Escolar Documentos
Profissional Documentos
Cultura Documentos
Enforcing the New Federal Health Care Law in New York State
January 2011
Table of Contents
I. Introduction ......................................................................................................1
VII. Consumer Rights: Appeals of Health Plan Decisions and Additional Consumer
Remedies .............................................................................................................18
VIII. Consumer Fairness: Reducing Racial and Ethnic Health Care Disparities ...........21
X. Conclusion ....................................................................................................26
Executive Summary
In March of 2010, President Obama signed the Affordable Care The focus of the exchange must be on marketing insurance to
Act (“ACA”), comprehensive health care reform legislation consumers and small businesses as well as attracting insurers.
that will significantly improve the availability, affordability Therefore, NYSID should have primary responsibility for
and quality of health insurance in the United States. The enforcement of consumer protections, while the exchange
new law will provide an estimated 2.2 million additional New should perform the functions specifically assigned to it by
Yorkers with access to health insurance. the ACA, like certification of health plans, enrollment, and
administering premium credits. The exchange should not be
In addition to the lack of coverage of tens of millions of a passive marketer of health insurance: it should aggressively
Americans, the ACA was passed in response to numerous bargain with health insurers for better terms for consumers,
documented unfair health insurer practices throughout the and exclude health plans that sell lower quality products.
nation, including denials of coverage for medically necessary
care; wrongful dropping of coverage through the practice of Several steps need to be taken to ensure that NYSID and
rescission; deceptive marketing of substandard plans; large the Attorney General can effectively protect consumers. The
increases for health insurance premiums; and the inability state implementation statute must clearly specify that NYSID
of state insurance regulators to hold large health insurers should be able to collect monetary penalties for any violation
accountable for these practices. The ACA’s success in New of the Affordable Care Act that affects health insurance
York State rests on establishing an effective system of health consumers. Technical legal requirements, like requiring proof
insurer accountability. that an insurer didn’t act in “good faith” before penalties can
be recovered, place roadblocks to enforcement and should
The ACA put much of the responsibility for implementation be reexamined. Existing monetary penalties for violations of
on the states. New York must pass a state implementation health care consumer protections need to be strengthened
statute in 2011. In developing this new state law, the and updated to account for inflation. The statute should
Legislature will face a number of important decisions that will explicitly list the health insurance protections in the ACA
greatly affect the ability of consumers to understand their as well as comparable state protections that the Attorney
ii new health care options and gain access to appropriate and General is permitted to enforce. Finally, even in a tight
affordable insurance. The statute must also afford consumers fiscal climate, state enforcement agencies need to be given
effective redress if they do not receive the benefits and rights adequate resources to make the new federal health care law
conferred on them in the Affordable Care Act: the central work for consumers.
focus of this report.
The state has distributed funding provided under the ACA
The new state ACA enforcement scheme must be consistent to a consortium of non-profits headed by the Community
with the existing structure for enforcement of rules applicable Service Society to establish a state consumer assistance office
to health insurers in the state. The New York State Insurance to help consumers select suitable insurance plans, and to
Department (NYSID) now accepts thousands inquiries each assist consumers with disputes with health plans. After the
year on such topics as differing interpretations of health first year, the state must decide which entity will coordinate
insurance policy provisions and the failure to timely settle the state consumer assistance office. We believe that the
claims. NYSID provides advice to consumers, mediates state’s decision to have community based organizations
disputes between consumers and insurers, and imposes (CBOs) operate the consumer assistance office in the first
monetary penalties for violations by health insurers. The New year was the correct one, and that the implementation
York State Department of Health shares oversight of HMOs statute should give preference to CBOs to perform the ACA
with NYSID. The Attorney General supplements NYSID’s and consumer assistance and navigator functions in future years.
DOH’s roles by focusing on systemic practices affecting large However, a number of requirements like adequate staff
numbers of consumers, such as its well-known investigation training need to be included in the statute to ensure that the
of utilization review practices. office is effective and accountable.
Critical to the success of the new health care law in New York The new state implementation statute also needs to have
State is making sure that the new state health care exchange strong pro-consumer provisions in the areas of consumer
works effectively with NYSID, the Attorney General, and other information, rate regulation, consumer appeal rights,
entities that assist consumers when it is established by 2014. and health disparities. It is critical that the statute ensure
The New York exchange - a marketplace for health insurance that information on health plans is easily available and
for individuals and small businesses - should be statewide understandable to consumers, so that consumers can
in nature to ensure that risk is spread more effectively, that make informed choices as to their health coverage, and
consumer bargaining power is enhanced, and that state that companies are held accountable. The statute should
resources are used efficiently. The exchange should be a have strong penalties for violations of the law’s consumer
public authority independent of any existing state agency, disclosure provisions, and the Legislature should give
with strong consumer representation. NYSID wide discretion to develop standardized consumer
information documents with broad consumer input. The
In March of 2010, President Obama signed comprehensive unreasonably delaying reimbursement of patients and
health care reform legislation that will significantly improve hospitals for care. Health insurers operating in New York
the availability, affordability and quality of health insurance engaged in many of the practices documented in the HCAN
in the United States. This legislation, the Affordable Care report.3 The report found that state insurance regulators are
Act (“ACA” or the “Act”),1 not able to hold insurers fully accountable due to inadequate
will provide an estimated The Affordable Care enforcement resources, inadequate state disclosure laws,
2.2 million additional and penalties that are a small percentage of total insurer
New Yorkers with access Act was in part a earnings.4 The ACA’s success in New York State therefore
to health insurance, or response to numerous rests in large part on establishing an effective system to hold
85% of the non-elderly health insurers accountable when they violate the law.
