insurance Commissioners

The National Association of Insurance Commissioners (NAIC) was established in 1871 and is the peak association comprising insurance regulators from the 50 states, the District of Columbia and the four U.S. territories.

Since Spring 1998 the NAIC has been working on a Consumer Complaints White Paper concerning all lines of insurance. The Draft White Paper (Attachment 1, 13 March 2000) was adopted at the March 2000 meeting by relevant working groups and committees and it is expected that it will be formally adopted by the NAIC Executive in June 2000.

It is important to stress at the outset that while the initial charge by the NAIC to the Consumer Complaints Working Group included developing “recommendations for features of an effective complaint handling process”, the Draft White Paper does not generally invoke the language of recommendations. The NAIC states that “it is not the intent of the paper to prescribe a single methodology or procedure”. Hence, the paper is advisory in nature as reflected in much of the language with frequent reference to statements such as “the following best practices may be of assistance”.

The NAIC states that the paper “is intended as a resource guide for regulators”, identifying areas "where the preponderance of states have migrated to certain practices that appear to be efficient, effective and common between many states". In addition, the NAIC acknowledges the advantages of state regulation including that "each jurisdiction may establish laws and implement those laws in a ways that suit the expectations of the citizens of each jurisdiction" and the different budgetary and legal situations across states.

As occurs in many similar organizations, the NAIC Draft White Paper represents the result of compromise and negotiation to achieve a consensus position. While consideration was initially given to interviewing NAIC staff involved in the development of the Draft White Paper, it was later decided not to proceed with such interviews. The Draft White Paper represents the official position of the NAIC developed through a finely negotiated process and it would be unlikely for NAIC staff to offer views which differ substantially from the Draft White Paper.

The following analysis outlines the NAIC position, based on the Draft White Paper, on the broad issues examined in the state case studies, namely:

1. Jurisdiction and responsibility for consumer complaint systems;
2. Jurisdiction and liaison with health plans;
3. Complaints reports;
4. Public education activities; and
5. Agency performance measures.

Legislative Jurisdiction

An important distinction recognized by the NAIC at the outset is that state insurance departments may well be involved in handling consumer complaints even where there is no specific jurisdiction through a statutory violation. Citing quality of service issues as an example, the NAIC states that insurance departments “should provide an avenue for resolution of all consumer complaints”, including providing “information and brochures outlining the consumer rights and resources”. The Draft White Paper appears to encourage less of a legalistic approach, and more of a consumer-focused, approach to the management of consumer complaints.

Liaison with Other Agencies

The Draft White Paper notes that for issues where state insurance departments lack jurisdiction, the "complaint should be immediately referred to the proper regulatory agency", citing the example of HMO complaints being sometimes the responsibility of health regulatory agencies. The NAIC suggests that where there is joint or overlapping jurisdiction, that the state insurance department should enter into a Memorandum of Understanding with relevant agencies. (Appendix G of the Draft White Paper provides an example of an MOU between the Maryland Insurance Administration and the Department of Health and Mental Hygiene which includes protocols and defines areas of responsibility for the two agencies). The Draft White Paper also proposes the development of an inter-agency task force with regular meetings for issues that cross agency lines.

1. Medicare and Medicaid - The NAIC suggests that the established practice is a referral to HCFA(now known as CMS) or the Social Security Administration at the federal government level or to the state Medicaid agency. However it notes that the HCFA(now known as CMS)-funded State Health Insurance and Assistance Program (SHIP) can also provide counseling services to Medicare beneficiaries. The NAIC and HCFA(now known as CMS) have also developed a document titled "Guidelines to be used between HCFA(now known as CMS) and the state insurance departments for the Medicare+ Choice Program".
2. ERISA - While acknowledging the lack of jurisdiction, the NAIC suggests that state insurance departments "should always be willing to assist all complainants who have problems with their health insurance or health plan".
3. Distribution of insurance through banks - The NAIC notes that the Office of the Comptroller of Currency (OCC) has entered into agreements with 25 state insurance departments, as of February 2000, to share consumer complaint information, in recognition of the functional regulation of the OCC and state insurance departments.

Ombudsman Programs

While the Draft White Paper makes no specific reference to ombudsman programs, it notes at the outset that "one of the primary missions of state insurance departments is to serve and protect the insurance consumer". The Draft White Paper is largely silent, however, on whether insurance departments should move beyond consumer assistance and regulatory compliance to a more active consumer advocacy role.

