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

by Bob Cohen, Esq.

Public Policy and Education Fund of New York

94 Central Avenue
Albany, NY 12206
518.465.4600
http://ppefny.org

January 2011
Table of Contents

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
 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
ii 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.
Public Policy and Education Fund of New York
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
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
iii
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.

A New Pro-Consumer Health Care System

I. Introduction
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 The Affordable Care
2.2 million additional
New Yorkers with access Act was in part a
to health insurance, or response to numerous
85% of the non-elderly
uninsured population in
documented instances
the state. According to of anti-consumer
New York State Health conduct by health
Foundation projections,
more than a million insurers.
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 1
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
The Affordable Care to how the state should
Act’s success in New respond to the new
York State rests on federal law will be made
in state legislation that
setting up an effective Governor Cuomo and the
system to hold Legislature need to pass in
the 2011 legislative session,5
New York insurers which we call the “state
accountable. 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.
A New Pro-Consumer Health Care System
 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
2 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.”)

Public Policy and Education Fund of New York

II. Enforcement of the Affordable Care Act In New York

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).

A New Pro-Consumer Health Care System

 III. Current NYS Health Care Enforcement Agencies
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
4 200,000 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
Public Policy and Education Fund of New York
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.”)
For example, the HCB has investigated the utilization review Other Entities That Accept and Handle Health Care
practices of eight major health plans: the process by which
health insurers save money by monitoring doctors and other
Complaints: Public and Private
providers to ensure that only ostensibly “medically necessary”
New York State Consumer Protection Board
services are covered. The investigations concerned compliance
with state law provisions requiring, among other things, that
The New York State Consumer Protection Board (CPB) is
companies provide consumers with adequate statements
empowered to coordinate all state agencies performing
and the “clinical rationale” for adverse determinations. The
consumer protection functions. It is also authorized to accept
investigations resulted in settlements, known as Assurances
consumer complaints on any subject. The CPB resolves
of Discontinuance (AODs), with the 8 insurers and a
complaints through informal mediation with companies and
company hired by plans to conduct utilization review. The
making referrals to state and federal regulatory agencies.
AODs established procedures for the defendants to follow
In the 2008-09 year, the CPB received more than 53,000
in the future, including requiring descriptions in adverse
calls to its toll-free bilingual consumer hotline and saved
determinations sufficiently specific to enable enrollees or
New Yorkers more than $1.3 million. The CPB does accept
their providers to determine whether or not to appeal the
health care complaints, but they are not among the highest
determination.27 Further, in February 2008, Attorney General
categories of the agency’s complaints.30 Informal voluntary
Cuomo began an industry-wide investigation involving some
mediation, referral and cooperation with regulatory and
the nation’s largest health insurers, including AETNA, CIGNA,
enforcement agencies such as the Insurance Department
and Wellpoint/Empire BlueCross BlueShield, concerning
and the Department of Law are the CPB’s only options to
allegations that consumers were overcharged for “out-of-
assist individual health insurance consumers, as the CPB is
network” care, resulting in AODs with several insurers.28
not empowered to represent consumers in court.31 Given
the recent establishment of a state consumer assistance
Although court decisions
have held that section As a backup to the office and the active enforcement efforts of NYSID and the
Attorney General, it seems to make the most sense for the
63(12) permits the State Insurance CPB to refer appropriate complaints to these entities rather
Department of Law to Department and the than handling them in-house.
bring court actions on
behalf of health care New York exchange, 5
Consumer Assistance Programs Run by CBOs
consumers for violations of state law should list
federal and state statutes,
as a precaution, the state important health An important means for consumers to receive assistance with
complaints concerning health insurance plans and programs,
implementation statute insurance protections
at least in New York City, has been the consumer assistance
should explicitly provide that the Attorney program directed by the Community Service Society (CSS), a
that the Attorney General
may directly enforce General is permitted New York City-based non-profit organization. CSS will serve
as the state consumer assistance office under the ACA for
certain enumerated to directly enforce. the first year of federal funding, expanding its consumer
sections of the Affordable
assistance efforts statewide in partnership with community-
Care Act on behalf of consumers, along with the state law
based organizations around the state. New York State
provisions on the same subjects. These legal protections
also has a large network of “facilitated enrollers” that help
should include, at a minimum, the provisions concerning:
consumers select and apply for health insurance (see Section
pre-existing conditions, annual and lifetime limits, and
V).
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).
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).

A New Pro-Consumer Health Care System

 IV. 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.
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.
6 regulators or Medicaid agencies while also maintaining good
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).
Public Policy and Education Fund of New York
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 The New York
whether the exchange should exchange should
be a new state agency,
housed at NYSID or another
be a public
existing state agency, or be a authority, with
non-profit entity established strong consumer
or regulated by the state.38
Housing the exchange within representation.
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
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.
To us, that strongly argues for housing the marketing and appointed by the Attorney General.47 We recommend that
regulatory functions in different entities. there be far more than one consumer representative.