uninsured population in
documented instances
the state. According to of anti-consumer The ACA puts much of the responsibility for implementation
New York State Health conduct by health on the states. The decisions New York State makes on how
Foundation projections, to implement the Act and how to structure the various
more than a million insurers. components of the new system will have a major impact
uninsured New Yorkers on the ability of consumers to understand their new health
are ultimately expected to obtain coverage.2 The law is care options, gain access to appropriate insurance and afford
also expected to make major changes to health care policy, health insurance.
including an expansion of Medicaid; protecting consumers
in the private insurance market from excessive costs for This report makes recommendations as to what New York
health insurance premiums and “out-of-pocket” expenses; State can do to ensure that the millions of health care
increasing consumer information about health care choices; consumers and small businesses in the private insurance
and protecting consumers from insurer practices like pre- market have access to affordable health care plans and
existing condition limitations, rescissions and limits on annual adequate information concerning their health insurance 1
and lifetime benefits. options. We also make recommendations to ensure that
consumers have effective redress - through state agencies, the
In addition to lack of coverage of tens of millions of Americans, courts and non-profits - if their health plan does not provide
much of the impetus for the new law was the outrageous the rights and benefits conferred on them by the Affordable
conduct of many major non-profit and commercial health Care Act. The report also discusses mechanisms to reduce
insurers, and the inadequate system of state regulation to racial and ethnic disparities in health care outcomes.
control harmful insurer practices. In a 2009 report, Health
Care for America Now (HCAN), a national reform coalition Many of the decisions as
of more than 1,000 organizations, documented many of the
The Affordable Care to how the state should
major anti-consumer practices of health insurers based on Act’s success in New respond to the new
media accounts and personal stories submitted to HCAN. York State rests on federal law will be made
These practices included: exposing consumers to high out- in state legislation that
of-pocket costs for medical services; denials of coverage for setting up an effective Governor Cuomo and the
medically necessary care; discrimination against women system to hold Legislature need to pass in
because of the cost of childbirth; wrongful dropping of the 2011 legislative session,5
coverage through the practice of rescission; deceptive
New York insurers which we call the “state
marketing of substandard plans; defrauding of taxpayers accountable. implementation statute” in
through billing public programs like Medicare and Medicaid this report. In developing
for services not provided; excessive CEO compensation; the statute and the new regulations, the Governor, the
denial of reimbursement to hospitals and other providers Legislature, and state regulators must make an array of
for emergency care; large increases for health insurance difficult decisions, most significantly the design of the state
premiums; incentives to providers to impede them from exchange (or exchanges) that will be established by 2014 to
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 3 Health Care for America Now, Health Insurance Company Abuses: How
Protection and Affordable Care Act, or “PPACA,” (H.R. 3590; Public Law 111-148), the Relentless Drive for Profit Endangers Americans (June 2009), http://hcfan.3cdn.
signed by the President on March 23, 2010, and the Health Care and Education net/d489f04dd6172aae34_4sm6iijoh.pdf.
Reconciliation Act (H.R. 4872; Public Law 111-152), signed by the President on March 4 Id., at 2.
30, 2010. Together, they are referred to as the “Affordable Care Act” in this report. 5 The administrative steps necessary to set up an exchange, including
2 New York State Health Foundation, Implementing Health Care Reform: A coordination of the IT systems that enable Medicaid and the exchange to work
Roadmap for New York State (August 2010), at 1, http://www.nyshealthfoundation. together seamlessly, as well as the need for the state to show sufficient progress to be
org/userfiles/file/RoadmapPaper_Aug2010.pdf (hereinafter, “Health Care Reform eligible for HHS grants both argue for the passage of state implementation legislation
Roadmap”). Table 1 on page 5 of the NYS Health Foundation report summarizes the in 2011. Department of Health and Human Services, Initial Guidance to States on
Foundation’s estimates of the number of individuals that are predicted to ultimately Exchanges (2010), http://www.hhs.gov/ociio/regulations/guidance_to_states_on_
obtain coverage. exchanges.html.
Enforcement of ACA in NYS Under Existing Law provision may not give NYSID blanket authority to take
enforcement action for any ACA violation that impacts health
An important question in determining what legislation insurance consumers. Given the vague language of section
is necessary in New York is whether the New York State 308, we recommend an explicit
Insurance Department (“NYSID” or “SID”), or any state entity, The State provision be included in the
has the existing authority to enforce the Affordable Care Act Insurance state implementation statute
against health insurers operating in the state. clarifying that any violation by
Department an insurer of ACA that affects
The authority for the states to enforce the insurance market should be able to health insurance consumers is
reforms in ACA derives from the fact that ACA’s insurance collect monetary subject to civil penalties that
can be recovered by NYSID. As
market reforms add new provisions to the Health Insurance
Portability and Accountability Act of 1996 (HIPPA).8 penalties for any the Paterson administration
(Examples of these reforms are the limits on lifetime limits and violation of the recognized, appropriate state
rescissions, extension of dependent coverage and mandates implementation legislation
for the development of uniform explanation of coverage
Affordable Care would “facilitate compliance
documents.) Section 2722 of HIPPA provides that states may Act that affects by having the applicable
enforce the insurance market reforms of that statute against health insurance requirements set forth in a single
place that combines the federal
health insurance issuers that issue, sell, renew, or offer health
insurance coverage in the State. However, if a state fails to consumers. and state requirements.”13
“substantially enforce” the law, the Department of Health
and Human Services (HHS) “shall enforce” the requirements ACA does not Preempt State Enforcement
of the statute as they relate to health insurance issued, sold,
renewed or offered in the State.9 It is unlikely that any effort by the state to enforce the
consumer protection provisions of the Affordable Care 3
The federal government’s HIPPA enforcement efforts have Act - including with strong penalty provisions - will present
been extremely limited. In the three years after the HIPPA a preemption problem. The law provides that “Nothing in
privacy provisions became effective, HHS received almost this title [which includes the major ACA provisions] shall be
20,000 complaints of violations of those provisions, but construed to preempt any State law that does not prevent
had not issued a single penalty and prosecuted just two the application of the provisions of this title.”14 The National
criminal cases.10 Therefore, it makes enormous sense for Association of Insurance Commissioners (NAIC) interprets this
New York State to enact explicit provisions providing for ACA statutory language to allow states to “adopt and enforce laws
enforcement, to eliminate any lack of clarity as to the state’s and regulations that afford greater consumer protections”
enforcement authority.11 than in the federal law.15 Enforcement of state consumer
protection laws with stronger penalties than in federal law,
In response to a letter by HHS Secretary Kathleen Sebelius, or with additional remedies would certainly not “prevent the
New York Governor David Paterson has taken the position application” of the ACA provisions,16 and therefore would
that the state has authority under current law to enforce not be preempted.
