A New Pro-Consumer Health Care System: Enforcing the New Federal Health Care Law in New York State

Public Policy and Education Fund oF nEw york

January 2011

a new Pro-Consumer HealtH Care system

Enforcing thE nEw fEdEral hEalth carE law in nEw York StatE

a new Pro-Consumer HealtH Care system:enforCing tHe new federal HealtH Care law in new york state

by bob CoHen, esq.

PubliC PoliCy and eduCation fund of new york

94 Central avenue

albany, ny 12206518.465.4600HttP://PPefny.org

January 2011

ExEcutivE Summary ................................................................................................ii

i. introduction ......................................................................................................1

ii. EnforcEmEnt of thE affordablE carE act in nEw york .........................................3

iii. currEnt nyS hEalth carE EnforcEmEnt agEnciES ...............................................4

iv. conSumEr-oriEntEd govErnancE: ExchangES and EnforcEmEnt ..............................6

v. EmpowErEd conSumErS: conSumEr aSSiStancE, navigatorS and diScloSurE of information ........................................................................................................10

vi. affordablE ratES: controlling coStS to protEct conSumErS ..............................15

vii. conSumEr rightS: appEalS of hEalth plan dEciSionS and additional conSumEr rEmEdiES .............................................................................................................18

viii. conSumEr fairnESS: rEducing racial and Ethnic hEalth carE diSparitiES ...........21

ix. Summary of rEcommEndationS ........................................................................23

x. concluSion ....................................................................................................26

table of Contents

ii

Public Policy and Education Fund of New York

exeCutive summary

In March of 2010, President Obama signed the Affordable Care Act (“ACA”), comprehensive health care reform legislation that will significantly improve the availability, affordability and quality of health insurance in the United States. The new law will provide an estimated 2.2 million additional New Yorkers with access to health insurance.

In addition to the lack of coverage of tens of millions of Americans, the ACA was passed in response to numerous documented unfair health insurer practices throughout the nation, including denials of coverage for medically necessary care; wrongful dropping of coverage through the practice of rescission; deceptive marketing of substandard plans; large increases for health insurance premiums; and the inability of state insurance regulators to hold large health insurers accountable for these practices. The ACA’s success in New York State rests on establishing an effective system of health insurer accountability.

The ACA put much of the responsibility for implementation on the states. New York must pass a state implementation statute in 2011. In developing this new state law, the Legislature will face a number of important decisions that will greatly affect the ability of consumers to understand their new health care options and gain access to appropriate and affordable insurance. The statute must also afford consumers effective redress if they do not receive the benefits and rights conferred on them in the Affordable Care Act: the central focus of this report.

The new state ACA enforcement scheme must be consistent with the existing structure for enforcement of rules applicable to health insurers in the state. The New York State Insurance Department (NYSID) now accepts thousands inquiries each year on such topics as differing interpretations of health insurance policy provisions and the failure to timely settle claims. NYSID provides advice to consumers, mediates disputes between consumers and insurers, and imposes monetary penalties for violations by health insurers. The New York State Department of Health shares oversight of HMOs with NYSID. The Attorney General supplements NYSID’s and DOH’s roles by focusing on systemic practices affecting large numbers of consumers, such as its well-known investigation of utilization review practices.

Critical to the success of the new health care law in New York State is making sure that the new state health care exchange works effectively with NYSID, the Attorney General, and other entities that assist consumers when it is established by 2014. The New York exchange - a marketplace for health insurance for individuals and small businesses - should be statewide in nature to ensure that risk is spread more effectively, that consumer bargaining power is enhanced, and that state resources are used efficiently. The exchange should be a public authority independent of any existing state agency, with strong consumer representation.

The focus of the exchange must be on marketing insurance to consumers and small businesses as well as attracting insurers. Therefore, NYSID should have primary responsibility for enforcement of consumer protections, while the exchange should perform the functions specifically assigned to it by the ACA, like certification of health plans, enrollment, and administering premium credits. The exchange should not be a passive marketer of health insurance: it should aggressively bargain with health insurers for better terms for consumers, and exclude health plans that sell lower quality products.

Several steps need to be taken to ensure that NYSID and the Attorney General can effectively protect consumers. The state implementation statute must clearly specify that NYSID should be able to collect monetary penalties for any violation of the Affordable Care Act that affects health insurance consumers. Technical legal requirements, like requiring proof that an insurer didn’t act in “good faith” before penalties can be recovered, place roadblocks to enforcement and should be reexamined. Existing monetary penalties for violations of health care consumer protections need to be strengthened and updated to account for inflation. The statute should explicitly list the health insurance protections in the ACA as well as comparable state protections that the Attorney General is permitted to enforce. Finally, even in a tight fiscal climate, state enforcement agencies need to be given adequate resources to make the new federal health care law work for consumers.

The state has distributed funding provided under the ACA to a consortium of non-profits headed by the Community Service Society to establish a state consumer assistance office to help consumers select suitable insurance plans, and to assist consumers with disputes with health plans. After the first year, the state must decide which entity will coordinate the state consumer assistance office. We believe that the state’s decision to have community based organizations (CBOs) operate the consumer assistance office in the first year was the correct one, and that the implementation statute should give preference to CBOs to perform the ACA consumer assistance and navigator functions in future years. However, a number of requirements like adequate staff training need to be included in the statute to ensure that the office is effective and accountable.

The new state implementation statute also needs to have strong pro-consumer provisions in the areas of consumer information, rate regulation, consumer appeal rights, and health disparities. It is critical that the statute ensure that information on health plans is easily available and understandable to consumers, so that consumers can make informed choices as to their health coverage, and that companies are held accountable. The statute should have strong penalties for violations of the law’s consumer disclosure provisions, and the Legislature should give NYSID wide discretion to develop standardized consumer information documents with broad consumer input. The

iii

A New Pro-Consumer Health Care System

2010 state “prior approval” law has already been successful in dampening increases in health insurance premiums, but additional reforms are necessary to permit consumers to meaningfully participate in rate proceedings. Steps also need to be taken to ensure that the state can enforce its existing strong managed care law, and to make sure that consumers are aware of the availability of assistance under the law.

Even with significant increases in resources, state and federal enforcement agencies will not be able to assist every consumer who complains of violations of the ACA and other health care protections. Therefore, alternatives to state agency enforcement need to be developed. Most significantly, the new state implementation statute should allow consumers harmed by serious violations of health insurance protections to bring court actions to recover damages, known as a private right of action.

Finally, no implementation effort will be complete if major communities of the state are left out of reform. Overwhelming evidence exists of disparities based on health care outcomes based on race, ethnicity, gender, primary language and disability status. However, current state efforts to collect health disparities data are incomplete and haphazard, making it difficult for the state to hold health care institutions and health plans accountable for not reducing disparities. A single office in the State Department of Health should therefore be responsible for overseeing the collection of all health equity data, including the data required to be collected by the ACA. The state should use this data to reduce health disparities. The disparities data should be made available to consumers on the Internet at no charge, so that consumers can use it to choose health plans and health care institutions.

New York State must design its implementation of ACA to create a pro-consumer health care system. When it comes to each decision about implementation, including governance structure, enforcement, consumer information, consumer assistance, control of insurance rates, and reduction of health care disparities, it is critical that New York State protects consumers’ interests. It is well documented that insurance companies will consistently put profits over people: it is the state’s job to make sure we have a health care system that puts people first.

1


In March of 2010, President Obama signed comprehensive health care reform legislation that will significantly improve the availability, affordability and quality of health insurance in the United States. This legislation, the Affordable Care Act (“ACA” or the “Act”),1 will provide an estimated 2.2 million additional New Yorkers with access to health insurance, or 85% of the non-elderly uninsured population in the state. According to New York State Health Foundation projections, more than a million uninsured New Yorkers are ultimately expected to obtain coverage.2 The law is also expected to make major changes to health care policy, including an expansion of Medicaid; protecting consumers in the private insurance market from excessive costs for health insurance premiums and “out-of-pocket” expenses; increasing consumer information about health care choices; and protecting consumers from insurer practices like pre-existing condition limitations, rescissions and limits on annual and lifetime benefits.

In addition to lack of coverage of tens of millions of Americans, much of the impetus for the new law was the outrageous conduct of many major non-profit and commercial health insurers, and the inadequate system of state regulation to control harmful insurer practices. In a 2009 report, Health Care for America Now (HCAN), a national reform coalition of more than 1,000 organizations, documented many of the major anti-consumer practices of health insurers based on media accounts and personal stories submitted to HCAN. These practices included: exposing consumers to high out-of-pocket costs for medical services; denials of coverage for medically necessary care; discrimination against women because of the cost of childbirth; wrongful dropping of coverage through the practice of rescission; deceptive marketing of substandard plans; defrauding of taxpayers through billing public programs like Medicare and Medicaid for services not provided; excessive CEO compensation; denial of reimbursement to hospitals and other providers for emergency care; large increases for health insurance premiums; incentives to providers to impede them from providing care that is in the best interests of patients; and

1 The new federal health care law consists of two public laws, the Patient Protection and Affordable Care Act, or “PPACA,” (H.R. 3590; Public Law 111-148), signed by the President on March 23, 2010, and the Health Care and Education Reconciliation Act (H.R. 4872; Public Law 111-152), signed by the President on March 30, 2010. Together, they are referred to as the “Affordable Care Act” in this report.2 New York State Health Foundation, Implementing Health Care Reform: A Roadmap for New York State (August 2010), at 1, http://www.nyshealthfoundation.org/userfiles/file/RoadmapPaper_Aug2010.pdf (hereinafter, “Health Care Reform Roadmap”). Table 1 on page 5 of the NYS Health Foundation report summarizes the Foundation’s estimates of the number of individuals that are predicted to ultimately obtain coverage.

unreasonably delaying reimbursement of patients and hospitals for care. Health insurers operating in New York engaged in many of the practices documented in the HCAN report.3 The report found that state insurance regulators are not able to hold insurers fully accountable due to inadequate enforcement resources, inadequate state disclosure laws, and penalties that are a small percentage of total insurer earnings.4 The ACA’s success in New York State therefore rests in large part on establishing an effective system to hold health insurers accountable when they violate the law.

The ACA puts much of the responsibility for implementation on the states. The decisions New York State makes on how to implement the Act and how to structure the various components of the new system will have a major impact on the ability of consumers to understand their new health care options, gain access to appropriate insurance and afford health insurance.

This report makes recommendations as to what New York State can do to ensure that the millions of health care consumers and small businesses in the private insurance market have access to affordable health care plans and adequate information concerning their health insurance options. We also make recommendations to ensure that consumers have effective redress - through state agencies, the courts and non-profits - if their health plan does not provide the rights and benefits conferred on them by the Affordable Care Act. The report also discusses mechanisms to reduce racial and ethnic disparities in health care outcomes.

Many of the decisions as to how the state should respond to the new federal law will be made in state legislation that Governor Cuomo and the Legislature need to pass in the 2011 legislative session,5 which we call the “state implementation statute” in this report. In developing

the statute and the new regulations, the Governor, the Legislature, and state regulators must make an array of difficult decisions, most significantly the design of the state exchange (or exchanges) that will be established by 2014 to

3 Health Care for America Now, Health Insurance Company Abuses: How the Relentless Drive for Profit Endangers Americans (June 2009), http://hcfan.3cdn.net/d489f04dd6172aae34_4sm6iijoh.pdf.4 Id., at 2.5 The administrative steps necessary to set up an exchange, including coordination of the IT systems that enable Medicaid and the exchange to work together seamlessly, as well as the need for the state to show sufficient progress to be eligible for HHS grants both argue for the passage of state implementation legislation in 2011. Department of Health and Human Services, Initial Guidance to States on Exchanges (2010), http://www.hhs.gov/ociio/regulations/guidance_to_states_on_exchanges.html.

i. introduCtion

The Affordable Care Act was in part a

response to numerous documented instances

of anti-consumer conduct by health

insurers.

The Affordable Care Act’s success in New York State rests on

setting up an effective system to hold

New York insurers accountable.

2


provide health insurance to consumers and small businesses.6 Health Care for All New York (HCFANY), a large consumer-focused coalition, has developed broad standards for the new state health insurance exchange, against which future legislative proposals will be measured.7

The decisions the state must make concerning consumer remedies are the focus of this report. Which state agencies should implement and enforce the new law, and what should their functions be? What should be the penalties or other consequences for violations by insurers of the consumer provisions of the new law? Should state agencies or non-profits be involved in consumer assistance, representation, and enforcement, or a combination of both? What is the relationship between the new rights consumers have under the Affordable Care Act and existing consumer remedies?

This report begins by discussing two threshold questions: the ability of the State to enforce the Affordable Care Act under existing legislation, and whether state officials are preempted from enforcing the Act (section II). Next, we summarize the roles of the major state agencies and other entities that have a role in protecting health insurance consumers under existing state law - including the State Insurance Department, the Department of Health and the Attorney General - to set the stage for determining what agencies should be assigned the task of enforcing the ACA (section III). We then summarize the major provisions of ACA that protect consumers; our focus is on consumer remedies - redress for violations - rather than substantive protections. We also make recommendations as to statutory and regulatory steps to make enforcement of the consumer protection provisions in ACA and comparable state protections effective (sections IV to VIII). The recommendations that appear throughout this report are summarized in the last section (section IX). It is our hope that this report will make a meaningful contribution to the implementation of this critical new federal law in our state, and will assist policymakers in developing a state exchange and regulatory system that protects consumers and holds insurers accountable for providing quality, affordable health care to all New Yorkers.

6 To guide the development of the state implementation statute, Governor Paterson appointed a “Health Care Reform Cabinet” and named 37 private organizations to a “Health Care Reform Advisory Committee” to advise the Cabinet. (One of the organizations is Health Care for All New York; a PPEF staffer is the HCFANY representative to the Advisory Committee.) As of the release of this report, it is not clear as to the procedure Governor Cuomo will follow to draft appropriate implementation legislation, and whether he will continue the process set up by Governor Paterson.7 HCFANY Press Release, Health Care Advocates Call on Governor-Elect and Legislature to Ensure Quality and Affordability When Creating New Health Insurance Exchange (December 1, 2010), http://hcfany.files.wordpress.com/2010/12/120110_hcfanypressrelease_5_standards.pdf. The standards, entitled “Five Standards for the New York State Insurance Exchange,” appear at: http://hcfany.files.wordpress.com/2010/12/hcfany-standards-for-the-ny-state-insurance-exchange_final_v2.pdf. (They are referred to below as the “HCFANY Standards.”)

3


enforCement of aCa in nys under existing law

An important question in determining what legislation is necessary in New York is whether the New York State Insurance Department (“NYSID” or “SID”), or any state entity, has the existing authority to enforce the Affordable Care Act against health insurers operating in the state.