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

A New Pro-Consumer Health Care System

 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
The New York
possibility of adverse selection.52 exchange should
be a pro-active
In order to ensure that
consumers comply with these agency, not a
provisions, the New York passive marketer of
exchange also needs to be able
to take effective enforcement
health insurance,
action. Violations of provisions and should be
enforced by the exchange able to exclude
should subject health insurers
to both monetary penalties health plans that
(which can be recovered by sell lower quality
NYSID after receiving a referral
from the exchange) and in
products
the case of serious violations,
8 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).
Public Policy and Education Fund of New York
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
The monetary that are fixed in absolute
dollars has decreased over
penalties for time due to inflation. For
violations of health example, the $500 penalty
in Insurance Law section 109,
care consumer not updated since at least
protections need 1984, should be significantly
to be strengthened increased. Moreover, the
penalties in the Insurance
and updated Law should be made more
to account for consistent to ensure that
the enforcement scheme is
inflation. 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.pdf
60 Id.
61 Public Health Service Act (PHSA) § 2715(f).
a day for each individual affected by any violation.62 Use Street” by identifying illegal practices by major financial
of these standards would result in a significant increase in firms and using them as a mechanism to reach agreements
penalties under the Insurance Law in many instances. providing for systemic changes in company practices.64 And,
as discussed above, Andrew
Strong penalties are almost meaningless if state agencies are The Attorney Cuomo achieved settlements
unable to enforce the provisions of ACA and other insurance General should focus with some the nation’s
consumer protections due to a lack of resources. Insurers largest health insurers, over
will not be deterred from engaging in improper or illegal his enforcement overcharges for “out-of-
conduct if there is an extremely low probability of being efforts on systemic network” care when he was
subject to civil penalties. Complaint data suggests that the practices affecting Attorney General. We need
overwhelming majority of complaints filed with the SID’s the next Attorney General to
Consumer Service Bureau are disposed of without a formal large numbers of continue to play an active role
adjudication, suggesting that current enforcement resources consumers. in policing the health care
are inadequate. SID also states that its resources are strained industry, with a particular
in trying to enforce the new state “prior approval” law, which focus on practices with a broad impact on consumers and
requires insurers to submit premium rate increases for its systemic or industry-wide practices. Attorney General Eric
approval. And these gaps in enforcement resources existed Schneiderman has indicated that he intends to play this role,
before the state will get substantial new responsibilities due promising to focus on issues like medical loss ratios, health
to the ACA. This supports the need for the new Governor insurer premium rates, consumer protections in the state
and the Legislature to increase funding for SID, DOH and the exchange, and denials of care through questionable medical
Department of Law as the law is implemented, even given necessity determinations.65
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 Even in a tight

day-to-day enforcement fiscal climate, 9
of ACA should rest with
NYSID and the exchange, it
state enforcement
is critical that the Attorney agencies need to
General play an active role in be given adequate
this area as well. As already
discussed, recent New York enforcement
State Attorneys General resources to make
have played a major role in
addressing major systemic
the health care law
health care issues affecting work for consumers.
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.
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.

A New Pro-Consumer Health Care System

 V. 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.
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
10 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”).
Public Policy and Education Fund of New York
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”).
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
The state should consumer assistance
give preference to program, including skill at
policy advocacy, ability to
Community Based outreach to consumers and
Organizations to ability to assist consumers
provide the consumer that have Limited English
Proficiency, argue in favor
assistance and of utilizing a consortium
navigator functions of consumer organizations
like CHA over a state
under the ACA. 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 11
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.
A New Pro-Consumer Health Care System
 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.
Steps, like adequate
The state implementation staff training, and the
statute should also ensure
that the office, as a adoption of minimum
private entity discharging service standards
a public function, is fully
accountable. The statute
should be mandated
should mandate that the to make sure the state
office provides adequate consumer assistance
staff training, including
on the ACA, and on state office under the ACA
and other federal health is accountable.
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
12 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).
Public Policy and Education Fund of New York
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.
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 13
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).
A New Pro-Consumer Health Care System
 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.
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).

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
14 number of determinations
which were upheld The State Insurance
or reversed, and Department should
concerning “prompt pay” get broad consumer
complaints.103
input when it develops
The state implementation the new standardized
statute must harmonize
the new federal disclosure consumer disclosure
provision (section 2715A) documents mandated
with the existing state law by the ACA.
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). 106 See, Id., at 19-20 (advising HHS to get extensive consumer input on the
105 NAIC Consumer Representatives Recommendations, at 19. development of federal disclosure requirements).

Public Policy and Education Fund of New York

VI. 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.
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 15
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.
A New Pro-Consumer Health Care System
 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 Reforms need to
increase proceedings, be made to the
amendments to the new
law are necessary to law governing
ensure that consumers can the Insurance
meaningfully participate
in rate proceedings. For
Department’s rate
example, currently tolling review process so that
(i.e., extension of the affected consumers
deadlines within which
NYSID must make its can meaningfully
16
decision and comments participate in rate
may be filed) is only
permitted if NYSID needs
proceedings.
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).
Public Policy and Education Fund of New York
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.
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
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
17

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. 126 Federal Register, Vol. 75, No. 230, at 748890.
125 Insurance Law §§ 3231(e)(1)(B), 4308(c)(3)(A), 4308(c)(3)(B), as amended 127 45 CFR § 158.607(a)(1).
by Chapter 107, Laws of 2010. 128 45 CFR §§ 158.402, 158.403, 158.603.