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 enforcement_letter.pdf.
action under HIPPA). Warren Pearl Construction also held there is no private right of 13 Id.
action to enforce a “nearly identical” state provision, New York Insurance Law section 14 Affordable Care Act (ACA) § 1321(d).
3221(p)(3)(A). 15 National Association of Insurance Commissioners, Preemption and State
12 Letter by New York Governor David Paterson to Secretary of Health Flexibility in PPACA (2010), http://www.naic.org/documents/index_health_reform_
and Human Services Kathleen Sebelius (August 5, 2010), available at: http://www. general_preemption_and_state_flex_ppaca.pdf.
healthcarereform.ny.gov/press/docs/2010-08-05_aca_consumer_protections_ 16 See, ACA § 1321(d).
Currently, three agencies have a significant role in enforcement the ACA, the DOH regulates HMOs (in conjunction with
of regulations applicable to health plans in New York: the NYSID) and is the lead agency with oversight over the state’s
State Insurance Department, the Department of Health, and Medicaid program.21
the Department of Law (the Attorney General).
The Department of Law
The New York State Insurance Department and the
Department of Health The Attorney General (Department of Law) has a
significant role in health care assistance and enforcement,
The lead agency for regulation of the practices of insurers in the supplementing the role of NYSID and DOH. The Department
state - health care and non-health care - is the New York State of Law has an active Health Care Bureau (HCB) that receives
Insurance Department. NYSID, through its Health Bureau, complaints and attempts to mediate them with health plans
reviews and approves accident and health insurance policy and providers.22 The HCB has initiated systemic investigations
forms of insurers licensed to write such insurance in the state, of health care practices resulting in enforcement actions
including health maintenance organizations (HMOs) and in court, often based on consumer complaints it receives.
other managed care organizations. The Bureau also accepts When Eliot Spitzer was Attorney General, for example, the
telephone inquiries and complaints. In 2009, it responded HCB brought numerous enforcement actions to protect the
to roughly 10,000 calls and accepted complaints on a wide basic rights of health care consumers and to seek restitution
variety of topics, including pre-existing condition provisions, (refunds) for consumers.23 As discussed in the next section,
mandated benefits, utilization review requirements, and the Attorney General Cuomo has continued this pro-consumer
application of COBRA and other laws.17 record. One experienced health care practitioner says that
the HCB is much more aggressive in assisting consumers than
SID also has a Consumer Services Bureau that responds to over the Insurance Department’s Consumer Services Bureau.24
4 200,000 consumer inquiries each year. (This figure includes
far more than health insurance issues.) The Bureau informally One of the main legal weapons of the Department of Law
mediates complaints by policyholders on such topics as is section 63(12) of the Executive Law, which gives the
differing interpretations of policy provisions, and failure to Attorney General extremely broad latitude to stop illegal
timely settle claims. In 2009, the Bureau closed 56,040 cases, conduct and recover damages on behalf of consumers. The
of which 7,320 were upheld and 5,816 involved cases that statute provides that whenever “any person shall engage in
were not formally upheld but involved adjustments; the repeated fraudulent or illegal acts or practices or otherwise
Bureau obtained $32.3 million in recoveries for consumers demonstrate persistent fraud or illegality in the carrying on,
in 2009.18 SID has from time to time been able to achieve conducting or transaction of business,” the Attorney General
significant penalties for insurer misconduct; for example, in may seek a court order to enjoin (stop) the practice, or to
October, AETNA was fined $850,000 for a series of violations, obtain restitution or damages on behalf of consumers.25
including incomplete disclosures on the “explanation of Court decisions have held that violations of federal laws
benefits” forms required to be provided to consumers making or regulations “can constitute fraud or illegality within the
an insurance claim, and the prompt pay law,19 a major area meaning of Section 63.”26
of enforcement in the health insurance area.
Recent New York attorneys general have not hesitated to
This report does not outline all of the consumer remedies use this broad authority in the health insurance area. The
that are enforced by SID. Two important examples are the HCB has in recent years attacked systemic practices involving
“Managed Care Bill of Rights” and the prompt pay law. (The major industry players that impact on millions of consumers.
Managed Care Bill of Rights is discussed in Section VII.)
Benefit Exchange: Key Decisions for State Policymakers (January 2011), at 11.
The New York State Department of Health (DOH) is the 21 Id., at 11.
primary agency responsible for oversight over public health 22 Joseph Baker and David Sharpe, “The Health Care Bureau: Empowering
Health Care Consumers,” NYSBA Health Law Journal (Spring 2003), at 21 (hereinafter,
functions such as local public health offices and infectious “Health Care Bureau”).
diseases.20 However, most relevant to consumer rights under 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
17 New York State Insurance Department, 2009 Annual Report, at 95, 102. Journal (Spring 2003), at 31.
COBRA is a federal statute that permits former employees to receive “continuation 24 Mark Scherzer, Handling Medical Insurance Claim Denials in New York
coverage” at a slightly higher rate than their former employer’s group rate. Under the (outline) (August 1, 2008), at 20-21, http://www.hivlawandpolicy.org/resources/
federal stimulus law (the American Recovery and Reinvestment Act of 2009), funding view/239.
was available to subsidize many COBRA-recipients’ premiums. 25 N.Y. Executive Law § 63(12).