The authority for the states to enforce the insurance market reforms in ACA derives from the fact that ACA’s insurance market reforms add new provisions to the Health Insurance Portability and Accountability Act of 1996 (HIPPA).8 (Examples of these reforms are the limits on lifetime limits and rescissions, extension of dependent coverage and mandates for the development of uniform explanation of coverage documents.) Section 2722 of HIPPA provides that states may enforce the insurance market reforms of that statute against health insurance issuers that issue, sell, renew, or offer health insurance coverage in the State. However, if a state fails to “substantially enforce” the law, the Department of Health and Human Services (HHS) “shall enforce” the requirements of the statute as they relate to health insurance issued, sold, renewed or offered in the State.9

The federal government’s HIPPA enforcement efforts have been extremely limited. In the three years after the HIPPA privacy provisions became effective, HHS received almost 20,000 complaints of violations of those provisions, but had not issued a single penalty and prosecuted just two criminal cases.10 Therefore, it makes enormous sense for New York State to enact explicit provisions providing for ACA enforcement, to eliminate any lack of clarity as to the state’s enforcement authority.11

In response to a letter by HHS Secretary Kathleen Sebelius, New York Governor David Paterson has taken the position that the state has authority under current law to enforce the “consumer protections as they relate to health insurance policies” which took effect on September 23, 2010. The Governor relied on Insurance Law section 308, which authorizes the Insurance Superintendent to “address … any inquiry” to a HMO or insurer “in relation to its transactions or condition or any matter connected therewith.”12 This

8 P.L. 104-191.9 Section 2722 of HIPPA, as codified at 42 U.S.C. § 300gg-22. 49 CFR Part 150 sets out the circumstances under which HHS enforces HIPPA, including the civil penalty structure.10 Rob Stein, “Medical Privacy Law Nets No Fines,” Washington Post (June 5, 2006), http://www.washingtonpost.com/wp-dyn/content/article/2006/06/04/AR2006060400672.html.11 Leaving enforcement to private actions is not an option, as the courts have ruled that there is no private right of action for enforcement of HIPPA. See, Warren Pearl Construction Corporation v. Guardian Life Insurance Company of America, 639 F.Supp.2d 371, 376-377 (S.D.N.Y. 2009) (neither an express nor implied private right of action under HIPPA). Warren Pearl Construction also held there is no private right of action to enforce a “nearly identical” state provision, New York Insurance Law section 3221(p)(3)(A).12 Letter by New York Governor David Paterson to Secretary of Health and Human Services Kathleen Sebelius (August 5, 2010), available at: http://www.healthcarereform.ny.gov/press/docs/2010-08-05_aca_consumer_protections_

provision may not give NYSID blanket authority to take enforcement action for any ACA violation that impacts health insurance consumers. Given the vague language of section

308, we recommend an explicit provision be included in the state implementation statute clarifying that any violation by an insurer of ACA that affects health insurance consumers is subject to civil penalties that can be recovered by NYSID. As the Paterson administration recognized, appropriate state implementation legislation would “facilitate compliance by having the applicable requirements set forth in a single place that combines the federal and state requirements.”13

aCa does not PreemPt state enforCement

It is unlikely that any effort by the state to enforce the consumer protection provisions of the Affordable Care Act - including with strong penalty provisions - will present a preemption problem. The law provides that “Nothing in this title [which includes the major ACA provisions] shall be construed to preempt any State law that does not prevent the application of the provisions of this title.”14 The National Association of Insurance Commissioners (NAIC) interprets this statutory language to allow states to “adopt and enforce laws and regulations that afford greater consumer protections” than in the federal law.15 Enforcement of state consumer protection laws with stronger penalties than in federal law, or with additional remedies would certainly not “prevent the application” of the ACA provisions,16 and therefore would not be preempted.

enforcement_letter.pdf.13 Id.14 Affordable Care Act (ACA) § 1321(d).15 National Association of Insurance Commissioners, Preemption and State Flexibility in PPACA (2010), http://www.naic.org/documents/index_health_reform_general_preemption_and_state_flex_ppaca.pdf.16 See, ACA § 1321(d).

ii. enforCement of tHe affordable Care aCt in new york

The State Insurance

Department should be able to collect monetary penalties for any violation of the Affordable Care Act that affects health insurance

consumers.

4


Currently, three agencies have a significant role in enforcement of regulations applicable to health plans in New York: the State Insurance Department, the Department of Health, and the Department of Law (the Attorney General).

tHe new york state insuranCe dePartment and tHe dePartment of HealtH

The lead agency for regulation of the practices of insurers in the state - health care and non-health care - is the New York State Insurance Department. NYSID, through its Health Bureau, reviews and approves accident and health insurance policy forms of insurers licensed to write such insurance in the state, including health maintenance organizations (HMOs) and other managed care organizations. The Bureau also accepts telephone inquiries and complaints. In 2009, it responded to roughly 10,000 calls and accepted complaints on a wide variety of topics, including pre-existing condition provisions, mandated benefits, utilization review requirements, and the application of COBRA and other laws.17

SID also has a Consumer Services Bureau that responds to over 200,000 consumer inquiries each year. (This figure includes far more than health insurance issues.) The Bureau informally mediates complaints by policyholders on such topics as differing interpretations of policy provisions, and failure to timely settle claims. In 2009, the Bureau closed 56,040 cases, of which 7,320 were upheld and 5,816 involved cases that were not formally upheld but involved adjustments; the Bureau obtained $32.3 million in recoveries for consumers in 2009.18 SID has from time to time been able to achieve significant penalties for insurer misconduct; for example, in October, AETNA was fined $850,000 for a series of violations, including incomplete disclosures on the “explanation of benefits” forms required to be provided to consumers making an insurance claim, and the prompt pay law,19 a major area of enforcement in the health insurance area.

This report does not outline all of the consumer remedies that are enforced by SID. Two important examples are the “Managed Care Bill of Rights” and the prompt pay law. (The Managed Care Bill of Rights is discussed in Section VII.)

The New York State Department of Health (DOH) is the primary agency responsible for oversight over public health functions such as local public health offices and infectious diseases.20 However, most relevant to consumer rights under

17 New York State Insurance Department, 2009 Annual Report, at 95, 102. COBRA is a federal statute that permits former employees to receive “continuation coverage” at a slightly higher rate than their former employer’s group rate. Under the federal stimulus law (the American Recovery and Reinvestment Act of 2009), funding was available to subsidize many COBRA-recipients’ premiums.18 Id., at 121-123.19 N.Y. Insurance Law §§ 3224-a, 3243; New York State Insurance Department Press Release, AETNA Fined $850,000 for Health Insurance Violations (October 4, 2010), http://www.ins.state.ny.us/press/2010/p1010041.htm.20 United Hospital Fund, Building the Infrastructure for a New York Health

the ACA, the DOH regulates HMOs (in conjunction with NYSID) and is the lead agency with oversight over the state’s Medicaid program.21

tHe dePartment of law

The Attorney General (Department of Law) has a significant role in health care assistance and enforcement, supplementing the role of NYSID and DOH. The Department of Law has an active Health Care Bureau (HCB) that receives complaints and attempts to mediate them with health plans and providers.22 The HCB has initiated systemic investigations of health care practices resulting in enforcement actions in court, often based on consumer complaints it receives. When Eliot Spitzer was Attorney General, for example, the HCB brought numerous enforcement actions to protect the basic rights of health care consumers and to seek restitution (refunds) for consumers.23 As discussed in the next section, Attorney General Cuomo has continued this pro-consumer record. One experienced health care practitioner says that the HCB is much more aggressive in assisting consumers than the Insurance Department’s Consumer Services Bureau.24

One of the main legal weapons of the Department of Law is section 63(12) of the Executive Law, which gives the Attorney General extremely broad latitude to stop illegal conduct and recover damages on behalf of consumers. The statute provides that whenever “any person shall engage in repeated fraudulent or illegal acts or practices or otherwise demonstrate persistent fraud or illegality in the carrying on, conducting or transaction of business,” the Attorney General may seek a court order to enjoin (stop) the practice, or to obtain restitution or damages on behalf of consumers.25 Court decisions have held that violations of federal laws or regulations “can constitute fraud or illegality within the meaning of Section 63.”26

Recent New York attorneys general have not hesitated to use this broad authority in the health insurance area. The HCB has in recent years attacked systemic practices involving major industry players that impact on millions of consumers.

Benefit Exchange: Key Decisions for State Policymakers (January 2011), at 11.21 Id., at 11.22 Joseph Baker and David Sharpe, “The Health Care Bureau: Empowering Health Care Consumers,” NYSBA Health Law Journal (Spring 2003), at 21 (hereinafter, “Health Care Bureau”). 23 Id., at 21. Sometimes, other bureaus of the Department of Law, such as the Antitrust and Consumer Frauds and Protection bureaus are involved with enforcement in the health care area as well. Thomas Conway and Rose Firestein, “An Interdisciplinary Approach to Protecting Health Care Consumers,” NYSBA Health Law Journal (Spring 2003), at 31.24 Mark Scherzer, Handling Medical Insurance Claim Denials in New York (outline) (August 1, 2008), at 20-21, http://www.hivlawandpolicy.org/resources/view/239.25 N.Y. Executive Law § 63(12).26 See, New York v. Feldman, 210 F.Supp.2d 294, 300 (S.D.N.Y. 2002) (antitrust violations); see also, People of the State of New York v. World Interactive Gaming Corporation, 185 Misc.2d 852, 714 N.Y.S.2d 844, 849 (Sup. Ct. N.Y. Cty. 1999) (any conduct “which violates state or federal law or regulation is actionable under this provision.”)

iii. Current nys HealtH Care enforCement agenCies

5


For example, the HCB has investigated the utilization review practices of eight major health plans: the process by which health insurers save money by monitoring doctors and other providers to ensure that only ostensibly “medically necessary” services are covered. The investigations concerned compliance with state law provisions requiring, among other things, that companies provide consumers with adequate statements and the “clinical rationale” for adverse determinations. The investigations resulted in settlements, known as Assurances of Discontinuance (AODs), with the 8 insurers and a company hired by plans to conduct utilization review. The AODs established procedures for the defendants to follow in the future, including requiring descriptions in adverse determinations sufficiently specific to enable enrollees or their providers to determine whether or not to appeal the determination.27 Further, in February 2008, Attorney General Cuomo began an industry-wide investigation involving some the nation’s largest health insurers, including AETNA, CIGNA, and Wellpoint/Empire BlueCross BlueShield, concerning allegations that consumers were overcharged for “out-of-network” care, resulting in AODs with several insurers.28

Although court decisions have held that section 63(12) permits the Department of Law to bring court actions on behalf of health care consumers for violations of federal and state statutes, as a precaution, the state implementation statute should explicitly provide that the Attorney General may directly enforce certain enumerated sections of the Affordable Care Act on behalf of consumers, along with the state law provisions on the same subjects. These legal protections should include, at a minimum, the provisions concerning: pre-existing conditions, annual and lifetime limits, and rescissions; providing consumers with a summary of benefits and explanation of coverage (see section V); disclosures to consumers as to insurance company practices such as claims processing records (section V); premium rate review and medical loss ratios (MLRs) (section VI); appeals of health plan decisions (section VII); and the collection of health disparities data (section VIII). There are other instances in which specific statutes contain language explicitly giving the Attorney General the right to enforce the statute; sometimes additional remedies are provided above and beyond the remedies in section 63(12).29

27 Health Care Bureau, at 22-23.28 Office of the Attorney General, In the Matter of Aetna, Inc., Assurance of Discontinuance Under Executive Law § 63(15); Department of Law Press Release, Attorney General Cuomo Announces Historic Nationwide Health Insurance Reform; Ends Practice of Manipulating Rates to Overcharge Patients By Hundreds of Millions of Dollars (January 13, 2009).29 See, for example, N.Y. Executive Law § 175 (charitable organizations), N.Y. Vehicle and Traffic Law § 417-a (used motor vehicles).

otHer entities tHat aCCePt and Handle HealtH Care ComPlaints: PubliC and Private new york state Consumer ProteCtion board

The New York State Consumer Protection Board (CPB) is empowered to coordinate all state agencies performing consumer protection functions. It is also authorized to accept consumer complaints on any subject. The CPB resolves complaints through informal mediation with companies and making referrals to state and federal regulatory agencies. In the 2008-09 year, the CPB received more than 53,000 calls to its toll-free bilingual consumer hotline and saved New Yorkers more than $1.3 million. The CPB does accept health care complaints, but they are not among the highest categories of the agency’s complaints.30 Informal voluntary mediation, referral and cooperation with regulatory and enforcement agencies such as the Insurance Department and the Department of Law are the CPB’s only options to assist individual health insurance consumers, as the CPB is not empowered to represent consumers in court.31 Given the recent establishment of a state consumer assistance office and the active enforcement efforts of NYSID and the Attorney General, it seems to make the most sense for the CPB to refer appropriate complaints to these entities rather than handling them in-house.

Consumer assistanCe Programs run by Cbos

An important means for consumers to receive assistance with complaints concerning health insurance plans and programs, at least in New York City, has been the consumer assistance program directed by the Community Service Society (CSS), a New York City-based non-profit organization. CSS will serve as the state consumer assistance office under the ACA for the first year of federal funding, expanding its consumer assistance efforts statewide in partnership with community-based organizations around the state. New York State also has a large network of “facilitated enrollers” that help consumers select and apply for health insurance (see Section V).

30 N.Y. Executive Law § 553; New York State Consumer Protection Board, FY 2008/2009 Annual Report of the New York State Consumer Protection Board, http://www.nysconsumer.gov/pdf/advocating/testimony_reports/cpb_annual_report_fy2008_2009.pdf. The author is a former CPB attorney; some of the information in this report is based on his personal experiences.31 See, Pooler v. Public Service Commission, 89 Misc.2d 700, 392 N.Y.S.2d 359, 361 (Sup. Ct. Alb. Cty. 1977).

As a backup to the State Insurance

Department and the New York exchange, state law should list

important health insurance protections

that the Attorney General is permitted to directly enforce.

6


In order to hold insurers accountable and protect New York consumers, the state implementation statute must give the state adequate authority to enforce the Affordable Care Act, and penalties for violations must be sufficient to deter illegal insurer conduct. The new health care exchange should be statewide in nature, should be an independent authority, and should effectively coordinate its enforcement efforts with the State Insurance Department and the Attorney General, which also have important roles in protecting health insurance consumers. Resources for all state enforcement agencies must be adequate.

exCHange governanCe

The Act envisions the new “American Health Benefit Exchanges” (“exchanges”) created under the law as the major means other than a Medicaid expansion through which millions of health insurance consumers will obtain insurance at an affordable price. Exchanges are marketplaces that will offer standard health insurance products to individuals and small businesses. Consumers will also receive standardized information on insurance plans to enable effective comparison-shopping.