In commenting on questions of fact complaints (i.e. "he said, she said" complaints which do not involve statutory violations), the NAIC suggests that such complaints may need to be referred to the appropriate remedy including "the court system, arbitration, appraisal, independent medical examination, or other appropriate mediator". The NAIC cites an example established by the Oklahoma Department of Insurance in 1999. The EAGLE program (ending arguments gently, legally and economically) is a mediation process using trained volunteer mediators, coordinated by the Legal Division in the Oklahoma Department.

Internal Communication

The NAIC notes that existing practices and procedures do not always result in timely, efficient internal communication between consumer services divisions of state insurance departments and other divisions with an interest in complaints. It is suggested that communication optimally involves both:

1. The provision of written statistical reports custom-designed to the needs of relevant divisions; and
2. An opportunity to discuss issues and share anecdotal information. The Draft White Paper cites as an example that the market conduct section "may be interested not only in evidence of trends but may also find that other facts discovered by the complaint analysts indicating any other systemic problems may be of value".

The NAIC suggests that other groups with an interest in complaints information may include: "management, actuarial, market conduct, financial services, rates and forms, policy groups, and the public information officer". It suggests that regular meetings involving a cross-section of staff should occur to exchange information and discuss ideas.

Oversight of Grievance Processes of Insurance Plans

The Draft White Paper is totally silent as to whether state insurance departments should have any role with regard to requiring plans to:

1. Submit internal complaints or grievance data;
2. Maintain internal complaints logs; and
3. Submit details of their internal complaints management process.

Enforcement

The survey of all state insurance departments conducted by the NAIC in 1998 found that in two-thirds of the responding states "less than 3% of complaints result in enforcement actions" and only three states reported that more than 10% of complaints resulted in enforcement actions. Interestingly, in discussing the link between complaints and enforcement, the NAIC suggested that complaints are "increasingly used by states to identify problem companies for purposes of market conducts exams and other oversight" rather than serving as the basis for individual enforcement actions.

The NAIC suggests that, in some situations, there are advantages to a "less legalistic approach to complaint resolution" using informal dispute resolution instead of enforcement including:

1. Reduced time and cost of an informal approach; and
2. Encouraging companies "to do the right thing" may be easier when advocacy is distinguished from enforcement and is sensible when there is no clear legal violation, but practices are "outside industry norms or otherwise not fair to the consumer".

However the NAIC also notes that enforcement actions may be required for "willful violations of an unambiguous law or recurrent violations of the same law". An example cited from Oregon concerned two HMOs which were fined for failing to conduct reasonable investigations prior to denying emergency room claims "despite the companies' argument that they routinely reversed initial decisions on appeal".

Definition of Complaints

The NAIC proposes that best practice would incorporate including both written and oral complaints, with the distinction between complaints and inquiries being that a complaint includes the expression of a grievance.

Consistency with NAIC Database

In some of its strongest language, the NAIC states that "it is imperative that states adopt the uniform data standards used for the NAIC Complaints Database System (CDS)". The CDS was "established to facilitate uniform data standardization, complaint analysis and the sharing of complaint data by multiple states".

Appendix B of the Draft White Paper comprises the NAIC Standard Complaint Data form. The form captures data using the following categories:

1. Type of coverage by line of insurance - under accident and health insurance the categories relate generally to the purchaser (e.g. Medicare supplement, individual) and some health condition/service groups (e.g. mental health, cancer/dread disease);
2. Reason for complaint - the first level categories are underwriting, policyholder service, claim handling and marketing & sales. Within these four categories, the following subcategories may have some broad relevance to the implementation of patient protection legislation:
3. Experimental;
4. PCP referrals;
5. Utilization review;
6. Quality of care;
7. Medical necessity; and
8. Denial of claim.

However compared with the complaints and grievance data collected by many of the states in this study, this database is much higher level (consistent with it being required to apply to all lines of insurance business rather than health insurance alone). It is therefore less likely to yield major insights into patterns of complaints relevant to understanding the implementation of patient protection legislation.

Disposition - The database allows up to 3 responses to be selected from a field of about 40 options as to the outcome of the complaint.

The Draft White Paper notes that states should submit closed complaints data.

Complaint Indices

The NAIC suggests that it is best practice that "aggregate complaint information should be provided in complaint index ratio format and should include well- documented definitions and explanations of calculation methodology". It also notes that it is "more accurate to have complaint index ratios based upon the number of policies in force instead of premium volume", but concedes that this information is often not readily available. The NAIC notes that complaint indices may be developed in a number of different ways and that it is important to base them on reliable data and to adequately define all categories and terms.