18 Id., at 121-123. 26 See, New York v. Feldman, 210 F.Supp.2d 294, 300 (S.D.N.Y. 2002)
19 N.Y. Insurance Law §§ 3224-a, 3243; New York State Insurance (antitrust violations); see also, People of the State of New York v. World Interactive
Department Press Release, AETNA Fined $850,000 for Health Insurance Violations Gaming Corporation, 185 Misc.2d 852, 714 N.Y.S.2d 844, 849 (Sup. Ct. N.Y. Cty. 1999)
(October 4, 2010), http://www.ins.state.ny.us/press/2010/p1010041.htm. (any conduct “which violates state or federal law or regulation is actionable under this
20 United Hospital Fund, Building the Infrastructure for a New York Health provision.”)
In order to hold insurers accountable and protect New York HCFANY that a “single statewide exchange will best achieve
consumers, the state implementation statute must give the affordable comprehensive coverage and access to care for
state adequate authority to enforce the Affordable Care all by spreading risk more effectively, maximizing bargaining
Act, and penalties for violations must be sufficient to deter power, achieving greater efficiency, and gathering and using
illegal insurer conduct. The new health care exchange data in a uniform and more meaningful way.”37
should be statewide in nature, should be an independent
authority, and should effectively coordinate its The state implementation
enforcement efforts with the State Insurance Department statute must also address The New York
and the Attorney General, which also have important roles whether the exchange should exchange should
in protecting health insurance consumers. Resources for all be a new state agency,
state enforcement agencies must be adequate. housed at NYSID or another
be a public
existing state agency, or be a authority, with
Exchange Governance non-profit entity established strong consumer
or regulated by the state.38
Housing the exchange within representation.
The Act envisions the new “American Health Benefit
Exchanges” (“exchanges”) created under the law as the an existing state agency
major means other than a Medicaid expansion through which initially has considerable
millions of health insurance consumers will obtain insurance appeal. Presumably, it would lead to greater efficiency
at an affordable price. Exchanges are marketplaces that will through the sharing of existing agency staff and other
offer standard health insurance products to individuals and resources. However, on balance, we agree with Professor
small businesses. Consumers will also receive standardized Timothy Stoltzfus Jost of Washington and Lee University
information on insurance plans to enable effective School of Law that “it will probably be advisable for exchanges
comparison-shopping. to maintain their independence from state insurance
6 regulators or Medicaid agencies while also maintaining good
The ACA targets the establishment of exchanges by states by working relationships with them.”39
January 1, 2014.32 However, if HHS determines on or before
January 1, 2013 that any state will not have an exchange Among other things, independence is necessary because of
in operation by January 1, 2014 or otherwise hasn’t taken the different roles of the exchange and insurance regulators.
the actions HHS determines are necessary to implement an Perhaps the primary role of the exchange is to create a “well-
exchange, HHS is mandated to operate an exchange in the functioning and efficient market for insurance products.”40
State, either directly or through an agreement with a non- A critical major factor in the success of the exchange will
profit entity.33 New York State has indicated it will “fully be attracting a large enough pool, particularly of healthy
explore” establishing a state-based exchange providing that participants, to avoid the “death spiral” of adverse selection,
it receives adequate federal funding. The state anticipates in which premiums are more expensive inside the exchange
receiving the maximum planning and establishment grant for than outside.41 This is a particularly important issue under
this purpose.34 ACA because it “permits both an individual and group health
insurance market to continue to exist outside the exchange,”42
The ACA leaves most of the important decisions as to the making it tempting for businesses with a healthy workforce to
governance and operation of state exchanges to state leave the exchange if state regulations permit lower quality
legislatures. The ACA permits a separate “SHOP” (Small and less expensive products outside the exchange. Small
Business Health Options Program) exchange for small employers must also be attracted into the exchange.43 The
businesses to enroll their employees.35 The states may also need of the exchange to attract both insurers and consumers
establish more than one exchange in different regions (small businesses and individuals) appears in contradiction
of the state, or even band with other states to establish to the need for a strong regulator to protect consumers.
regional exchanges.36 However, we strongly agree with
37 HCFANY, Five Standards for the New York State Insurance Exchange,
Standard 1.
32 ACA § 1311(b)(1). 38 ACA § 1311(d).
33 ACA § 1321(c). 39 Timothy Stoltzfus Jost, Health Insurance Exchanges and the Affordable
34 See, ACA § 1321(a); Governor David A. Paterson and Wendy Saunders, Care Act: Key Policy Issues (July 2010), at 24-25, http://www.commonwealthfund.
Deputy Secretary for Health, Medicaid & Oversight, Planning and Establishment org/~/media/Files/Publications/Fund%20Report/2010/Jul/1426_Jost_hlt_insurance_
of State-Level Exchanges, Comments provided to Office of Consumer Information exchanges_ACA.pdf (hereinafter, “Health Insurance Exchanges: Key Policy Issues”).
and Insurance Oversight, Department of Health and Human Services, Document ID: 40 Id., at 19.