The ACA targets the establishment of exchanges by states by January 1, 2014.32 However, if HHS determines on or before January 1, 2013 that any state will not have an exchange in operation by January 1, 2014 or otherwise hasn’t taken the actions HHS determines are necessary to implement an exchange, HHS is mandated to operate an exchange in the State, either directly or through an agreement with a non-profit entity.33 New York State has indicated it will “fully explore” establishing a state-based exchange providing that it receives adequate federal funding. The state anticipates receiving the maximum planning and establishment grant for this purpose.34

The ACA leaves most of the important decisions as to the governance and operation of state exchanges to state legislatures. The ACA permits a separate “SHOP” (Small Business Health Options Program) exchange for small businesses to enroll their employees.35 The states may also establish more than one exchange in different regions of the state, or even band with other states to establish regional exchanges.36 However, we strongly agree with

32 ACA § 1311(b)(1).33 ACA § 1321(c).34 See, ACA § 1321(a); Governor David A. Paterson and Wendy Saunders, Deputy Secretary for Health, Medicaid & Oversight, Planning and Establishment of State-Level Exchanges, Comments provided to Office of Consumer Information and Insurance Oversight, Department of Health and Human Services, Document ID: HHS-OS-2010-0021-0001 (October, 2010), http://www.healthcarereform.ny.gov/docs/nys_comments_title_i_ppaca.pdf; Health Care Reform Cabinet, Federal Health Care Reform Grants for New York State: November 22, 2010 (memorandum distributed at the third meeting of the Health Care Reform Advisory Committee, November 22, 2010) (hereinafter, “NYS Federal Health Care Reform Grants Memo”).35 ACA § 1311(b)(1)(B).36 ACA §§ 1311(f)(1),1311(f)(2).

HCFANY that a “single statewide exchange will best achieve affordable comprehensive coverage and access to care for all by spreading risk more effectively, maximizing bargaining power, achieving greater efficiency, and gathering and using data in a uniform and more meaningful way.”37

The state implementation statute must also address whether the exchange should be a new state agency, housed at NYSID or another existing state agency, or be a non-profit entity established or regulated by the state.38 Housing the exchange within an existing state agency initially has considerable appeal. Presumably, it would lead to greater efficiency through the sharing of existing agency staff and other resources. However, on balance, we agree with Professor Timothy Stoltzfus Jost of Washington and Lee University School of Law that “it will probably be advisable for exchanges to maintain their independence from state insurance regulators or Medicaid agencies while also maintaining good working relationships with them.”39

Among other things, independence is necessary because of the different roles of the exchange and insurance regulators. Perhaps the primary role of the exchange is to create a “well-functioning and efficient market for insurance products.”40 A critical major factor in the success of the exchange will be attracting a large enough pool, particularly of healthy participants, to avoid the “death spiral” of adverse selection, in which premiums are more expensive inside the exchange than outside.41 This is a particularly important issue under ACA because it “permits both an individual and group health insurance market to continue to exist outside the exchange,”42 making it tempting for businesses with a healthy workforce to leave the exchange if state regulations permit lower quality and less expensive products outside the exchange. Small employers must also be attracted into the exchange.43 The need of the exchange to attract both insurers and consumers (small businesses and individuals) appears in contradiction to the need for a strong regulator to protect consumers.

37 HCFANY, Five Standards for the New York State Insurance Exchange, Standard 1. 38 ACA § 1311(d). 39 Timothy Stoltzfus Jost, Health Insurance Exchanges and the Affordable Care Act: Key Policy Issues (July 2010), at 24-25, http://www.commonwealthfund.org/~/media/Files/Publications/Fund%20Report/2010/Jul/1426_Jost_hlt_insurance_exchanges_ACA.pdf (hereinafter, “Health Insurance Exchanges: Key Policy Issues”). 40 Id., at 19. 41 Id., at 3; Lynn Quincy, Consumers Union, PowerPoint Presentation, Health Insurance Exchanges – Key Issues for States and Advocates (presented at conference, From Vision to Reality: State Strategies for Health Reform Implementation, Washington, D.C., November 11, 2010), at slide 16 (hereinafter, “Consumers Union PowerPoint on Exchanges”). 42 Health Insurance Exchanges: Key Policy Issues, at 3. 43 Consumers Union PowerPoint on Exchanges, at slide 13.

iv. Consumer-oriented governanCe: exCHanges and enforCement

The New York exchange should

be a public authority, with

strong consumer representation.

7


To us, that strongly argues for housing the marketing and regulatory functions in different entities.

Further, each of the existing state agencies that might be candidates to house the exchange - NYSID, the Department of Health and the Department of Civil Service (DCS) - has at least potential conflicts between its existing mission and the role an exchange will be expected to play under the ACA. NYSID has limited experience with the “lower-income populations expected to be served through the exchange.” DOH, like NYSID, would have potential conflicts as both a regulator and the exchange role of marketing insurance products. DCS administers health insurance for state and local government employees, a much different task than serving individuals from all income groups with different risk profiles and coordinating enrollment in public programs. As UHF suggests, due to the breadth of responsibilities and current focus of the three agencies, each agency might lack the focus or the resources to run the state exchange.44

Housing the exchange in a totally new Executive Department agency created for that purpose also presents significant start up problems and operational issues. To address these issues, on balance, we recommend the exchange be a public authority, otherwise known as a public benefit corporation. Both the existing Massachusetts connector and the new California health care implementation law have adopted this model.45 A public authority would give the exchange much greater flexibility to operate and to become fully established within the short timeframe mandated by the ACA.

However, given the documented abuses of public authorities in New York, the authority would have to be subject to strict oversight to ensure accountability. The Legislature enacted two major pieces of legislation to increase the accountability of New York public authorities in 2005 and 2009. The new laws created a new Authorities Budget Office (ABO) within the Department of State to oversee the operations and finances of public authorities and required that authorities establish audit and governance committees with independent members and submit detailed reports to the ABO and the State Comptroller.46 The state implementation statute should apply the requirements of the 2005 and 2009 laws to the New York exchange. The Legislature should also examine whether the exchange should be exempted from any provisions in these two laws given the need to rapidly put the exchange into operation.

Whether the exchange is a public authority or a state agency, it is critical that there be a substantial consumer role in its governance, through representation on the agency’s or authority’s governing board. The Massachusetts Health Insurance Connector, the existing Massachusetts exchange, is governed by a 10-person board, one of whom is a consumer

44 United Hospital Fund, Building the Infrastructure for a New York Health Benefit Exchange: Key Decisions for State Policymakers (January 2011), at 11-13.45 Id. at 12-19.46 Id., at 20-21; Final Report of the (New York State Assembly) Committee on Corporations, Commissions, and Authorities (2010).

appointed by the Attorney General.47 We recommend that there be far more than one consumer representative.

enforCement and Penalties

Assuming the exchange is a state authority independent of NYSID, the state implementation statute would also have to address which state entity will enforce the insurance market reforms and other consumer protections in the ACA. We recommend that the primary enforcement responsibilities be assigned to SID, which already regulates insurance companies in the state and is in the best position to address complex

regulatory issues involving the state health insurance market.

However, the New York exchange must necessarily have some regulatory responsibilities, even if it is a separate entity. ACA expressly assigns a number of regulatory responsibilities to state exchanges, including the certification of “qualified health plans” under the Act and developing a standardized format for presenting health benefits plan options.48 Further, as discussed in the

next section, the funding of consumer assistances offices is an exchange function. Finally, exchanges have the responsibility of administering applications for premium assistance credits and cost-sharing reduction payments, a task they are suited to perform because eligibility for such subsidies can be determined during the enrollment process, a critical exchange function.49

In general, tasks specifically assigned by the terms of ACA to exchanges should be assigned to the New York exchange, while traditional consumer protection functions like pre-existing condition provisions, annual limits, lifetime limits, and consumer disclosures should be the responsibility of SID. The specific oversight responsibilities of the exchange and NYSID should be carefully delineated in the state implementation statute, to avoid confusion by the regulated community and legal challenges.50

47 Nancy Turnball, Harvard School of Public Health, PowerPoint Presentation, How Massachusetts Answered the Eight Questions (presented at conference, From Vision to Reality: State Strategies for Health Reform Implementation, Washington, D.C., November 11, 2010), at slide 1 (Ms. Turnball is also a board member of the Massachusetts Health Insurance Connector.) The other board members are 4 designated governmental officials, 3 gubernatorial appointees (an economist, a small business representative, and an actuary) and 2 additional Attorney General appointees (a union representative and a representative of a health and welfare trust fund). 48 ACA § 1311(d)(4). The “core functions” that state exchanges must meet and other optional functions are listed in the initial guidance document on exchanges issued by HHS. HHS, Initial Guidance to States on Exchanges (2010), http://www.hhs.gov/ociio/regulations/guidance_to_states_on_exchanges.html.49 ACA § 1411; Health Insurance Exchanges: Key Policy Issues, at 21.50 See, HHS, Initial Guidance to States on Exchanges (2010) (advising States to incorporate federally mandated exchange function in “authorizing legislation or other

The New York exchange should

perform the functions assigned

to it by the ACA like premium credits,

while the Insurance Department should

be responsible for enforcement

of consumer protections.

8


In order to protect against adverse selection and achieve the consumer protection and affordability goals of the ACA, the New York exchange must be a pro-active agency, not a passive marketer of insurance products. The exchange should insist that the same insurance rules apply to insurance plans inside and outside the exchange. Health plans should not be permitted to sell lower quality products outside the exchange.51 Provisions concerning the marketing of health plans, provider networks, consumer information requirements, and quality standards should equally apply to products inside and outside the exchange to minimize the possibility of adverse selection.52

In order to ensure that consumers comply with these provisions, the New York exchange also needs to be able to take effective enforcement action. Violations of provisions enforced by the exchange should subject health insurers to both monetary penalties (which can be recovered by NYSID after receiving a referral from the exchange) and in the case of serious violations, exclusion of insurers from the exchange. This is consistent with state licensing statutes, which permit licenses to be revoked for the most serious violations.

What penalties should NYSID impose on insurers that violate the ACA’s consumer protection provisions? The existing enforcement provisions in the Insurance Law are often extremely weak, providing little incentive for large health insurers to comply, as well as inconsistent. For example, the “catch-all” penalty of the Insurance Law, section 109, provides for penalties of $500 for each “willful” violation of the Insurance Law.53 The willful requirement is a barrier to enforcement against health insurers.54 Courts appear to strictly construe section 109. For example, in one case, the court ruled that the $500 penalty in section 109 could not be cumulated by imposing the $500 penalty for each day’s lateness in meeting a filing deadline.55 Some penalties in the Insurance Law are significantly higher than in section 109; for example, section 308(a) gives the Insurance Superintendent the authority to obtain a civil penalty of up to $7500 for an

governing documents”).51 Consumers Union PowerPoint on Exchanges, at slide 26 (slide unnumbered); Health Insurance Exchanges: Key Policy Issues at 19; HCFANY Standards, Standard 2. 52 See, Families USA, Implementing Health Insurance Exchanges: A Guide to State Activities and Choices (October 2010), at 23.53 N.Y. Insurance Law § 109(c)(1); see generally, N.Y. Insurance Law § 202(1)(b).54 See, for example, American Transit Insurance Company v. Corcoran, 76 N.Y.2d 977, 563 N.Y.S.2d 736, 738 (1990) (evidence that the company, with 16 attorneys on staff, ignored repeated letters warning of violation deemed willful); Hroncich v. Corcoran, 158 A.D.2d 274, 550 N.Y.S.2d 676, 677 (1st Dept. 1990) ($500 penalty cannot be imposed in addition to another enumerated penalty in the Insurance Law).55 See, American Transit Insurance Company, 563 N.Y.S.2d at 738 (no explicit statutory authority for cumulating the $500 penalty).

insurer’s or HMO’s failure to provide a “good faith response” to the Superintendent’s inquiry.56 However, section 308(a) itself is difficult to enforce due to the technical “good faith” requirement; one court decision reduced a penalty because the judge was not persuaded that the evidence in the record indicated a lack of good faith.57

The Legislature should reexamine technical requirements like willfulness and lack of good faith - which entail detailed factual inquiries that can tax the limited enforcement resources of SID - to improve the capacity of SID to enforce both existing law and the ACA requirements. The state’s “prompt pay” law could be used as a model. This law, which requires insurers to pay policyholders, subscribers and providers within 45 days of the receipt of claims (30 days if the bill is transmitted through the Internet or email),58 comprises the overwhelming majority of claims imposed by SID,59 presumably because it involves simple factual inquiries in which violations can be determined through routine examinations of health insurers.

Second, the existing penalties in the Insurance Law need to be updated and made much stronger to ensure that health insurers take compliance with ACA seriously. According to an examination of the fines imposed on health insurers from December 1997 to December 2009, while the state occasionally imposed penalties of over a $1 million, the majority of penalties were under $20,000, certainly not an effective deterrent for a major health insurer.60 Further, the

deterrent effect of penalties that are fixed in absolute dollars has decreased over time due to inflation. For example, the $500 penalty in Insurance Law section 109, not updated since at least 1984, should be significantly increased. Moreover, the penalties in the Insurance Law should be made more consistent to ensure that the enforcement scheme is rational.

Third, as a basic principle, no state penalty should be lower than any parallel federal penalty. The federal summary of benefits and coverage provision provides a penalty of up to $1000 for “each” failure to provide the required disclosures, apparently permitting the $1000 maximum to be awarded for each impacted consumer.61 Further, the new MLR regulations under ACA provide for a civil monetary penalty of up to $100

56 N.Y. Insurance Law § 308(a).57 Graphic Arts Mutual Insurance Company v. Schenk, 42 A.D.2d 522, 344 N.Y.S.2d 674, 679 (1st Dept. 1973).58 N.Y. Insurance Law § 3224-a.59 American Medical Association, Report of Health Insurer Fines Issued by State Regulatory Agencies (updated to April 2010) (finding that less than 5 of the over 200 fines imposed by NYSID against health insurers were for violations of provisions other than the prompt pay law), http://www.ama-assn.org/ama1/pub/upload/mm/368/insurer-fines.pdf60 Id.61 Public Health Service Act (PHSA) § 2715(f).

The New York exchange should be a pro-active agency, not a

passive marketer of health insurance,

and should be able to exclude

health plans that sell lower quality

products

The monetary penalties for

violations of health care consumer

protections need to be strengthened

and updated to account for

inflation.

9


a day for each individual affected by any violation.62 Use of these standards would result in a significant increase in penalties under the Insurance Law in many instances.