A New Pro-Consumer Health Care System

 VII. 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.
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,
18 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).
Public Policy and Education Fund of New York
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.
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 19
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).
A New Pro-Consumer Health Care System
 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 As state and federal
for identical amounts enforcement will
for consumer recovery
(namely, actual damages
not be adequate
or $50, whichever is to protect all
greater). Yet, in 2007, the consumers, the new
Legislature only increased
the available damages state implementation
for violations of the false law should allow
advertising provision. There
is simply no justification
consumers harmed
20 for the Legislature to have by serious violations
increased the available of health insurance
damages for only one of
these parallel statutes. It protections to
may have been an oversight, recover their
and should be corrected by
the Legislature.146
damages in court.
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.
Public Policy and Education Fund of New York
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.
VIII. Consumer Fairness: Reducing Racial and Ethnic Health Care
Disparities
In order to ensure that health insurers and health care influence some consumers to select competing institutions;
institutions are held accountable for addressing health the possibility of this happening provides an incentive
care disparities, a single office in the State Department for institutions to improve. The state could also consider
of Health should be assigned to oversee the collection developing further enforcement mechanisms against entities
of health disparities data - both the data required to be that fail to reduce health disparities and incentivizing
collected under the ACA and additional state requirements. institutions with good records in this area.
The State should use this information to develop ways to
reduce disparities. This data should be made available to We agree with New York Lawyers for the Public Interest
the public in an easy to use format at no charge. that a single governmental office should be responsible
for assembling all health equity measures.154 In our view,
Overwhelming evidence exists that, both nationally and in this includes data required to be collected under ACA, the
New York, racial and ethnic minorities receive a lower level disparities data already required to be collected under state
of care and have poorer health outcomes.150 Disparities also law, and any additional requirements that are enacted by the
exist by gender, primary language and disability status. ACA Legislature as part of the state implementation statute.
has limited provisions to address health care disparities. Most
significantly, ACA provides that by March 23, 2012, HHS must However, it may not be practical for one entity to directly
ensure that “any federally conducted or supported health collect all disparities data from regulated entities. Instead, one
care or public health program, activity or survey [including state office, which we will call the “state disparities collection
the American Community Survey conducted by the U.S. agency,” should be empowered to establish a standardized
Census]… collects and reports, to the extent practicable” data collection program that compiles disparities data from
data on “race, ethnicity, sex, primary language, and disability all sources into a format available to the public. The agency
status for applicants, recipients, or participants.” Data should also have the authority to mandate that additional data
must be collected “at the smallest geographic level such as be collected beyond the information required to be collected 21
State, local or institutional levels.”151 HHS is also required by statute. A single entity - especially with staff specifically
to establish collection standards that include self-reported assigned to data collection and oversight - would “ensure
data by applicants, recipients, or participants, including from transparency, accountability and efficiency” and could focus
parents or guardians if the applicant, recipient, or participant public attention on health care disparities and mechanisms
is a minor or legally incapacitated. Special provisions exist to combat it.155 The State Department of Health (DOH) is
for disabilities, including the locations where individuals the most logical agency
with disabilities access primary, acute and long term care Health disparities to perform this function;
and the number of providers with accessible facilities and the Department’s Office
equipment.152 HHS is also mandated to establish standards data collected of Minority Health (OHM)
for data analysis and to analyze the data to detect and under state and and other DOH divisions
monitor trends in health disparities. HHS must make the
data available to various entities, including the federal Office
federal law should are already charged with
collecting some disparities
of Minority Health, and report the data on HHS’ Internet be easily available data.156
website and in other locations. Finally, the data must be made to consumers on
available to federal agencies, non-governmental entities, and The state implementation
the public.153 the Internet at no statute should also have
charge, so that provisions for public
In order to ensure that disparities are addressed in New York, dissemination of disparities
the state implementation statute should contain provisions
consumers can use data. At a minimum, the
to ensure that the new federal data is made fully accessible it to choose health data should be available
to state agencies, non-profits and other interested parties in plans and health care in an easy to use format
a form that is clear enough to enable the development of on the Internet, and data
solutions to health care disparities. Standardized data is also institutions. applicable to health insurers
a means to hold health plans and health care institutions should be summarized in
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).
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).

A New Pro-Consumer Health Care System

 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
22 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.

Public Policy and Education Fund of New York

IX. Summary of Recommendations

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.

A New Pro-Consumer Health Care System

 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
24 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:
Public Policy and Education Fund of New York
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.
Consumer Rights: Appeals of Health Plan Decisions Consumer Fairness: Reducing Racial
and Additional Consumer Remedies Health Care Disparities
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.
and Ethnic
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 25
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.
A New Pro-Consumer Health Care System
 X. Conclusion

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.
26
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.

Public Policy and Education Fund of New York