HHS-OS-2010-0021-0001 (October, 2010), http://www.healthcarereform.ny.gov/docs/ 41 Id., at 3; Lynn Quincy, Consumers Union, PowerPoint Presentation,
nys_comments_title_i_ppaca.pdf; Health Care Reform Cabinet, Federal Health Care Health Insurance Exchanges – Key Issues for States and Advocates (presented at
Reform Grants for New York State: November 22, 2010 (memorandum distributed conference, From Vision to Reality: State Strategies for Health Reform Implementation,
at the third meeting of the Health Care Reform Advisory Committee, November 22, Washington, D.C., November 11, 2010), at slide 16 (hereinafter, “Consumers Union
2010) (hereinafter, “NYS Federal Health Care Reform Grants Memo”). PowerPoint on Exchanges”).
35 ACA § 1311(b)(1)(B). 42 Health Insurance Exchanges: Key Policy Issues, at 3.
36 ACA §§ 1311(f)(1),1311(f)(2). 43 Consumers Union PowerPoint on Exchanges, at slide 13.
Further, each of the existing state agencies that might be Enforcement and Penalties
candidates to house the exchange - NYSID, the Department
of Health and the Department of Civil Service (DCS) - has Assuming the exchange is a state authority independent of
at least potential conflicts between its existing mission and NYSID, the state implementation statute would also have to
the role an exchange will be expected to play under the address which state entity will enforce the insurance market
ACA. NYSID has limited experience with the “lower-income reforms and other consumer protections in the ACA. We
populations expected to be served through the exchange.” recommend that the primary enforcement responsibilities be
DOH, like NYSID, would have potential conflicts as both a assigned to SID, which already regulates insurance companies
regulator and the exchange role of marketing insurance in the state and is in the best position to address complex
products. DCS administers health insurance for state and regulatory issues involving
local government employees, a much different task than
serving individuals from all income groups with different risk
The New York the state health insurance
market.
profiles and coordinating enrollment in public programs. exchange should
As UHF suggests, due to the breadth of responsibilities and perform the However, the New York
current focus of the three agencies, each agency might lack exchange must necessarily
the focus or the resources to run the state exchange.44 functions assigned have some regulatory
to it by the ACA like responsibilities, even if it
Housing the exchange in a totally new Executive Department
agency created for that purpose also presents significant
premium credits, is a separate entity. ACA
expressly assigns a number
start up problems and operational issues. To address these while the Insurance of regulatory responsibilities
issues, on balance, we recommend the exchange be a public Department should to state exchanges,
authority, otherwise known as a public benefit corporation. including the certification
Both the existing Massachusetts connector and the new be responsible of “qualified health
California health care implementation law have adopted this for enforcement plans” under the Act and 7
model.45 A public authority would give the exchange much
greater flexibility to operate and to become fully established
of consumer developing a standardized
format for presenting health
within the short timeframe mandated by the ACA. protections. benefits plan options.48
Further, as discussed in the
However, given the documented abuses of public authorities next section, the funding of consumer assistances offices is an
in New York, the authority would have to be subject to strict exchange function. Finally, exchanges have the responsibility
oversight to ensure accountability. The Legislature enacted of administering applications for premium assistance credits
two major pieces of legislation to increase the accountability and cost-sharing reduction payments, a task they are suited
of New York public authorities in 2005 and 2009. The new to perform because eligibility for such subsidies can be
laws created a new Authorities Budget Office (ABO) within determined during the enrollment process, a critical exchange
the Department of State to oversee the operations and function.49
finances of public authorities and required that authorities
establish audit and governance committees with independent In general, tasks specifically assigned by the terms of ACA to
members and submit detailed reports to the ABO and the exchanges should be assigned to the New York exchange,
State Comptroller.46 The state implementation statute should while traditional consumer protection functions like pre-
apply the requirements of the 2005 and 2009 laws to the New existing condition provisions, annual limits, lifetime limits, and
York exchange. The Legislature should also examine whether consumer disclosures should be the responsibility of SID. The
the exchange should be exempted from any provisions in specific oversight responsibilities of the exchange and NYSID
these two laws given the need to rapidly put the exchange should be carefully delineated in the state implementation
into operation. statute, to avoid confusion by the regulated community and
legal challenges.50
Whether the exchange is a public authority or a state agency,
it is critical that there be a substantial consumer role in its
47 Nancy Turnball, Harvard School of Public Health, PowerPoint Presentation,
governance, through representation on the agency’s or How Massachusetts Answered the Eight Questions (presented at conference, From
authority’s governing board. The Massachusetts Health 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
Insurance Connector, the existing Massachusetts exchange, is Massachusetts Health Insurance Connector.) The other board members are 4
governed by a 10-person board, one of whom is a consumer 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
44 United Hospital Fund, Building the Infrastructure for a New York Health issued by HHS. HHS, Initial Guidance to States on Exchanges (2010), http://www.hhs.
Benefit Exchange: Key Decisions for State Policymakers (January 2011), at 11-13. gov/ociio/regulations/guidance_to_states_on_exchanges.html.
45 Id. at 12-19. 49 ACA § 1411; Health Insurance Exchanges: Key Policy Issues, at 21.
46 Id., at 20-21; Final Report of the (New York State Assembly) Committee on 50 See, HHS, Initial Guidance to States on Exchanges (2010) (advising States to
Corporations, Commissions, and Authorities (2010). incorporate federally mandated exchange function in “authorizing legislation or other
62 45 CFR § 158.606. 64 See, for example, Peter Elkind, Rough Justice: The Rise and Fall of Eliot
63 See, New England Journal of Medicine, Health Policy and Reform: Spitzer, New York: Penguin Group (2010).
Remaking Health Care (Blog), Beyond Repeal – The Future of Health Care Reform 65 Schneiderman for Attorney General 2010, The Schneiderman Attorney
(November 17, 2010) (incoming Speaker Boehner likely to seek ACA repeal and General Agenda: Blueprint for Economic Fairness, Social Justice & Real Reform in New
has called the new law a “monstrosity”), http://healthpolicyandreform.nejm. York State, http://www.scribd.com/doc/35292426/Schneiderman-AG-Agenda-Book-
org/?p=13113. One.