Strong penalties are almost meaningless if state agencies are unable to enforce the provisions of ACA and other insurance consumer protections due to a lack of resources. Insurers will not be deterred from engaging in improper or illegal conduct if there is an extremely low probability of being subject to civil penalties. Complaint data suggests that the overwhelming majority of complaints filed with the SID’s Consumer Service Bureau are disposed of without a formal adjudication, suggesting that current enforcement resources are inadequate. SID also states that its resources are strained in trying to enforce the new state “prior approval” law, which requires insurers to submit premium rate increases for its approval. And these gaps in enforcement resources existed before the state will get substantial new responsibilities due to the ACA. This supports the need for the new Governor and the Legislature to increase funding for SID, DOH and the Department of Law as the law is implemented, even given the state’s tight fiscal climate. Adequate funding must also be provided for the New York exchange when it is established in 2014.

While the function of primary day-to-day enforcement of ACA should rest with NYSID and the exchange, it is critical that the Attorney General play an active role in this area as well. As already discussed, recent New York State Attorneys General have played a major role in addressing major systemic health care issues affecting consumers, particularly those affecting consumers throughout the nation. State insurance departments often have difficulty addressing systemic practices due to a number of factors, including inadequate statutory authority, and their traditional focus on issues like insurer solvency and market stability. The Department of Law does not have these impediments. Further, given the active hostility of the new U.S. House of Representatives leadership to ACA63 and pressures to cut the federal deficit, there is reason to fear that HHS will not play an aggressive enforcement role in the coming years.

The Attorney General could enhance his effectiveness through cooperation with other state attorneys general and the National Association of Attorneys General (NAAG), the “trade group” for state attorneys general. Former Attorney General Eliot Spitzer became known as the “Sherriff of Wall

62 45 CFR § 158.606.63 See, New England Journal of Medicine, Health Policy and Reform: Remaking Health Care (Blog), Beyond Repeal – The Future of Health Care Reform (November 17, 2010) (incoming Speaker Boehner likely to seek ACA repeal and has called the new law a “monstrosity”), http://healthpolicyandreform.nejm.org/?p=13113.

Street” by identifying illegal practices by major financial firms and using them as a mechanism to reach agreements providing for systemic changes in company practices.64 And,

as discussed above, Andrew Cuomo achieved settlements with some the nation’s largest health insurers, over overcharges for “out-of-network” care when he was Attorney General. We need the next Attorney General to continue to play an active role in policing the health care industry, with a particular

focus on practices with a broad impact on consumers and systemic or industry-wide practices. Attorney General Eric Schneiderman has indicated that he intends to play this role, promising to focus on issues like medical loss ratios, health insurer premium rates, consumer protections in the state exchange, and denials of care through questionable medical necessity determinations.65

64 See, for example, Peter Elkind, Rough Justice: The Rise and Fall of Eliot Spitzer, New York: Penguin Group (2010).65 Schneiderman for Attorney General 2010, The Schneiderman Attorney General Agenda: Blueprint for Economic Fairness, Social Justice & Real Reform in New York State, http://www.scribd.com/doc/35292426/Schneiderman-AG-Agenda-Book-One.

Even in a tight fiscal climate,

state enforcement agencies need to

be given adequate enforcement

resources to make the health care law

work for consumers.

The Attorney General should focus

his enforcement efforts on systemic practices affecting large numbers of

consumers.

10


The state must ensure that consumers have sufficient information and assistance to be able to protect their rights under the new federal law and comparable state laws. The state implementation law should establish a preference in assigning consumer assistance and navigation functions to community-based organizations. Penalties for violations of the consumer information provisions in the new law must be adequate, and NYSID should develop standardized disclosure documents with strong input by consumers.

The ACA’s consumer assistance and navigator provisions are critical to achieving the goals of the new law. Through these provisions, health insurance enrollment will enormously increase in the coming years, and consumers will be able to make informed choices as to health plans inside and outside the exchange. Consumer assistance offices will also be one of the major means for consumers to level the playing field in disputes with insurers over the payment of claims and other policies. In a time when state agencies are under enormous funding pressure, private non-profit organizations must be given a significant role in assisting consumers to enroll in health insurance and to navigate through an ever more complex health care system, and to help consumers complain if they believe they have been mistreated. It is also critical that consumers be fully informed about the benefits that are available to them so that they can make informed choices as to health care plans.

Consumer assistanCe

Section 1002 of the Act provides nearly $30 million in federal funding to the states for consumer complaint mechanisms for the first fiscal year. The grant funding is available for the creation or support of existing independent “offices of health insurance consumer assistance” or “health insurance ombudsman programs.”66 (For simplicity, we have called them “consumer assistance offices” below.) ACA provides for five primary “duties” of consumer assistance offices: 1) assisting with the filing of “complaints and appeals, including filing appeals with the internal appeal or grievance process of the group health plan or health insurance issuer involved and providing information about the external appeal process;” 2) “collect[ing], track[ing] and quantify[ing] problems and inquiries encountered by consumers;” 3) “educat[ing] consumers on their rights and responsibilities with respect to group health plans and health insurance coverage;” 4) “assist[ing] consumers with enrollment in a group health plan or health insurance coverage by providing information,

66 PHSA § 2793(a). $29 million is being awarded to states; $1 million is being retained by HHS to administer the program and assist states to carry out their consumer assistance activities. Department of Health and Human Services Office of Consumer Information and Insurance Oversight: Affordable Care Act (ACA) – Consumer Assistance Program Grants: Initial Announcement: Invitation to Apply for FY 2010 (July 22, 2010), http://www.communitycatalyst.org/doc_store/publications/CAP_grant_announcement.pdf (hereinafter, “HHS Consumer Assistance Program Grants Invitation”).

referral and assistance;” and 5) “resolv[ing] problems with obtaining [the] premium tax credits” that are provided to consumers from 100% to 400% of the Federal Poverty Level.67 Congress intended that consumer assistance offices receive and respond to both “inquiries and complaints” whether they arise under “Federal health insurance requirements” or “State law.”68 Further, as a condition of receiving a section 1002 grant, each office must report data to HHS on the “types of problems and inquiries encountered by consumers”. HHS must share this data with state insurance regulators and the labor and treasury secretaries for use in their enforcement activities.69

On July 22, 2010, HHS issued a “funding opportunity announcement” inviting the states to apply for the first year of funding for consumer complaint handling under section 1002. State insurance departments, state attorneys general offices, other state agencies and non-profit organizations (either a single non-profit or a consortium of non-profits) all were eligible to be designated as the state consumer assistance office. If the state designee is a non-profit or consortium of non-profits, the state must contract with the non-profit or consortium within 45 days of receiving the notice of the state’s grant award.70

On October 19, 2010, New York was awarded a $1.76 million consumer assistance program grant (with $441,702 in supplemental funding anticipated) to establish a consumer assistance program in the state. State officials determined that the funding should be used to “establish a state consortium to provide independent consumer assistance, expand walk-in services in key regions of the state, raise consumer awareness and other activities.”71 State policymakers understand that the role of the consumer assistance program under ACA will have to be harmonized with existing consumer complaint-handling functions of state agencies.72

The State selected Community Health Advocates (CHA), formerly known as the New York City Managed Care Consumer Assistance Program (MCCAP), to serve as the state consumer assistance program for the first year.73 CHA, operated by the Community Service Society (CSS), is a nationally recognized74 program founded in 1999 “in response to a requirement that

67 PHSA § 2793(c); Internal Revenue Code § 36B, as added by the ACA. 68 PHSA § 2793(b)(1). 69 PHSA § 2793(d).70 HHS Consumer Assistance Program Grants Invitation, at 6.71 NYS Federal Health Care Reform Grants Memo.72 Troy Oeschner, NYSID Deputy Superintendent for Health, Presentation, Meeting of the Health Care Reform Advisory Committee (October 25, 2010).73 See generally, Community Health Advocates Request for Statewide CBO Proposals: FY 2011, at 1-2, http://hcfany.files.wordpress.com/2010/11/state_cap_rfp_11-01-10_final2.pdf. 74 See, PPACA Implementation: Consumer Recommendations for Regulators and Lawmakers: May, 2010 (authored by funded and unfunded consumer representatives of the National Association of Insurance Commissioners), at 12 (urging HHS to look at CSS’ program as a model for consumer assistance), http://www.nationalpartnership.org/site/DocServer/NAIC_consrecs_PPACAimmreforms.pdf?docID=6522 (hereinafter: “NAIC Consumer Representatives Recommendations”).

v. emPowered Consumers: Consumer assistanCe, navigators and disClosure of information

11


public insurance recipients join managed care plans”, including Medicaid Managed Care, Family Health Plus and Child Health Plus. CHA currently uses a “hub and spokes” model where CSS provides trainings, contact management and resources to the network and the network agencies provide direct consumer assistance through individual counseling and outreach sessions. CSS also operates a live central helpline. Referrals are made to a network of community based organizations (CBOs), enhancing the network’s ability to serve underserved populations and those who might not otherwise seek assistance, including immigrants, the elderly and people with disabilities. Quality control is maintained through a number of different mechanisms, including monthly meetings, regular case reviews, trainings for CBOs that provide advice and assistance, and the monitoring of client outcomes in a single database.75 While 51% of the cases in 2010 concerned obtaining and maintaining coverage, a number of cases involved utilization of health care appeals processes.76

While CHA was until recently based solely in New York City,77 CHA is now in the process of expanding the program statewide with the new federal funding. CHA has selected non-profit organizations across the state (including PPEF) to operate consumer assistance programs. The role of CHA will be “program administration, operation of a central toll-free hotline and internet intake process … funding and training [of] CBOs throughout the state to act as front line advisors and advocates for consumers and data collection and reporting.” Three well-established non-profits, Empire Justice Center, the Medicare Rights Center and Legal Aid will provide technical assistance to the funded CBOs, through such means as training, consultation on individual cases and accepting referrals of complex cases in formal grievance and appeal proceedings.78

Given the long and successful excellent track record of the already existing CHA program and the need for the state consumer assistance program to become operational in a short time period, CHA’s selection was a logical choice.79 CHA, as a non-profit, had far greater flexibility than the State of New York to establish a program quickly in 2010. The MCCAP model - an established network of CBOs that serve diverse populations, combined with effective quality control mechanisms - also argued for CHA to be selected to serve as the state consumer assistance office.

After the first year of funding, decisions will have to be made as to who should perform the consumer assistance function on an ongoing basis. Here too, there is a strong argument for

75 MCCAP Annual Report 2009: The Consumer Voice for Health Care Access, at 2.76 Community Service Society, the Consumer Voice for Health Care Access, Community Health Advocates 2010 Annual Report, at 11.77 MCCAP Annual Report 2009: The Consumer Voice for Health Care Access, at 2.78 Community Health Advocates Request for Statewide CBO Proposals: FY 2011, at 1.79 We must disclose that CSS is a close organizational ally of PPEF. Specifically, CSS and PPEF are both founders and lead organizations of Health Care for All New York, a statewide consumer-focused health care coalition. And, as already noted, PPEF was one of the programs selected to operate a consumer assistance program through CHA.

having a non-profit like CSS operate the program rather than a state entity such as the SID’s Consumer Services Bureau, and this preference should be reflected in the state implementation statute. Assuming that the entities adjudicating consumer complaints continue to be state and federal agencies, CBOs are more likely than state agencies to be independent from these adjudicatory agencies.80 Several other identified

characteristics of a good consumer assistance program, including skill at policy advocacy, ability to outreach to consumers and ability to assist consumers that have Limited English Proficiency, argue in favor of utilizing a consortium of consumer organizations like CHA over a state agency.81 As a recent report argues:

[N]on-profit community-based consumer assistance programs, with their local knowledge, connections, and expertise, are best positioned to explain the new law to individuals and families in the neighborhoods in which they live and work… Mature and effective CAPs, … often work with a broad network of community partners to ensure the delivery of efficient, culturally competent health help to people in their own neighborhoods. These “trusted messengers” understand how to reach and assist diverse, low-income, and vulnerable populations – the people who will be most dramatically affected by health reform.82

Whichever entity is chosen to operate the consumer assistance office after the first year, the state implementation statute should contain certain provisions to ensure that it is as effective as possible. Several provisions are particularly important. First, the office should have access to sufficient data from insurers and NYSID to resolve consumer complaints, including information relating to individual cases, as well as sufficient general complaint data to enable the office to address systemic problems. As health plans are likely to be reluctant to share information with parties other than insureds and SID due to concerns with consumer privacy protections under HIPPA (the Health Insurance Portability and Accountability Act of 1996), the state implementation statute must address access to data by the office. Second, the state implementation statute should ensure that consumers receive information about the availability of the consumer assistance office at each point they might need the office’s

80 See, NAIC Consumer Representatives Recommendations, at 9 (“Ombudsman programs must be independent so they can assist consumers in filing appeals and focus on the consumer’s side of the case.”)81 See, Id., at 9-10.82 Community Service Society and Community Catalyst, Making Health Reform Work: State Consumer Assistance Programs (September 2010), at 4, http://hcfany.files.wordpress.com/2010/09/cap-report-final-9-2-10.pdf.

The state should give preference to Community Based Organizations to

provide the consumer assistance and

navigator functions under the ACA.

12


assistance, such as after claims denials. (This would generate significant additional complaints, which highlights the need for significant state support for the office after the first year of federal funding.) Third, the statute should provide that the office is required to assist consumers with complaints concerning violations of federal and state health care laws, consistent with the ACA. The statute should also encourage the office to refer appropriate cases to enforcement agencies like the NYSID, the DOH, the Attorney General, and the state exchange.

The state implementation statute should also ensure that the office, as a private entity discharging a public function, is fully accountable. The statute should mandate that the office provides adequate staff training, including on the ACA, and on state and other federal health insurance protections; trainings should also include representation of consumers through the adjudicatory processes set up to resolve health insurance complaints.83 Standards should also be developed concerning the tracking of complaints, which should include data on the populations served,84 and consideration should be given to developing a common tracking system for the consumer assistance office and state consumer complaint-handling agencies like SID, the Department of Law, and the CPB. Such a system would greatly enhance quality control and help the Legislature, the exchange, and state policymakers to more effectively determine what further steps are necessary to improve consumer health care protections and their enforcement. The statute or regulations should also include mandated service standards like a minimum number of hours that staff are available to take phone complaints.85 (These “best practices” are already substantially in place in the CHA consumer assistance program.)

Finally, the ACA does not provide for a specific funding amount for consumer assistance beyond the office’s first year but instead leaves funding levels to the Congressional appropriations process.86 Given the lack of support for the new law by the new U.S. House of Representatives leadership, it is quite likely that significant state funding will be necessary in the future to continue the state consumer assistance program.