Justified Complaints

The NAIC is not prescriptive as to whether states should make a final determination as to whether complaints are justified or not justified. It notes that some states such as California make such a determination, but offers no advice as to whether this is desirable or not, simply noting somewhat ambiguously that the final disposition of the complaint should be "consistent with the administrative appeal procedures in the state". In discussing state submission of data to the CDS, the NAIC also notes that some states submit only "closed complaints that the department determines are justified", but again, makes no recommendation as to the preferred option.

Provider Complaints

The NAIC notes that regulators "struggle" with provider complaints, given the volume of consumer complaints. While recognizing the legitimate concern of state insurance departments about "being used as collection agencies", the NAIC cautions that providers play an integral role, citing an example relating to health insurance consumer protection standards. In particular, it acknowledges that provider education on "medical service authorization timelines, appeal rights, prudent layperson emergency services standards, and the like, is a key element of any strategy to promote compliance and improved health plan performance".

Analysis of Patterns of Complaints

The NAIC stresses the importance of a complaints database in tracking patterns of complaints. While noting that complaint trends may be used to trigger a referral to the market conduct or enforcement areas, the Draft White Paper does not provide any guidance on what level of complaints might constitute a pattern leading to further action, referring alternatively to "a large influx of complaints" and "a certain level" of complaints. Once a pattern has been identified, the NAIC suggests that "Department staff may want to meet with the company to review adverse trends and require that the company establish a compliance plan". It also notes that complaints patterns "should be considered in the selection of companies for examination and in the determination of the scope of an examination". Another proposal is that complaint patterns may be assigned to a single analyst or team of analysts to allow increased scrutiny and understanding.

Publication of Complaints Information

The NAIC notes that in response to a survey sent to all state insurance departments, 26 states indicated that they "publish complaint information in either an annual report, consumer brochure or on the department's web site". However the Draft White Paper is relatively silent as to the desirability of publicizing complaints information. Instead, the NAIC notes that "insurance departments should develop specific protocols consistent with state Information and Open Records laws to make information in closed individual complaint files public". Unlike other topics in the paper, the NAIC does not cite particular examples of best practice in regard to publication and dissemination.

Outreach

The NAIC suggests that "Insurance Departments should pursue programs that increase the accessibility of complaint analysts and consumer education services to all consumers".

While outreach programs are generally thought of as a way of increasing visibility and promoting greater use of services, the NAIC suggests that consumer outreach and education programs "may help prevent complaints", in addition to addressing consumer issues. Examples of outreach activities cited in the Draft White Paper include: consumer brochures, field offices, a Commissioner's Bulletin or a department seminar, a Speaker's Bureau and visits to groups including recreation facilities for the elderly, libraries and chambers of commerce.

Staffing

The Draft White Paper notes that although some complaints analysts may specialize by line of insurance, it is beneficial for all analysts to have "a basic understanding of all lines of insurance", particularly relevant to dealing with catastrophic situations.

Consumer Satisfaction

The NAIC states that a consumer satisfaction survey is "essential to providing feedback on overall performance". It mentions alternative methods such as written surveys and self-addressed postcards, but does not offer any guidance as to a preferred method. In addition to assessing performance, the NAIC notes that consumer satisfaction surveys can be helpful in determining resource needs "by identifying how consumers learned of the availability of consumer assistance and information, the means of communication used, the reason for contact, and the consumer's age and county of residence".

Audit

The NAIC notes that states should have "quality control measures in place to monitor both the individual complaint analyst and the department performance and to ensure that complaints are being handled properly". Monitoring individual complaints analysts may include supervisory review and telephone monitoring, with factors reviewed including: the timeliness of resolution, clarity of communication, accuracy and quality of response to consumer questions, friendliness to consumers and overall consumer satisfaction.

Appendix C provides examples of supervisory review and audit forms used by Florida, Colorado and California. For example, Florida undertakes monthly audits of consumer files and annual audits of overall office policies and procedures. The Florida annual audit is quite far-reaching and includes documenting the extent of consumer outreach programs, the volume of files referred to various agencies, identifying trends, topics of concern and legislative suggestions.

Random monitoring of complaint analyst telephone calls is also suggested as a quality improvement initiative. The NAIC notes that some states may also choose to conduct "blind telephone call" investigations where staff "call the Consumer Services Section and represent themselves as consumers in order to identify areas where improvements and job training were needed".

Workload Performance Measures Including Financial Savings

The NAIC notes that currently most states monitor various performance measures such as the number of telephone calls, information requests, Internet site hits, time for resolution of complaints and the amount of money recovered. However it is supportive of benchmarking through the development of more specific outcome measures.

In terms of measuring financial savings to consumers, the NAIC recommends that states track the amount of monies recovered subsequent to the involvement of the insurance department (a differential basis), rather than simply measuring the full amount of monies recovered by the complainant.