Reforms need to be made to the new state law giving the each grant is based on a formula established by HHS; grants
State the authority to approve health insurer rate increases range from $1 million to $5 million based on, among other
(the “prior approval law”), and the state must maintain things, the number of health insurance plans in the state and
enforcement efforts as to the state law on Medical Loss the state’s population.109 On August 9th, New York State
Ratios (MLRs), to ensure that an adequate percentage was awarded a $1 million grant, which it indicated it will be
of consumers’ premium dollars are spent on health care used for system upgrades and to hire two additional staff;
rather than the profits and administrative expenses of NYSID anticipates receiving a second-year rate review grant
health insurers. Reforms to the state statute must be made of up to $5 million in 2011.110
consistent with the ACA.
In 2010, New York State reinstated NYSID’s authority to
The dramatic increases in health insurance premiums in recent approve health insurance premium rates before they go into
years are a major impediment to businesses and individual effect (known as “prior approval”) which had been removed
consumers purchasing and maintaining insurance coverage. in the 1990s. Under the new law, insurers proposing to change
From 2000 to 2009, New Yorkers with employer-based rates for “direct pay” (individuals) and small group policies
health insurance experienced premium increases of 92% in must notify policyholders and certificate holders (including
a period when their wages only increased by 14%.107 Health employees in the case of group plans) of the proposed new
insurance is now unaffordable for many individuals and small rate on or before the date the rate filing or application is
businesses alike. Further exacerbating the problem, health filed with SID. The notice must include the “specific change
insurers in the past two decades have spent less and less of requested” and “prominently include mailing and website
consumers’ premium dollars on patient care, instead devoting addresses for both the insurance department and the
an ever higher percentage of premium dollars to profits, insurer” through which a person may, within 30 days of when
marketing, administrative expenses and sales commissions. the application is filed with SID, submit written comments or
PricewaterhouseCoopers, which often consults for the health receive additional information about the rate change. The
care industry, found that from 1993 to 2007, the percentage rate increase (or decrease) may be modified or disapproved 15
of premium dollars that the leading investor-owned health by SID if it finds the premiums are “unreasonable, excessive,
insurers spent on health care - known as the “medical loss inadequate, or unfairly discriminatory.” In making this
ratio,” or “MLR” - declined precipitously from 95% to 81%.108 determination, SID may consider the insurer’s “financial
condition.”111
In 2010, Congress through the ACA and the State Legislature
both acted to address skyrocketing health insurance rates by Insurers began in the summer of 2010 to seek rate increases
establishing oversight of health insurance premium rates and under the new law, in some cases, well above 10%. Re-
MLRs. The Legislature must harmonize the new federal and regulation has helped to dampen down rate increases,
state provisions in this area and address issues concerning the although health insurance premiums still remain unaffordable
enforcement of the new state law. for many. Due to prior approval, SID reports that it reduced
the rate increase from the percentage increase requested by
Rate Review insurers an average of 2.5% for the first round of decisions.112
Under ACA, HHS is required to establish a process for the Despite these initial successes, problems have already
annual review of “unreasonable” increases in health insurance been identified with the new statute, making statutory
premiums beginning with plan year 2010. Health insurers or regulatory changes appropriate. First, SID has written
must submit a “justification” for any increase to HHS and the insurers that the first round of rate increase notices under
relevant State prior to its effective date and prominently post the new law have been deficient in several respects, including
information on rate increase proposals on their websites. misleadingly attributing the need for rate increases to
Under the new rate review regulations proposed in December mandates under ACA and the state’s mental health parity law
of 2010, states that HHS determines have effective rate review (known as “Timothy’s Law”); including in proposed increases
processes, including presumably New York, will be able to disclosed to consumers amounts attributable to time periods
conduct their own reviews. A $250 million grant program is before the effective date of the new law; and failure to
established nationally from 2010 to 2014 to assist states with inform insureds that they could complain to the insurer in
reviewing, and, if “appropriate under state law” (as in New
York), to approve health insurance premiums. The amount of 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-
107 Health Care for All New York, HCFANY Fact Sheet, Restore the Hikes.aspx.
Government’s Power to Regulate Insurance (March 2010), http://hcfany.files. 110 NYS Federal Health Care Reform Grants Memo.
wordpress.com/2010/01/prior-approval_final3.pdf. 111 Chapter 107, Laws of 2010, amending N.Y. Insurance Law §§ 3231(e)(1)
108 The Main Street Alliance, National Minimum Medical Loss Ratio Would (A), 4308(c)(2). (The quoted language is identical in the two provisions.)
Save Tens of Billions of Dollars For Businesses, Individuals (December 2009), at 3, 112 New York State Insurance Department Press Release, Prior Approval Helps
http://mainstreetalliance.org/wordpress/wp-content/uploads/Ensuring-Value-for- Hold Down Health Insurance Rate Increases (October 21, 2010), http://www.ins.state.