Consumer navigators

The ACA’s navigator provisions will become effective in 2014

83 NAIC Consumer Representatives Recommendations, at 10.84 At a minimum, complaint data should include results broken down by race, ethnicity (Hispanic status), gender, primary language, and disability status and age to identify disparities in treatment based on these criteria.85 Many of the recommendations in this section are contained in NAIC Consumer Representatives Recommendations, at 10-12.86 PHSA § 2793(e)(2).

when state exchanges are established. The ACA requires exchanges to establish and fund navigator programs with these duties: 1) conducting “public education activities to raise awareness of the availability of qualified health plans;” 2) distributing “fair and impartial information concerning enrollment in qualified health plans, and the availability of premium tax credits … and cost-sharing reductions …;” 3) “facilitat[ing] enrollment in qualified health plans;” 4) making “referrals to any applicable office of health insurance consumer assistance ” established under ACA “for any enrollee with a grievance, complaint, or question regarding their health plan, coverage, or a determination under such plan or coverage”; and 5) providing information “in a manner that is culturally and linguistically appropriate to the needs of the population being served by the Exchange or Exchanges.”87

State exchanges will award grants to qualified entities - industry or non-profit - to operate navigator programs in the states.88 Under the Act, grantees must have or “could readily establish relationships, with employers and employees, consumers (including uninsured and underinsured consumers), or self-employed individuals likely to be qualified to enroll in a qualified health plan.”89 Second, grantees must demonstrate they are capable of meeting the duties of navigators. Third, navigators must be qualified and cannot be a health insurer or receive compensation from a health insurer for enrolling people in health plans.90 While insurance agents and brokers are permitted by the express statutory language to be navigators,91 given the requirement that navigators have relationships or be able to develop relationships with consumers and the statutory function of providing enrollment information in a fair and impartial manner, we believe that it would be totally illogical for insurance brokers or other industry entities to serve as funded navigators in regions where qualified consumer organizations are available to do the job in New York State.

Which non-profit entities should play the navigator role in New York State? New York already has a successful program in place geared towards enrolling New Yorkers in health care plans. The “facilitated enrollment” (“FE”) program focuses on utilizing CBOs to enroll New Yorkers that are eligible for public insurance but are not enrolled.92 Enrollers currently help screen families for eligibility, complete applications for benefits, assemble eligibility documents, and advise clients on how to select appropriate managed care plans. Assistance is also provided as to the annual renewal process for public

87 ACA § 1311(i)(3).88 ACA § 1311(i)(1). So long as the entity is not a health insurer (and doesn’t receive compensation from a health insurer for enrollment) and can perform the duties of a navigator, including impartiality, the entities that can serve as a navigator under the ACA are extremely broad. Navigators “may include trade, industry, and professional associations, commercial fishing industry organizations, ranching and farming organizations, community and consumer-focused nonprofit groups, chambers of commerce, unions, small business development centers, other licensed insurance agents and brokers, and other entities that--… are capable of carrying out the duties” of a navigator set forth in the statute. ACA § 1311(i)(2)(B).89 ACA § 1311(i)(2)(A).90 ACA §§ 1311(i)(2), 1311(i)(4).91 ACA § 1311(i)(2)(B).92 Children’s Aid Society and Children’s Defense Fund, Community-based Facilitated Enrollment: Meeting Uninsured New Yorkers Where They Are (February 2005), at 4, http://www.eric.ed.gov/PDFS/ED484250.pdf.

Steps, like adequate staff training, and the adoption of minimum

service standards should be mandated

to make sure the state consumer assistance office under the ACA

is accountable.

13


programs. FE programs function in every county in the state. The focus of FEs is making enrollment accessible and convenient for the uninsured, through such means as service during evening hours and locating at CBOs, places of worship and schools. FEs also use enrollers that speak many languages (40 by a recent count).93 Facilitated enrollers currently perform the eligibility screening for the “vast majority” of Medicaid, Child Health Plus and Family Health Plus enrollees in the state.94

Navigation programs under the Act should build on the existing facilitated enroller system, providing that the CBOs that currently serve this function are willing to and able to take on the additional functions in the Act. While the focus of facilitated enrollers is currently public insurance, it appears that FEs would be fully capable of adding the additional functions of private coverage eligibility assistance, and providing information on the premium tax credits under the ACA.

Separating the roles of the consumer assistance office and navigators under the ACA in New York will be a considerable challenge, given the varying expertise and focus of CBOs throughout the state that currently perform navigation (i.e., advice on selection of health plans) and consumer assistance (i.e., advice and representation concerning disputes with health insurers or health care institutions). We believe that non-profits who demonstrate the capability to fulfill both the navigation and consumer assistance roles should be given preference in funding, in order to make it as easy and convenient as possible for consumers. Roughly half of the 21 CBOs selected by CHA to perform the consumer assistance function for 2011 are FEs, and therefore should be able to meet this standard when the federal navigation program is established in 2014. However, selecting CBOs with expertise in both consumer assistance and navigation is not likely to be feasible in some regions of the state.

Consumer information

ACA has several provisions designed to help consumers understand and compare health insurance plans, a major struggle for consumers. It is critical that the State’s implementation of ACA include close attention to making information easily available and understandable, so that consumers can make choices based on full knowledge of their options, and so that insurance companies are held accountable for their performance under ACA.

summaries of benefits and Coverage

HHS must by 12 months from the date of enactment (March 23, 2011) develop standards to guide health insurers in developing accurate summaries of benefits and explanations

93 Children’s Defense Fund New York, Implementing the Exchange (Planning and Establishment of State-Level Exchanges, Comments provided to Office of Consumer Information and Insurance Oversight, Department of Health and Human Services, Document ID: HHS-OS-2010-0021-0001) (October 2010), at 4 (pages unnumbered). 94 Health Care Reform Roadmap, at 32.

of coverage for applicants, enrollees, and policyholders, using language that is easily understood by the average enrollee and “culturally and linguistically appropriate.” The explanation must include, among other things, any cost-sharing, exceptions and limitations on coverage. Health insurers and plan administrators (in the case of self-insured group health plans) must provide a summary of benefits and coverage explanation - which cannot be longer than 4 pages - at three critical points: 1) to applicants at the time of application for the plan; 2) to enrollees prior to reenrollment or renewal; and 3) to policyholders or certificate holders at the time of the issuance of policies. In addition, if “material modifications” in any of the terms of the plan are made that are not contained in the most recent summary of benefits, the issuer or plan must provide notice of this modification to enrollees at least 60 days before the effective date of the modification.95

The summary of benefits and coverage provision has a penalty of up to $1000 for “each” failure to provide the required disclosures.96 This language seems to suggest that if a health insurer fails to provide a required disclosure to all or a group of customers, a $1000 penalty may be imposed for each customer that does not receive the summary of benefits. This is a very significant deterrent, although it is doubtful the maximum penalty will be applied. This penalty presumably applies to failure to provide any explanation of coverage at all, as well as the failure to include any information mandated by the statute. The state implementation statute should afford SID the right to recover a comparable penalty amount.

State law currently requires that significant information be provided to consumers about their insurance plans. Specifically, health insurers are required to supply to “each insured, and upon request each prospective insured prior to enrollment, written disclosure information” including, but not limited to a description of the health insurer’s coverage provisions, requirements for prior authorization, utilization review policies and appeal rights, coinsurance and deductible provisions, and procedures for emergency services.97 (A separate virtually identical provision of the Public Health Law applies these requirements to HMOs.98) However, state law permits insurers to incorporate these disclosures into a lengthy insurance contact (or in the case of the HMO, the subscriber contract or member handbook),99 thus making it far less likely consumers will read the required provisions. Moreover, there is no explicit requirement in the state statute that the disclosures be understandable to average consumers or culturally and linguistically appropriate as in the federal statute. These provisions appear to violate the spirit if not the letter of the ACA provision that “state requirements for summaries of benefits and coverage that provide[] less information to consumers” than required to be provided under the federal law are preempted. Therefore, New York should amend the state provisions to incorporate the stronger

95 PHSA § 2715(a-d).96 PHSA § 2715(f).97 N.Y. Insurance Law § 3217-a(a).98 N.Y. Public Health Law § 4408.99 N.Y. Insurance Law § 3217-a(a); N.Y. Public Health Law § 4408(1).

14


federal requirements into the state statute, and ensure that the state-mandated disclosures (at least for non-HMOs) are also included in an easy to read document separate from the insurance contract.100 And, as already recommended, the $1000 penalty provision in the federal law should be available for violations of the revised Insurance and Public Health Law disclosure provisions.101

additional Consumer disClosures

The ACA requires plans inside and outside state exchanges to disclose to the public, to HHS and to insurance commissioners, among other things, claims payment policies and practices, and data on enrollment and disenrollment, ratings practices, and the number of claims that are denied.102 Failure to disclose this information or inaccurate information can have enormous consequences for consumers who rely on such disclosure to select their health plans.

New York has a comparable provision requiring the publication of an annual consumer guide to health insurers. The annual guide includes, among other things, a ranking of insurers from best to worst based on each company’s claims processing record during the preceding calendar year. The guide also includes important information about grievances and utilization review determinations under the state managed care law, including the number of determinations which were upheld or reversed, and concerning “prompt pay” complaints.103

The state implementation statute must harmonize the new federal disclosure provision (section 2715A) with the existing state law provision (section 210) and other consumer disclosure requirements in state law.104 The state implementation statute should assign the implementation and enforcement of the federal and the comparable state provisions to NYSID.

However, advocates have raised concerns that additional disclosures in many areas, including in consumer credit, fail to help consumers make informed decisions “because ordinary people don’t read them, cannot understand them, do not know what to do with the information, and face way too many such disclosures in their every day lives.”105 Because of the difficulty of harmonizing the consumer disclosure

100 PHSA § 2715(e).101 N.Y. Insurance Law § 3217-a; N.Y. Public Health Law § 4408. A separate disclosure provision requires insurers, including HMOs, to provide an explanation of benefits when a consumer makes a claim under their policy. N.Y. Insurance Law § 3243.102 PHSA § 2715A.103 N.Y. Insurance Law § 210. See, New York Consumer Guide to Health Insurers (2010), http://www.ins.state.ny.us/consumer/health/cg_health_2010.pdf. 104 See, for example, N.Y. Insurance Law § 4323 (“consumer shopping guide” requirement).105 NAIC Consumer Representatives Recommendations, at 19.

provisions in state and federal law, NYSID should be given wide discretion in the statute to develop standardized disclosure documents. NYSID should convene a representative task force of stakeholders to advise it in this area.106

It is important that the enforcement of the consumer disclosure provisions be harmonized as well. It seems logical to apply the $1000 federal penalty for violations of section 2715 of the Public Health Service Act (discussed in the section above entitled “Summary of Benefits and Coverage”) to violations of section 2715A and the comparable state provision (section 210).

106 See, Id., at 19-20 (advising HHS to get extensive consumer input on the development of federal disclosure requirements).

The State Insurance Department should get broad consumer

input when it develops the new standardized consumer disclosure

documents mandated by the ACA.

15


Reforms need to be made to the new state law giving the State the authority to approve health insurer rate increases (the “prior approval law”), and the state must maintain enforcement efforts as to the state law on Medical Loss Ratios (MLRs), to ensure that an adequate percentage of consumers’ premium dollars are spent on health care rather than the profits and administrative expenses of health insurers. Reforms to the state statute must be made consistent with the ACA.

The dramatic increases in health insurance premiums in recent years are a major impediment to businesses and individual consumers purchasing and maintaining insurance coverage. From 2000 to 2009, New Yorkers with employer-based health insurance experienced premium increases of 92% in a period when their wages only increased by 14%.107 Health insurance is now unaffordable for many individuals and small businesses alike. Further exacerbating the problem, health insurers in the past two decades have spent less and less of consumers’ premium dollars on patient care, instead devoting an ever higher percentage of premium dollars to profits, marketing, administrative expenses and sales commissions. PricewaterhouseCoopers, which often consults for the health care industry, found that from 1993 to 2007, the percentage of premium dollars that the leading investor-owned health insurers spent on health care - known as the “medical loss ratio,” or “MLR” - declined precipitously from 95% to 81%.108

In 2010, Congress through the ACA and the State Legislature both acted to address skyrocketing health insurance rates by establishing oversight of health insurance premium rates and MLRs. The Legislature must harmonize the new federal and state provisions in this area and address issues concerning the enforcement of the new state law.

rate review

Under ACA, HHS is required to establish a process for the annual review of “unreasonable” increases in health insurance premiums beginning with plan year 2010. Health insurers must submit a “justification” for any increase to HHS and the relevant State prior to its effective date and prominently post information on rate increase proposals on their websites. Under the new rate review regulations proposed in December of 2010, states that HHS determines have effective rate review processes, including presumably New York, will be able to conduct their own reviews. A $250 million grant program is established nationally from 2010 to 2014 to assist states with reviewing, and, if “appropriate under state law” (as in New York), to approve health insurance premiums. The amount of

107 Health Care for All New York, HCFANY Fact Sheet, Restore the Government’s Power to Regulate Insurance (March 2010), http://hcfany.files.wordpress.com/2010/01/prior-approval_final3.pdf.108 The Main Street Alliance, National Minimum Medical Loss Ratio Would Save Tens of Billions of Dollars For Businesses, Individuals (December 2009), at 3, http://mainstreetalliance.org/wordpress/wp-content/uploads/Ensuring-Value-for-Premiums.pdf.

each grant is based on a formula established by HHS; grants range from $1 million to $5 million based on, among other things, the number of health insurance plans in the state and the state’s population.109 On August 9th, New York State was awarded a $1 million grant, which it indicated it will be used for system upgrades and to hire two additional staff; NYSID anticipates receiving a second-year rate review grant of up to $5 million in 2011.110

In 2010, New York State reinstated NYSID’s authority to approve health insurance premium rates before they go into effect (known as “prior approval”) which had been removed in the 1990s. Under the new law, insurers proposing to change rates for “direct pay” (individuals) and small group policies must notify policyholders and certificate holders (including employees in the case of group plans) of the proposed new rate on or before the date the rate filing or application is filed with SID. The notice must include the “specific change requested” and “prominently include mailing and website addresses for both the insurance department and the insurer” through which a person may, within 30 days of when the application is filed with SID, submit written comments or receive additional information about the rate change. The rate increase (or decrease) may be modified or disapproved by SID if it finds the premiums are “unreasonable, excessive, inadequate, or unfairly discriminatory.” In making this determination, SID may consider the insurer’s “financial condition.”111

Insurers began in the summer of 2010 to seek rate increases under the new law, in some cases, well above 10%. Re-regulation has helped to dampen down rate increases, although health insurance premiums still remain unaffordable for many. Due to prior approval, SID reports that it reduced the rate increase from the percentage increase requested by insurers an average of 2.5% for the first round of decisions.112

Despite these initial successes, problems have already been identified with the new statute, making statutory or regulatory changes appropriate. First, SID has written insurers that the first round of rate increase notices under the new law have been deficient in several respects, including misleadingly attributing the need for rate increases to mandates under ACA and the state’s mental health parity law (known as “Timothy’s Law”); including in proposed increases disclosed to consumers amounts attributable to time periods before the effective date of the new law; and failure to inform insureds that they could complain to the insurer in

109 PHSA § 2794; The Commonwealth Fund, The Commonwealth Fund Blog, New Review Process for “Unreasonable” Premium Hikes (December 22, 2010), http://www.commonwealthfund.org/Content/Blog/2010/Dec/Review-Process-for-Premium-Hikes.aspx.110 NYS Federal Health Care Reform Grants Memo.111 Chapter 107, Laws of 2010, amending N.Y. Insurance Law §§ 3231(e)(1)(A), 4308(c)(2). (The quoted language is identical in the two provisions.)112 New York State Insurance Department Press Release, Prior Approval Helps Hold Down Health Insurance Rate Increases (October 21, 2010), http://www.ins.state.ny.us/press/2010/p1010211.htm.

vi. affordable rates: Controlling Costs to ProteCt Consumers

16


addition to SID. SID found that these defective notices made it extremely difficult for affected insureds and members of the public to make meaningful comments as permitted under the new law.113

Second, commenters in rate proceedings have pointed to delays by SID and insurers to respond to their requests for data or other information relevant to the proceeding. One commenter expressed fear that he would not have the data needed in time to file meaningful comments in the 30 day period provided.114 In addition, insurers have resisted the release of portions of their rate requests to commenters and the general public, claiming the information is proprietary and therefore not subject to public disclosure.

Based on these early rate increase proceedings, amendments to the new law are necessary to ensure that consumers can meaningfully participate in rate proceedings. For example, currently tolling (i.e., extension of the deadlines within which NYSID must make its decision and comments may be filed) is only permitted if NYSID needs additional information not provided by insurers to make its decision.115 The statute should therefore be amended to permit tolling or other remedies, like dismissal of the rate increase request in extreme cases, if reasonable information requests by commenters are not responded to by the insurer in a timely fashion. Further, while NYSID has indicated that it intends to issue guidance to insurers as to the content of rate increase notices,116 the Legislature may wish to ultimately mandate the content of these notices by statute or to provide remedies to consumers for defective notices. Finally, either statutory or regulatory changes need to be made to define the extremely narrow instances in which information in rate filings is proprietary and therefore not subject to public disclosure, and to establish a rapid and simple procedure to resolve such disputes.

Given the importance of affordable health insurance, health insurer rate increases and MLR enforcement should also

113 New York State Insurance Department Press Release, Health Insurers Told to Provide More Details on Proposed Rate Increases (September 23, 2010) (SID letter to CEOs of insurers is appended to the release), http://www.ins.state.ny.us/press/2010/p1009233.htm. NYSID has created a “Rate Change Notice Index”: a portal on its web page listing rate increase requests by insurers and comments from the public: http://www.ins.state.ny.us/health/prior_app/prior_app.htm (hereinafter, “Rate Change Notice Index”).114 Letter by Subscriber to Charles Lovejoy, Health Bureau, NYSID, Re: Comments on 2011 IHA Proposed Rate Adjustment for HMO Silver Plan Individual Pay, in comments filed under “Independent Health Association” in Rate Change Notice Index, http://www.ins.state.ny.us/health/prior_app/comments/07292010_IHA_IHBC_comments.pdf; N.Y. Insurance Law §§ 3231(e)(1)(A), 4308(c)(2).115 Insurance Law §§ 3231(e)(1)(A), 4308(c)(2).116 NYSID Letter to Insurer CEOs (September 23, 2010), Appended to NYSID Press Release, Health Insurers Told to Provide More Details on Proposed Rate Increases (September 23, 2010).

be an important area of Attorney General involvement. It appears that the Attorney General may file comments in rate proceedings under current law.117 The Attorney General may also recover damages and obtain injunctive relief on behalf of policyholders or subscribers affected by deceptive rate increase notices that are not in compliance with the prior approval law, using his authority under Executive Law section 63(12) and General Business Law Article 22-A. Subscribers would be injured, for example, if they renewed their coverage in reliance on deceptive rate increase notices.

mediCal loss ratios (mlrs)

ACA addresses the issue of inadequate insurer MLRs through a provision that requires health insurance issuers offering group or individual health insurance coverage (including grandfathered plans) to report annually to HHS beginning in 2011 how they spent their premium dollars. Insurers must file a MLR report containing the amounts spent on: 1) “reimbursement for clinical services provided to enrollees”; 2) on “activities that improve health care quality”; and on 3) “all other non-claims costs … excluding Federal and State taxes and licensing or regulatory fees.” Starting in 2012, if the percentage expended on reimbursement for clinical services and activities that improve health care quality - known as the “medical loss ratio” (MLR) - is lower than 85% in the large group market or 80% in the individual market, the insurer is required to provide rebates to enrollees on a pro-rata basis.118

Unlike most other consumer provisions of the ACA, Congress explicitly assigned the primary enforcement responsibility for the MLR provision to HHS rather than the states, although the states play a significant role. HHS is directed to promulgate regulations for enforcement of the MLR provision, and is permitted to establish civil penalties by regulation.119 On November 22nd, HHS issued an interim final rule establishing enforcement procedures and civil penalties.120 The regulation provides that HHS may impose civil penalties if the insurer fails to do one of the following: 1) submit the annual MLR report to HHS; 2) submit a “substantially complete or accurate report”; 3) timely and accurately pay the rebates provided for in the statute; 4) respond to HHS inquiries as part of an investigation of insurer non-compliance; 5) maintain any required records; 6) allow access and entry to premises, facilities and records; 7) comply with corrective actions resulting from the audits provided for in the statute; or 8) furnish inaccurate data to HHS or to a State.121

The maximum civil monetary penalty for each violation of the new MLR regulations, modeled on the HIPPA penalty structure, is $100 a day for each individual affected by the

117 See, N.Y. Insurance Law §§ 3231(e)(1)(A), 4308(c)(2) (Attorney General is a “person” entitled to file comments in a rate proceeding before NYSID).118 PHSA §§ 2718(a), 2718(b)(1).119 PHSA § 2718(b)(3).120 See, Federal Register, Vol. 75, No. 230 (December 1, 2010), available online at: http://edocket.access.gpo.gov/2010/pdf/2010-29596.pdf. The new rules add a new part 158 to 45 CFR subtitle A (45 CFR Part 158), which are reproduced in the cited issue of the Federal Register.121 45 CFR § 158.602.

Reforms need to be made to the law governing the Insurance

Department’s rate review process so that

affected consumers can meaningfully participate in rate

proceedings.

17


violation.122 This presumably means that an insurer with 10,000 customers who submits a MLR report 10 days late or who provides rebates 10 days late is subject to up to a $10 million penalty. However, the regulations provide that the insurer’s history of violations and the seriousness of the violations should be taken into account in setting the level of civil penalties. Further, under the regulation, the penalty may be lowered for “substantial or several mitigating circumstances” such as the voluntary payment of the rebates owed customers.123 While it is extremely unlikely that the maximum penalty will be sought in other than the most egregious cases, it is clear that the penalties provide a strong incentive for insurers to comply; insurers face the risk that penalties will be greater than amount they can gain through non-compliance.

Before the enactment of the new state “prior approval law” (Chapter 107 of the Laws of 2010), the MLR was set in New York at 75% for small group policies (solo proprietors and employers with 2 to 50 employees) and 80% for “direct pay” (individual) and Healthy New York policies. As previously stated, SID did not have the authority to review the reasonableness of premium rates before they went to effect. Instead, under a procedure known as “file and use,” health insurers were able to make premium rate adjustments if two requirements were met: 1) the insurer indicated in its filing that based on projected claims, the MLR requirements would be met; and 2) an actuarial certification was made of compliance with the law. By May 1st following the year when a filing was made, insurers were required to file a “loss ratio report” based on claims made up to that point. Insurers were then required to issue refunds to enrollees (and former enrollees of they can be found) of the excess monies retained over the statutory MLR by September 1st of the year after the filing.124

Chapter 107 made two major changes to the rate review process. First, as already discussed, SID may now review and approve, disapprove or modify health insurance rates before they go into effect, mitigating rate increases. Second, if upon submission of a loss ratio report, the expected loss ratio is not met, in addition to the existing remedy of issuing rebates, the SID may now require the insurer to submit a new rate filing to “reduce future premiums”, or a combination of both remedies. In addition, the MLRs have been raised for both the small group and direct pay markets to 82%.125

In response to the issuance of the interim federal rule, the state faces several decisions concerning the interaction of the state and federal MLR enforcement schemes. Among the critical issues is the extent to which the state should maintain active enforcement efforts in light of the new role of HHS in enforcement of MLR requirements.

122 45 CFR § 158.606.123 45 CFR §§ 158.607, 158.608.124 New York State Insurance Department, The Price of Deregulation: How “File and Use” Has Undermined New York State’s Ability to Protect Consumers From Excessive Health Insurance Premiums (June 9, 2009), at 6-8, http://www.ins.state.ny.us/acrobat/File&Use090608.pdf.125 Insurance Law §§ 3231(e)(1)(B), 4308(c)(3)(A), 4308(c)(3)(B), as amended by Chapter 107, Laws of 2010.

It is clear that under the federal HHS regulation, active state enforcement of the MLR standards is encouraged. For example, if a state has already assessed a penalty against an issuer, “HHS will take that into account in considering whether it should assess any penalty”, so there is little danger of insurers being subject to unfair cumulative penalties.126 The regulation also permits previous state sanctions for violations of the ACA MLR requirements to be taken into account in the amount of the penalty in an HHS enforcement proceeding, giving states an incentive to actively enforce the ACA.127 Further, as previously discussed, the extent of future enforcement of the ACA is uncertain. These factors all weigh strongly in favor of continued active enforcement efforts by the states.

Second, as apparently intended by the regulations, the state should actively conduct discussions with HHS to coordinate enforcement efforts, including the sharing of MLR data and information and insurer violations, to efficiently coordinate the use state and federal enforcement resources. Subject to certain conditions, state audits of issuers’ reporting and rebate obligations may be used by HHS as a basis for enforcement. Reports by states of potential violations of the MLR regulations may also trigger HHS enforcement proceedings.128

126 Federal Register, Vol. 75, No. 230, at 748890.127 45 CFR § 158.607(a)(1).128 45 CFR §§ 158.402, 158.403, 158.603.

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Revisions need to be made to New York’s managed care law consistent with the ACA to ensure that the state can enforce the law and that the protections mandated by federal law are in the state statute. As state enforcement agencies will never have enough resources to help all consumers harmed by violations of the ACA and comparable health care laws, the Legislature must ensure that violations of these provisions may be enforced by private actions in court by consumers.

Consumer aPPeals

ACA has an important provision (PHSA section 2719) to ensure that aggrieved consumers have the right to a meaningful review of decisions made by health plans on such issues as claims denials and rescissions. The federal statute and a new implementing regulation issued by HHS address both the right to appeal decisions through the plan’s internal processes, and to appeal health plan decisions to an outside, independent decision-maker. HHS estimates that 31 million people in new employer plans will benefit from the new regulations when they are implemented in 2011, rising to 78 million by 2013, and 10 million in new individual plans.129

Section 2719 and its implementing regulation have different standards for internal and external review. As to internal review, group plans must initially incorporate the standards in an existing federal regulation that before the enactment of ACA only applied to ERISA-covered group health plans (29 CFR 2560.503-1), while for individual coverage, insurers must initially comply with state law and update their procedures in light of subsequent HHS standards.130 As to external review, health insurers will be subject to either a state or federal process. A state process will apply in the individual or group market if it incorporates the consumer protections provided for in the Uniform External Review Model Act promulgated by the National Association of Insurance Commissioners (“NAIC Model Act”). However, if a state has not established an external appeals process that meets the NAIC Model Act standards or in the case of a self-insured plan that is not subject to the relevant state external review law, insurance plans and issuers must comply with the minimum standards established by HHS.131 For states like New York with existing state external review processes, the federal regulations issued to implement section 2719 include a transition period until July 1, 2011 within which the state process is presumed to

129 PHSA § 2719; HHS, Fact Sheet: The Affordable Care Act: Protecting Consumers and Putting Patients Back in Charge of Their Care (July 22, 2010), http://www.dol.gov/ebsa/pdf/fsaffordablecareact.pdf.130 PHSA § 2719(a); Throughout this section of the report, we have also consulted the following document on the meaning of the statute: HHS, Interim Final Rules for Group Health Plans and Health Insurance Issuers Relating to Internal Claims and Appeals and External Review Processes Under the Patient Protection and Affordable Care Act; Interim Final Rule; Federal Register, Vol. 75, No. 141 (July 23, 2010).131 PHSA § 2719(b).

meet federal standards. In the interim period, states not in compliance can work with the federal enforcement agencies involved (HHS, Department of Treasury and Department of Labor) to come into compliance so that the state process applies after the July 2011 date.132

New York State already has a comprehensive statute that affords consumers the right to challenge decisions by health plans through an internal and neutral external process. The Managed Care Bill of Rights, passed in 1996, applies to HMOs and other managed care organizations (MCOs). This important statute, codified at Articles 44 and 49 of the Public Health Law and Article 48 of the Insurance Law, provides for a two-tiered system of review of insurer practices. Decisions in regard to coverage issues involving “medical necessity” are subject to review by a “utilization review agent,” and decisions involving other issues, like denial of acceptance into a network and the services covered under the health plan are resolved under an internal grievance system.133 Enrollees not satisfied with the insurer’s decision regarding medical necessity, or experimental, clinical trial or rare disease treatments, or treatments for life threatening or seriously disabling conditions after losing an internal appeal within the insurance company, may file an appeal with NYSID, which, if timely and otherwise eligible, will be assigned to a certified external appeal agent with independent medical experts to review the appeal.134

The impact on New York of the new ACA appeal provision is somewhat less significant than other states due to the state’s strong managed care law. In addition to adding some protections to all covered insureds, new categories of New York consumers will now have external appeal rights, including members of self-insured ERISA-covered group health plans which were not subject to these laws due to ERISA preemption.135