Premiums.pdf. ny.us/press/2010/p1010211.htm.
additional information Unlike most other consumer provisions of the ACA, Congress
not provided by insurers to make its decision.115 The statute explicitly assigned the primary enforcement responsibility for
should therefore be amended to permit tolling or other the MLR provision to HHS rather than the states, although the
remedies, like dismissal of the rate increase request in extreme states play a significant role. HHS is directed to promulgate
cases, if reasonable information requests by commenters are regulations for enforcement of the MLR provision, and is
not responded to by the insurer in a timely fashion. Further, permitted to establish civil penalties by regulation.119 On
while NYSID has indicated that it intends to issue guidance November 22nd, HHS issued an interim final rule establishing
to insurers as to the content of rate increase notices,116 the enforcement procedures and civil penalties.120 The regulation
Legislature may wish to ultimately mandate the content of provides that HHS may impose civil penalties if the insurer fails
these notices by statute or to provide remedies to consumers to do one of the following: 1) submit the annual MLR report to
for defective notices. Finally, either statutory or regulatory HHS; 2) submit a “substantially complete or accurate report”;
changes need to be made to define the extremely narrow 3) timely and accurately pay the rebates provided for in the
instances in which information in rate filings is proprietary and statute; 4) respond to HHS inquiries as part of an investigation
therefore not subject to public disclosure, and to establish a of insurer non-compliance; 5) maintain any required records;
rapid and simple procedure to resolve such disputes. 6) allow access and entry to premises, facilities and records;
7) comply with corrective actions resulting from the audits
Given the importance of affordable health insurance, health provided for in the statute; or 8) furnish inaccurate data to
insurer rate increases and MLR enforcement should also HHS or to a State.121
If the Legislature made this change, it logically should amend Use of the False Claims Act is a particularly powerful
section 349(h) to at least permit consumers to recover the enforcement mechanism due to the “qui tam” or
amount of damages provided for private actions for false whistleblower provisions in the federal law. The statute
advertising, namely actual damages or $500, whichever permits private parties with evidence of fraud involving
greater, with treble damages up to $10,000 for willful government contracts and programs to sue to recover the
violations.145 From 1980, when a private right of action funds provided on behalf of the government. Plaintiffs
was created both for the deceptive practices and the false that prevail in court may be awarded a portion of the funds
advertising statutes, to 2007, recovered on behalf of the government, typically between 15
each statute provided As state and federal and 25 percent. The Act provides for treble damages: three
for identical amounts enforcement will times the damages the government sustained. Dorn suggests
for consumer recovery that state agencies such as insurance regulators or even private
(namely, actual damages
not be adequate consumer assistance programs might have standing to bring
or $50, whichever is to protect all False Claims Act actions, resulting in recoveries that could help
greater). Yet, in 2007, the consumers, the new defray costs for state enforcement or consumer assistance
Legislature only increased efforts. The Legislature should therefore determine whether
the available damages state implementation the New York exchange, the NYSID, consumer assistance
for violations of the false law should allow offices, the Attorney General and private consumers who
advertising provision. There utilize the New York exchange would be entitled to bring
is simply no justification
consumers harmed actions under the False Claims Act under current state law.
20 for the Legislature to have by serious violations If this question is unclear, the Legislature should explore
increased the available of health insurance giving such parties the right to sue under the federal statute,
damages for only one of as Dorn suggests. (These amendments would have to be
these parallel statutes. It protections to harmonized with the state False Claims Act as well.) Given
may have been an oversight, recover their its role in protecting the state against Medicaid fraud, the
and should be corrected by Department of Law might be particularly well-suited to take
the Legislature.146
damages in court. the lead in enforcing the False Claims Act against unqualified
insurers in the exchange. In addition to providing funds for
The Federal False Claims Act enforcement, this mechanism could potentially be a powerful
deterrent to the misuse of federal funds intended to improve
In a recent report, Stan Dorn of the Urban Institute’s Health health insurance access and affordability. At a minimum, the
Policy Center has pointed to a particularly innovative method availability of this legal remedy should be widely publicized as
of enforcement of some of the ACA’s consumer provisions. a deterrent to improper insurer conduct.149
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 148 Id., at 26-27.
Reform: Harnessing Federal Resources to Meet State Policy Goals (July 2010) (prepared 149 Id., at 26-27; Whistleblower Lawyer Blog, Part 4: The Modern False
for State Coverage Initiatives by the Urban Institute), at 26, http://www.rwjf.org/files/ Claims Act – How it Works (October 7, 2007), http://www.whistleblowerlawyerblog.
research/66488.pdf/. Premium tax credits available for consumers to purchase health com/2007/10/part_4_the_modern_false_claims_1.html; see, Office of Attorney
insurance are one example of the receipt of federal funds by health plans through General, About the Medicaid Fraud Control Unit, http://www.ag.ny.gov/bureaus/
exchanges. medicaid_fraud_control/about.html; N.Y. State Finance Law § 187 et seq.
154 See, New York Lawyers for the Public Interest, Reducing Health Disparities
150 See generally, Brian D. Smedley, Moving Toward Health Equity in New Through Data Collection: Massachusetts as a Model for New York, at 11-12.
York: State Strategies to Eliminate Health Disparities (January, 2009) (a report for the 155 See, Id., at 11.
Minority Health Council, New York State Department of Health), at 13, http://hcfany. 156 N.Y. Public Health Law § 242. OMH is also charged with compiling a
files.wordpress.com/2009/01/microsoft-word-final-and-distributed-version-of-white- biennial report on the health status of “minority areas.” A “minority area” is a “county
paper-_3_.pdf. with a non-white population of forty percent or more, or the service area of an
151 PHSA § 3101(a)(1). agency, corporation, facility or individual providing medical and/or health services
152 PHSA § 3101(a)(2). whose non-white population is forty percent or more. See, N.Y. Public Health Law §
153 PHSA §§ 3101(a)(2), 3101(b), 3101(c). 240(1).
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.
Consumer-Oriented Governance: Exchanges and 7. The specific oversight responsibilities of the exchange
and NYSID should be carefully delineated in the state
Enforcement implementation statute to avoid confusion by the
regulatory community and legal challenges.