The regulations implementing section 2719 establish a lengthy list of the most critical consumer protections states must have to ensure that the state law is deemed to meet the requirements of the NAIC Model Act, and therefore that the state external review process rather than the federal review process will apply. HHS has determined that to comply with the Model Act, under state law, insurers must, among other things: 1) provide for the external review of adverse benefit determinations that are based on medical necessity,

132 Federal Register, Vol. 75, No. 141, at 43332.133 N.Y. Public Health Law §§ 4902; 4900(8); see generally, Ryan L. Everhart (Note), “New York Managed Care Legislation: A Substantive Response to Corporate Medicine or a Token Gesture to Ease Consumer Concerns?”, 46 Buffalo Law Review 507, at 523-525. (1998); see generally, Mark Scherzer, Handling Medical Insurance Claim Denials in New York, at 8.134 New York State Insurance Department, 2009 Annual Report, at 103. From July 1, 1999, the program’s inception, to December 31, 2009, SID received 25,839 external appeal requests. A later court action is theoretically available, but courts are likely to defer to the independent experts appointed by SID.135 Federal Register, Vol. 75, No. 141, at 43339.

vii. Consumer rigHts: aPPeals of HealtH Plan deCisions and additional Consumer remedies

19


appropriateness, health care setting, level of care or effectiveness of a covered benefit; 2) require effective written notice to claimants of their rights in connection with external review; 3) ensure that no more than a nominal cost is imposed on consumers for external review; 4) adopt measures that assure the independence and impartiality of the assignment process such as assignment of cases on a random basis; and 5) require that issuers include an adequate description of the external review process in the summary plan description or other evidence of coverage provided to claimants.136

It is clearly in the interest of New York State to have its statute apply and to have regulatory oversight over the appeals processes of insurers with New York customers. Therefore, one key implementation task the state should undertake is to thoroughly compare the NAIC Model Law and the HHS interim regulations, and, in consultation with HHS, add any necessary additional protections to the state law. State officials should also review all state requirements applicable to disclosures distributed by insurers to consumers to determine which should contain a notification of the availability of assistance with appeals under the state managed care law and the new federal appeals regulations. These documents should contain contact information for the new state consumer assistance program.

general business law artiCle 22-a

General Business Law section 349, contained in General Business Law Article 22-A, is the primary remedy for New York consumers seeking to recover for their injuries due to deceptive practices by businesses, including health insurers and health care institutions. The statute, similar to other “deceptive practices” statutes in most states, makes unlawful “[d]eceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service” in the state. Section 349 also permits the State Attorney General to obtain injunctive relief and obtain restitution on behalf of consumers impacted by deceptive practices, adding a valuable remedy for the Attorney General in addition to Executive Law section 63(12).137

However, in practical terms, the most important benefit of section 349 is the “private right of action” provision, added by the Legislature in 1980. ACA does not contain an explicit provision giving injured consumers the right to recover for their injuries due to violations of ACA in court, and it is extremely unlikely that the courts will find an “implied” right of action under the ACA.138 Therefore, state law provisions are necessary to allow consumers to pursue their rights in court.

Section 349 permits “any person who has been injured by” a deceptive act or practice to bring a court action to enjoin the act or practice, or for “actual damages or fifty dollars,”

136 Id., at 43335.137 N.Y. General Business Law § 349.138 See, Acara v. Banks, 470 F.3d 569, 571 (5th Cir. 2006) (because Congress specifically delegated HIPPA enforcement to HHS, court assumed Congress intended to preclude private enforcement).

whichever is greater. Consumers may receive three times their actual damages up to $1000 for knowing violations. A separate section of Article 22-A provides a private right of action for false advertising with greater available damages: actual damages or $500, whichever greater, with treble damages up to $10,000 for willful violations.139 Both section 349 (the “deceptive practices” provision) and sections 350 and 350-a (the false advertising provisions) permit reasonable attorneys’ fees for prevailing plaintiffs, providing an incentive for attorneys to represent consumers and to bring class actions.140 Attorneys’ fees and the right to bring class actions are particularly important in consumer cases, particularly where the amount at issue is greater than the jurisdiction of small claims court: currently $5000.141

While section 349 is a broad remedial statute, it clearly does not permit consumers to bring court actions for every violation of ACA that affects them. To prevail, a consumer must establish that “(1) the challenged act or practice was consumer-oriented; (2) the act was misleading in a material way; and (3) the plaintiff suffered injury as a result of the deceptive act.”142 The second required element of section 349 (that a challenged practice be “misleading”) is fatal for many legal claims under the Affordable Care Act. A health plan’s failure to make mandated disclosures or to comply with disclosure provisions, or non-compliance with other consumer protection regulations, for example, will not be enforceable through a private action under section 349, unless the mandated disclosure involves deceptive (as opposed to, for example, unfair or illegal) conduct.143

Nor is it sufficient for consumers to rely on state enforcement agencies to protect their rights when they are impacted by violations of ACA. The Department of Law and NYSID, like similar agencies throughout the nation, are simply unable to take action as to more than a small percentage of the violations of consumer protection laws under their jurisdiction. In the large number of instances in which enforcement agencies have not received enough complaints involving a common practice by a single company and the company does not respond to voluntary mediation efforts, state agencies are generally forced to close a consumer’s file and the consumer is out of luck.

139 N.Y. General Business Law § 350-e(3).140 See, N.Y. General Business Law § 349(h) (private right of action for deceptive practices); N.Y. General Business Law § 350-e(3) (private right of action for false advertising).141 N.Y. New York City Civil Court Act § 1801, N.Y. Uniform District Court Act § 1801, N.Y. Uniform City Court Act § 1801; N.Y. Uniform Justice Court Act § 1801.142 Diaz v. Paragon Motors of Woodside, Inc., 424 F.Supp.2d 519, 542 (E.D.N.Y. 2006), citing Oswego Laborers’ Local 214 Pension Fund v. Marine Midland Bank, 85 N.Y.2d 20, 623 N.Y.S.2d 529, 532 (1995). 143 These principles are illustrated by the Broder decision. In that case, a consumer sought to bring a class action against a cable operator based on the operator’s creation of a reduced “Winter Season” tier of programming for certain customers without offering it or disclosing it to other customers, in apparent violation of a provision of federal law [47 U.S.C. § 543(d)] requiring uniform rates, and a state law provision requiring a “materially accurate” description of all programming and other services offered by cable television systems [N.Y. Pub. Serv. Law § 224-a(4)(a)]. The court dismissed the section 349 claims predicated on both state and federal law, as in each case, there was no explicit private right of action in the underlying statute. The court held that a plaintiff “cannot circumvent the lack of a private right of action” in a federal statute “by pleading his claim under GBL § 349,” at least concerning a federal law which “on its face does not address deceptive or misleading behavior at all.” Broder v. Cablevision Systems Corp., 418 F.3d 187 (2d. Cir. 2005).

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Therefore, both basic fairness and compliance with the Affordable Care Act will be greatly enhanced by listing in the state implementation statute specific violations of ACA and comparable state law provisions which may be enforced by consumers through a private action. One method of doing this would be to amend the state “deceptive practices” statute (General Business Law section 349), to list these violations.144

If the Legislature made this change, it logically should amend section 349(h) to at least permit consumers to recover the amount of damages provided for private actions for false advertising, namely actual damages or $500, whichever greater, with treble damages up to $10,000 for willful violations.145 From 1980, when a private right of action was created both for the deceptive practices and the false advertising statutes, to 2007, each statute provided for identical amounts for consumer recovery (namely, actual damages or $50, whichever is greater). Yet, in 2007, the Legislature only increased the available damages for violations of the false advertising provision. There is simply no justification for the Legislature to have increased the available damages for only one of these parallel statutes. It may have been an oversight, and should be corrected by the Legislature.146

tHe federal false Claims aCt

In a recent report, Stan Dorn of the Urban Institute’s Health Policy Center has pointed to a particularly innovative method of enforcement of some of the ACA’s consumer provisions. A section of the ACA applies the federal False Claims Act - now one of the strongest tools for rooting out Medicare and Medicaid fraud - to the receipt by health plans of federal funds through exchanges.147 The False Claims Act prohibits the knowing submission of false claims to receive government funds. Dorn suggests that the Act could provide a potentially powerful remedy against insurers who knowingly violate preconditions for the participation by health plans in the exchange. “Put simply, liability [under the False Claims Act] may result if an insurance company participated in the exchange but knew or clearly should have known that

144 The requirement that the challenged act be “misleading” would also have to be eliminated to make this proposal effective.145 N.Y. General Business Law § 350-e(3).146 Chapters 345, 346, Laws of 1980; Chapter 328, Laws of 2007.147 ACA § 1313(a)(6)(A); Stan Dorn, State Implementation of National Health Reform: Harnessing Federal Resources to Meet State Policy Goals (July 2010) (prepared for State Coverage Initiatives by the Urban Institute), at 26, http://www.rwjf.org/files/research/66488.pdf/. Premium tax credits available for consumers to purchase health insurance are one example of the receipt of federal funds by health plans through exchanges.

it was not qualified to do so.” For example, insurers that knowingly employed marketing plans or benefit structures with the purpose of attracting low-cost rather than high-cost consumers might be subject to liability under the Act, based on an ACA provision prohibiting plans in the exchange from discouraging the enrollment of individuals with “significant health needs.”148

Use of the False Claims Act is a particularly powerful enforcement mechanism due to the “qui tam” or whistleblower provisions in the federal law. The statute permits private parties with evidence of fraud involving government contracts and programs to sue to recover the funds provided on behalf of the government. Plaintiffs that prevail in court may be awarded a portion of the funds recovered on behalf of the government, typically between 15 and 25 percent. The Act provides for treble damages: three times the damages the government sustained. Dorn suggests that state agencies such as insurance regulators or even private consumer assistance programs might have standing to bring False Claims Act actions, resulting in recoveries that could help defray costs for state enforcement or consumer assistance efforts. The Legislature should therefore determine whether the New York exchange, the NYSID, consumer assistance offices, the Attorney General and private consumers who utilize the New York exchange would be entitled to bring actions under the False Claims Act under current state law. If this question is unclear, the Legislature should explore giving such parties the right to sue under the federal statute, as Dorn suggests. (These amendments would have to be harmonized with the state False Claims Act as well.) Given its role in protecting the state against Medicaid fraud, the Department of Law might be particularly well-suited to take the lead in enforcing the False Claims Act against unqualified insurers in the exchange. In addition to providing funds for enforcement, this mechanism could potentially be a powerful deterrent to the misuse of federal funds intended to improve health insurance access and affordability. At a minimum, the availability of this legal remedy should be widely publicized as a deterrent to improper insurer conduct.149

148 Id., at 26-27.149 Id., at 26-27; Whistleblower Lawyer Blog, Part 4: The Modern False Claims Act – How it Works (October 7, 2007), http://www.whistleblowerlawyerblog.com/2007/10/part_4_the_modern_false_claims_1.html; see, Office of Attorney General, About the Medicaid Fraud Control Unit, http://www.ag.ny.gov/bureaus/medicaid_fraud_control/about.html; N.Y. State Finance Law § 187 et seq.

As state and federal enforcement will not be adequate

to protect all consumers, the new state implementation

law should allow consumers harmed by serious violations of health insurance

protections to recover their

damages in court.

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In order to ensure that health insurers and health care institutions are held accountable for addressing health care disparities, a single office in the State Department of Health should be assigned to oversee the collection of health disparities data - both the data required to be collected under the ACA and additional state requirements. The State should use this information to develop ways to reduce disparities. This data should be made available to the public in an easy to use format at no charge.

Overwhelming evidence exists that, both nationally and in New York, racial and ethnic minorities receive a lower level of care and have poorer health outcomes.150 Disparities also exist by gender, primary language and disability status. ACA has limited provisions to address health care disparities. Most significantly, ACA provides that by March 23, 2012, HHS must ensure that “any federally conducted or supported health care or public health program, activity or survey [including the American Community Survey conducted by the U.S. Census]… collects and reports, to the extent practicable” data on “race, ethnicity, sex, primary language, and disability status for applicants, recipients, or participants.” Data must be collected “at the smallest geographic level such as State, local or institutional levels.”151 HHS is also required to establish collection standards that include self-reported data by applicants, recipients, or participants, including from parents or guardians if the applicant, recipient, or participant is a minor or legally incapacitated. Special provisions exist for disabilities, including the locations where individuals with disabilities access primary, acute and long term care and the number of providers with accessible facilities and equipment.152 HHS is also mandated to establish standards for data analysis and to analyze the data to detect and monitor trends in health disparities. HHS must make the data available to various entities, including the federal Office of Minority Health, and report the data on HHS’ Internet website and in other locations. Finally, the data must be made available to federal agencies, non-governmental entities, and the public.153

In order to ensure that disparities are addressed in New York, the state implementation statute should contain provisions to ensure that the new federal data is made fully accessible to state agencies, non-profits and other interested parties in a form that is clear enough to enable the development of solutions to health care disparities. Standardized data is also a means to hold health plans and health care institutions accountable. Bad publicity for entities that fall short will likely

150 See generally, Brian D. Smedley, Moving Toward Health Equity in New York: State Strategies to Eliminate Health Disparities (January, 2009) (a report for the Minority Health Council, New York State Department of Health), at 13, http://hcfany.files.wordpress.com/2009/01/microsoft-word-final-and-distributed-version-of-white-paper-_3_.pdf.151 PHSA § 3101(a)(1).152 PHSA § 3101(a)(2).153 PHSA §§ 3101(a)(2), 3101(b), 3101(c).

influence some consumers to select competing institutions; the possibility of this happening provides an incentive for institutions to improve. The state could also consider developing further enforcement mechanisms against entities that fail to reduce health disparities and incentivizing institutions with good records in this area.

We agree with New York Lawyers for the Public Interest that a single governmental office should be responsible for assembling all health equity measures.154 In our view, this includes data required to be collected under ACA, the disparities data already required to be collected under state law, and any additional requirements that are enacted by the Legislature as part of the state implementation statute.

However, it may not be practical for one entity to directly collect all disparities data from regulated entities. Instead, one state office, which we will call the “state disparities collection agency,” should be empowered to establish a standardized data collection program that compiles disparities data from all sources into a format available to the public. The agency should also have the authority to mandate that additional data be collected beyond the information required to be collected by statute. A single entity - especially with staff specifically assigned to data collection and oversight - would “ensure transparency, accountability and efficiency” and could focus public attention on health care disparities and mechanisms to combat it.155 The State Department of Health (DOH) is

the most logical agency to perform this function; the Department’s Office of Minority Health (OHM) and other DOH divisions are already charged with collecting some disparities data.156

The state implementation statute should also have provisions for public dissemination of disparities data. At a minimum, the data should be available in an easy to use format on the Internet, and data applicable to health insurers should be summarized in

154 See, New York Lawyers for the Public Interest, Reducing Health Disparities Through Data Collection: Massachusetts as a Model for New York, at 11-12.155 See, Id., at 11.156 N.Y. Public Health Law § 242. OMH is also charged with compiling a biennial report on the health status of “minority areas.” A “minority area” is a “county with a non-white population of forty percent or more, or the service area of an agency, corporation, facility or individual providing medical and/or health services whose non-white population is forty percent or more. See, N.Y. Public Health Law § 240(1).

viii. Consumer fairness: reduCing raCial and etHniC HealtH Care disParities

Health disparities data collected

under state and federal law should be easily available to consumers on the Internet at no

charge, so that consumers can use it to choose health

plans and health care institutions.