In order to hold insurers accountable and protect New York
8. The state exchange should be a pro-active agency rather
consumers, the state implementation statute must give the
than a passive marketer of insurance products to protect
state adequate authority to enforce the Affordable Care
against adverse selection, ensure that health insurance
Act, and penalties for violations must be sufficient to deter
protects are affordable, and enhance consumer
illegal insurer conduct. The new health care exchange
protection. For example, the same insurance rules should
should be statewide in nature, should be an independent
apply to insurance plans inside and outside the exchange,
authority, and should effectively coordinate its
and health plans should not be permitted to sell lower
enforcement efforts with the State Insurance Department
quality products outside the exchange. Consumer
and the Attorney General, which also have important roles
protection provisions like marketing rules and rules on
in protecting health insurance consumers. Resources for all
provider networks should apply to products both inside
state enforcement agencies must be adequate.
and outside the exchange.
9. Violations of provisions enforced by the exchange should
subject health insurers to both monetary penalties (which
1. The state implementation statute should clarify that any
can be recovered by NYSID after receiving a referral of the
violation of the Affordable Care Act (ACA) that affects
violation to NYSID) and in the case of serious violations,
health insurance consumers is subject to civil penalties
exclusion of health insurers from the exchange.
that may be enforced by NYSID.
10. The Legislature should reexamine technical requirements
2. The state implementation statute should provide in that
in the Insurance Law like willfulness and lack of good
the Attorney General may enforce certain enumerated
faith - which often involve detailed factual inquiries that
provisions of the ACA along with the comparable state
tax the limited enforcement resources of SID - to improve 23
law provisions, including the provisions concerning:
the capacity of SID to enforce both existing law and the
a. pre-existing conditions, annual and lifetime limits,
ACA requirements.
and rescissions;
11. The existing monetary penalties in the Insurance Law
b. the summary of benefits and explanation of coverage
need to be strengthened. They also need to be updated
provided to consumers;
to account for inflation and made consistent to make the
c. disclosures to consumers on insurance company
enforcement scheme more logical.
practices;
12. No state penalty for violations of ACA and comparable
d. premium rate review and medical loss ratios (MLRs);
state provisions should be less than a comparable penalty
e. appeals of health plan decisions; and
set forth in the ACA or in federal law.
f. collection of data in regard to health disparities.
13. In order to ensure that consumers benefit from the ACA,
3. The State Consumer Protection Board should consider
agencies designated to enforce ACA in New York State
referring appropriate complaints under the jurisdiction
should be given adequate resources as the provisions
of the state consumer assistance program, NYSID and the
of the new law become effective, even in a tight fiscal
Attorney General to these agencies rather than handling
climate.
health care complaints in-house.
14. The State Attorney General (in addition to the exchange
4. The state exchange should be a single statewide entity.
and NYSID) should play an active role in policing the health
Exchanges in different regions of the state would
care industry and enforcing the ACA; the Department of
undermine the goal of spreading risk and maximizing the
Law should focus on industry-wide or systemic practices.
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 Empowered Consumers: Consumer Assistance,
strict oversight to ensure accountability. In either instance, Navigators and Disclosure of Information
there should be substantial consumer representation on
the agency’s or authority’s governing board. The state must ensure that consumers have sufficient
6. The tasks specifically assigned by the explicit language information and assistance to be able to protect their rights
of ACA to exchanges (like making determinations as to under the new federal law and comparable state laws. The
qualification for premium credits) should be assigned to state implementation law should establish a preference in
the New York exchange, while enforcement of traditional assigning consumer assistance and navigation functions to
consumer protections (such as provisions in regard to community-based organizations. Penalties for violations
pre-existing condition provisions, annual limits, lifetime of the consumer information provisions in the new law
limits, and consumer disclosures) should be assigned to must be adequate, and NYSID should develop standardized
SID. disclosure documents with strong input by consumers.
26. The state should thoroughly compare the NAIC model 30. A single governmental office should be responsible for
law on external review and the HHS interim regulations overseeing the process of collecting all health equity
and add any necessary additional protections to the state measures, including data required to be collected under
law. the ACA, the disparities data already required to be
27. All types of documents distributed by insurers to collected by various state entities under state law, and
consumers should be reviewed to determine which should any additional requirements that are enacted by the
contain a notification of the availability of assistance with Legislature in the state implementation statute.
appeals under the state managed care law and the new 31. The state disparities collection agency should be housed
federal appeals regulations. Such documents should be in the New York State Department of Health (DOH) and
mandated to contain contact information for the new perform the data collection oversight function.
state consumer assistance program. 32. Health disparities data that is collected should be available
28. The state implementation statute should include a list of in an easy to use format on the Internet, and the data
the violations of ACA and comparable state provisions applicable to health insurers should be summarized in the 25
which may be enforced through a private right of action consumer guides to health insurers already published by
in court. The amount that consumers may recover for NYSID. The data should be available in a downloadable
violations of these federal and state provisions, along format at no charge, so that researchers, policymakers,
with other violations of the “deceptive practices” statute, stakeholders and the general public can access and
should be made consistent with the recovery amount for analyze it, and to guide consumers’ choices of health
violations of the false advertising statute (actual damages insurers and health care institutions.
or $500, whichever is greater, with treble damages up to 33. Enforcement of the data collection provisions in federal
$10,000 for willful violations). and state law should be housed in the state agencies with
29. The Legislature should investigate whether the New primary enforcement jurisdiction over each regulated
York exchange, the NYSID, consumer assistance offices, entity, for example, the DOH for hospitals, and NYSID or
the Attorney General and private consumers who utilize DOH for health insurers. The state disparities collection
the exchange are currently entitled to bring actions agency should be given the authority to refer complaints
under the federal False Claims Act against insurers who to appropriate enforcement agencies and to share
knowingly participate in the New York exchange but are information concerning violations with these agencies.
unqualified to do so, and if the legal question is unclear, 34. The new data collection system should be mandated to
consider providing such parties with the right to sue be place in 2012, when the new ACA requirements will
under the federal statute. (The changes would have to be become effective.
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.