22


the consumer guides to health insurers already published by NYSID so that consumers can use it to guide their selection of health plans and health care institutions. Data from each health plan and health care institution should also be available on the web in a downloadable format at no charge, so that researchers, policymakers and stakeholders can access it to recommend policy changes and to hold insurers and health care institutions accountable.

While there should be one entity that oversees collection and dissemination of disparities data, it seems problematic for a single agency to enforce the data collection provisions against all regulated entities. The data collection provisions in the ACA and as proposed in this report will apply to a wide variety of entities - hospitals, other health care institutions, and health plans - all of which are subject to the jurisdiction of different state agencies. We therefore recommend that the task of enforcing the data collection provisions in federal and state law should be housed in the state agency with primary enforcement jurisdiction over each regulated entity, for example, the DOH for hospitals, and NYSID or DOH for health insurers. Of course, the state disparities collection agency should be given authority to refer complaints concerning non-compliance with the data collection provisions to the appropriate enforcement agency and to share information concerning violations with that agency. Penalties should be consistent with existing penalties for violations of other state mandates applicable to each institution. Serious violations of the data reporting requirements by managed care plans could also be subject to the Statements of Deficiencies and Correction Action Plans procedures of the DOH.157

The new data collection system should be mandated by the state implementation statute to be in place in 2012, when the new ACA requirements will become effective.

157 The Community Service Society has suggested that the State consider issuing Statements of Deficiency and Corrective Action Plans for managed care plans “which have unacceptable levels of disparity in health outcomes.” Community Service Society, Promoting Equity & Quality in New York’s Public Insurance Programs (May 2009), at 9, http://www.cssny.org/userimages/downloads/Promoting_Equity_May2009.pdf.

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Consumer-oriented governanCe: exCHanges and enforCement

In order to hold insurers accountable and protect New York consumers, the state implementation statute must give the state adequate authority to enforce the Affordable Care Act, and penalties for violations must be sufficient to deter illegal insurer conduct. The new health care exchange should be statewide in nature, should be an independent authority, and should effectively coordinate its enforcement efforts with the State Insurance Department and the Attorney General, which also have important roles in protecting health insurance consumers. Resources for all state enforcement agencies must be adequate.

1. The state implementation statute should clarify that any violation of the Affordable Care Act (ACA) that affects health insurance consumers is subject to civil penalties that may be enforced by NYSID.

2. The state implementation statute should provide in that the Attorney General may enforce certain enumerated provisions of the ACA along with the comparable state law provisions, including the provisions concerning: a. pre-existing conditions, annual and lifetime limits,

and rescissions; b. the summary of benefits and explanation of coverage

provided to consumers;c. disclosures to consumers on insurance company

practices;d. premium rate review and medical loss ratios (MLRs); e. appeals of health plan decisions; and f. collection of data in regard to health disparities.

3. The State Consumer Protection Board should consider referring appropriate complaints under the jurisdiction of the state consumer assistance program, NYSID and the Attorney General to these agencies rather than handling health care complaints in-house.

4. The state exchange should be a single statewide entity. Exchanges in different regions of the state would undermine the goal of spreading risk and maximizing the bargaining power of consumers against health insurers.

5. The New York exchange should be a state entity independent of NYSID or any other state agency. We recommend it be a public authority which is subject to strict oversight to ensure accountability. In either instance, there should be substantial consumer representation on the agency’s or authority’s governing board.

6. The tasks specifically assigned by the explicit language of ACA to exchanges (like making determinations as to qualification for premium credits) should be assigned to the New York exchange, while enforcement of traditional consumer protections (such as provisions in regard to pre-existing condition provisions, annual limits, lifetime limits, and consumer disclosures) should be assigned to SID.

7. The specific oversight responsibilities of the exchange and NYSID should be carefully delineated in the state implementation statute to avoid confusion by the regulatory community and legal challenges.

8. The state exchange should be a pro-active agency rather than a passive marketer of insurance products to protect against adverse selection, ensure that health insurance protects are affordable, and enhance consumer protection. For example, the same insurance rules should apply to insurance plans inside and outside the exchange, and health plans should not be permitted to sell lower quality products outside the exchange. Consumer protection provisions like marketing rules and rules on provider networks should apply to products both inside and outside the exchange.

9. Violations of provisions enforced by the exchange should subject health insurers to both monetary penalties (which can be recovered by NYSID after receiving a referral of the violation to NYSID) and in the case of serious violations, exclusion of health insurers from the exchange.

10. The Legislature should reexamine technical requirements in the Insurance Law like willfulness and lack of good faith - which often involve detailed factual inquiries that tax the limited enforcement resources of SID - to improve the capacity of SID to enforce both existing law and the ACA requirements.

11. The existing monetary penalties in the Insurance Law need to be strengthened. They also need to be updated to account for inflation and made consistent to make the enforcement scheme more logical.

12. No state penalty for violations of ACA and comparable state provisions should be less than a comparable penalty set forth in the ACA or in federal law.

13. In order to ensure that consumers benefit from the ACA, agencies designated to enforce ACA in New York State should be given adequate resources as the provisions of the new law become effective, even in a tight fiscal climate.

14. The State Attorney General (in addition to the exchange and NYSID) should play an active role in policing the health care industry and enforcing the ACA; the Department of Law should focus on industry-wide or systemic practices.

emPowered Consumers: Consumer assistanCe, navigators and disClosure of information

The state must ensure that consumers have sufficient information and assistance to be able to protect their rights under the new federal law and comparable state laws. The state implementation law should establish a preference in assigning consumer assistance and navigation functions to community-based organizations. Penalties for violations of the consumer information provisions in the new law must be adequate, and NYSID should develop standardized disclosure documents with strong input by consumers.

ix. summary of reCommendations

24


15. The state implementation statute should establish a preference in assigning the consumer assistance and navigator functions under the ACA and state law to Community Based Organizations (CBOs). Numerous policy concerns favor the selection of CBOs over state agencies.

16. These measures should be enacted to ensure that the state consumer assistance office created under the ACA is as effective as possible: a. the office should have access to sufficient data

from insurers and NYSID alike to resolve consumer complaints;

b. consumers should receive information about the availability of the consumer assistance program at each point they might need the office’s assistance, such after coverage denials; and

c. the office should be required to assist consumers with complaints concerning violations of federal and state laws, and encouraged to refer appropriate cases to enforcement agencies like the NYSID, the Attorney General, and the exchange.

17. In order to ensure that the consumer assistance office is fully accountable:a. the statute should ensure that the office provides

adequate staff training, including on state and federal health insurance protections and how to represent consumers through the adjudicatory processes set up to resolve health insurance complaints;

b. standards should be developed as to the tracking of complaints; and

c. service standards (like a minimum number of hours staff is available to take complaints by phone) should be mandated for funded CBOs providing consumer assistance.

d. (These provisions are substantially in place in the new CHA program.) Adequate state funding should also be provided to the office after the first year of operation.

18. Insurance brokers or other industry entities should not serve as funded navigators in regions where qualified consumer organization are available to perform this function.

19. CBOs that can demonstrate the capability to fulfill both the navigator and consumer assistance roles should receive a preference in funding.

20. The state implementation statute should empower NYSID to recover a comparable penalty to the $1000 penalty per customer in the ACA for customers who do not receive the summary of benefits and explanation of coverage mandated by federal law. This penalty should also be applied to violations of section 2715A of the Public Health Service Act (concerning, among other things, disclosure to the public of claims payment policies, enrollment data and ratings practices) and section 210 of the Insurance Law (concerning publication of a consumer guide to health insurers).

21. The provisions in the Insurance Law requiring insurers to supply insureds and prospective insureds with certain critical information about their health insurance coverage should be amended to require that:

a. mandated disclosures be in a separate document rather than as part of insurance contracts; and that

b. disclosures are understandable to average consumers and be culturally and linguistically appropriate.

22. The Legislature should give NYSID wide discretion to develop standardized disclosure documents mandated by federal and state law. NYSID should convene a representative task force of stakeholders including consumer representatives to advise it in this area.

affordable rates: Controlling Costs to ProteCt Consumers

Reforms need to be made to the new state law giving the State the authority to approve health insurer rate increases (the “prior approval law”), and the state must maintain enforcement efforts as to the state law on Medical Loss Ratios (MLRs), to ensure that an adequate percentage of consumers’ premium dollars are spent on health care rather than the profits and administrative expenses of health insurers. Reforms to the state statute must be made consistent with the ACA.

23. Amendments to the new “prior approval statute” statute should be made to enable consumers to meaningfully participate in rate proceedings. Specifically: a. provisions should be added providing for tolling if

reasonable information requests by commenters is not responded to by insurers in a timely fashion (other remedies like dismissal of the rate request should be available for extreme cases);

b. greater specificity as to the content of rate increases notices should be mandated (with discretion to NYSID to provide additional requirements by regulation) and remedies provided for defective notices;

c. the statute should define the extremely narrow instances in which information provided by insurers in rate proceedings is proprietary and therefore not subject to public disclosure; and

d. provisions should be added to enable the resolution of disputes over disclosure in an expeditious manner.

24. The Attorney General should be actively involved in health insurance rate increase proceedings and in the enforcement of federal and state Medical Loss Ratio (MLR) requirements.

25. The state, through the State Insurance Department, should maintain active enforcement efforts of the MLR requirements, despite the fact that ACA assigns primary enforcement jurisdiction to HHS. The state should actively conduct discussions with HHS to coordinate enforcement efforts, including the sharing of MLR data and information and insurer violations, to efficiently use state and federal enforcement resources.

25


Consumer rigHts: aPPeals of HealtH Plan deCisions and additional Consumer remedies

Revisions need to be made to New York’s managed care law consistent with the ACA to ensure that the state can enforce the law and that the protections mandated by federal law are in the state statute. As state enforcement agencies will never have enough resources to help all consumers harmed by violations of the ACA and comparable health care laws, the Legislature must ensure that violations of these provisions may be enforced by private actions in court by consumers.

26. The state should thoroughly compare the NAIC model law on external review and the HHS interim regulations and add any necessary additional protections to the state law.

27. All types of documents distributed by insurers to consumers should be reviewed to determine which should contain a notification of the availability of assistance with appeals under the state managed care law and the new federal appeals regulations. Such documents should be mandated to contain contact information for the new state consumer assistance program.

28. The state implementation statute should include a list of the violations of ACA and comparable state provisions which may be enforced through a private right of action in court. The amount that consumers may recover for violations of these federal and state provisions, along with other violations of the “deceptive practices” statute, should be made consistent with the recovery amount for violations of the false advertising statute (actual damages or $500, whichever is greater, with treble damages up to $10,000 for willful violations).

29. The Legislature should investigate whether the New York exchange, the NYSID, consumer assistance offices, the Attorney General and private consumers who utilize the exchange are currently entitled to bring actions under the federal False Claims Act against insurers who knowingly participate in the New York exchange but are unqualified to do so, and if the legal question is unclear, consider providing such parties with the right to sue under the federal statute. (The changes would have to be harmonized with the state False Claims Act as well.) Such an innovative strategy would be a powerful deterrent to the misuse of federal and state funds intended to improve health insurance access and affordability. Given its role in protecting the state against Medicaid fraud, the Department of Law might be particularly well-suited to take the lead in enforcing the False Claims Act. At a minimum, the availability of this legal remedy should be publicized as a potential deterrent to improper insurer conduct.

Consumer fairness: reduCing raCial and etHniC HealtH Care disParities

In order to ensure that health insurers and health care institutions are held accountable for addressing health care disparities, a single office in the State Department of Health should be assigned to oversee the collection of health disparities data - both the data required to be collected under the ACA and additional state requirements. The State should use this information to develop ways to reduce disparities. This data should be made available to the public in an easy to use format at no charge.

30. A single governmental office should be responsible for overseeing the process of collecting all health equity measures, including data required to be collected under the ACA, the disparities data already required to be collected by various state entities under state law, and any additional requirements that are enacted by the Legislature in the state implementation statute.

31. The state disparities collection agency should be housed in the New York State Department of Health (DOH) and perform the data collection oversight function.

32. Health disparities data that is collected should be available in an easy to use format on the Internet, and the data applicable to health insurers should be summarized in the consumer guides to health insurers already published by NYSID. The data should be available in a downloadable format at no charge, so that researchers, policymakers, stakeholders and the general public can access and analyze it, and to guide consumers’ choices of health insurers and health care institutions.

33. Enforcement of the data collection provisions in federal and state law should be housed in the state agencies with primary enforcement jurisdiction over each regulated entity, for example, the DOH for hospitals, and NYSID or DOH for health insurers. The state disparities collection agency should be given the authority to refer complaints to appropriate enforcement agencies and to share information concerning violations with these agencies.

34. The new data collection system should be mandated to be place in 2012, when the new ACA requirements will become effective.

26


As this report documents, the Affordable Care Act has enormous potential to expand coverage to two million New Yorkers and to vastly improve the quality of coverage to those who already have health insurance.

In designing the state legislative and regulatory approach to the ACA, we must keep foremost in our minds that passage of the federal law was a response to the total failure of the profit-driven health insurance market in the nation and in our state. The success of health care reform implementation in New York rests not just on expanding coverage and improving benefits, but also on deterring insurers from engaging in the anti-consumer practices that have prevented so many consumers from receiving quality affordable health care.

New York State must design its implementation of ACA to create a pro-consumer health care system. That means giving consumers adequate information about their health care choices, providing consumers with adequate assistance to navigate through an ever more complex health care system, and - most importantly - holding health insurers accountable when they engage in illegal conduct. The recommendations in this report are a roadmap to accomplishing these goals.

New York must continue to be a model for the nation in expanding health care coverage. That means designing an aggressive system of state regulation of health insurers, and establishing mechanisms to enable consumers to take action if they do not receive the rights and benefits promised in the new law. The new federal health care law was a response to a health insurance system that consistently put profits over people. To make health care work, state government must reverse the equation to put health care needs before health insurer profits.

x. ConClusion

Documents

A New Pro-Consumer Health Care System: Enforcing the New Federal Health Care Law in New York State