The Fiscal Practices Of HMOs In NYS

 

Background:
Last year, Senate Democrats commissioned an independent study by a well-known actuary to look at HMO profits in New York State. Frankly, we were amazed by what the study revealed. While consumers are paying higher premiums, higher copays and higher deductibles for health care coverage, they are receiving dramatically less coverage for their money. Today, HMOs in New York are reporting massive profits – profits that in part have come at the expense of working people, small business owners, and state and local taxpayers.

What did the study reveal?
Health insurance premiums continue to increase. Last year the costs of premiums paid by workers and their employers was up 6.1 percent, while wages rose an average of 3.7 percent and inflation went up 2.6 percent. Our analysis of New York’s HMO industry shows that between the years 2001 and 2005, while consumers coped with escalating premiums, profits for the health maintenance insurance industry soared by 93 percent– jumping from $672 million in 2001 to $1.3 billion in 2005.

During this five-year time period, HMOs lost about 14 percent of their insured. They also paid less of each premium dollar collected to health care providers, down from 85.3 percent in 2001 to 81.7 percent in 2005. And while HMOs were doubling their profits and losing one of every seven customers, their administrative and claims adjustment expenses went up by 24 percent.

What contributes to this growing inequity?
HMOs have essentially been left unregulated since 1999, and been allowed to increase premiums as they see fit, far in excess of what they need to cover increases in their costs. Since 2000, Senate Democrats have consistantly proposed legislation to return the regulation of HMO rates to the State Health Department. Without taking decisive action, insurance costs are projected to continue rising, likely leading to even more New Yorkers joining the ranks of the uninsured.

Public hearing to address a health care crisis
We are in the midst of a very real health care crisis in New York State. Health care is too expensive and still unavailable to too many New Yorkers. We have to wonder what happened to the 14 percent of people who dropped their HMO coverage during the five year study period– were they forced to join the ranks of New York’s 2.8 million uninsured? HMOs can and should be part of the solution, not part of the problem. They must act as responsible partners to the people of New York State.

On October 31, 2007, I conducted a public hearing in Rochester where health care professionals and other interested parties engaged in an open dialogue on issues related to HMO profitability. The recommendations formulated that day will provide the groundwork for future public policy discussions.

A summary of the information presented in Rochester includes:

List of Testifyers:
Dr. Leslie Algase, President, Monroe County Medical Society
Reinaldo Cardona, MSSW, LCSW, National Association of Social Workers
Dr. Jim Gaden, Private Physician
Robert Ostrander, Private Physician
Tom Gillett, BALCONY, NYSUT
Dr. Leon Zoghlin, Physicians for a National Health Plan
Dawn Cortez McKee, National Autism Association
Gretchen Schauss, Consumer Advocate

Monroe County Medical Society:
The Monroe County Medical Society recommended the following:

•Establish an external grievance process for providers and consumers whereby
penalties are created for insurance companies related to denied claims and inadequate
reimbursement.

• Require reviewers of insurance claims to have experience in a given medical specialty.

• Authorize the State Insurance Department to pre-approve insurance companies’ prior-
authorization policies.

• Allow collective bargaining among independent practices. Currently anti-trust law
prohibits this practice.

Mental Health:

• The National Association of Social Workers recommends that the Legislature closely
examine the reauthorization of the New York State Empire Plan in order to assure that
mental health providers are treated adequately and fairly.

• Most insurance companies that cover mental health services limit coverage to 20 visits
per year. Limitations on the number of services is often arbitrary, reducing the quality of
care provided.

• Despite the passage of Timothy’s Law, coverage issues continue to exist for mental
health services. Timothy’s Law presents numerous loopholes and exclusionary clauses
and does not include preventative services.

• The National Autism Association noted that there is insufficient coverage for treatment
of autism. Insurance companies deny claims on the grounds that treatments are
experimental and non-restorative.

• Parents of autistic children must provide continual care totaling $100,000 in direct and
indirect costs per year, totaling over $10 million during a lifetime.

Physicians Serving Rural and Underserved Communities:

•The structure of insurance payments is an extreme burden for providers. In the past,
consumers would research which insurance company provided adequate reimbursement
for their health needs. In today’s insurance market, consumers have become less
selective in choosing their insurance. As a result, if a service is not covered, physicians
must absorb the cost.

• Physicians argue that denials have little to do with medical need. If a service is covered, it
is often at the third level of appeal.

• Medical students avoid entering family practice because of the inability to service medical
school debt. Research shows that medical students from underserved communities are
more likely to enter the practices primary care and family medicine.

Policy Recommendations:
Following is a summary of policy recommendations promoted by various testifiers at the hearing:

• Establish an external grievance process with penalties for insurance companies.

• Require reviewers of insurance claims to have experience in a given medical specialty.

• Authorize the State Insurance Department to pre-approve insurance companies’ prior-
authorization policies.

• Allow collective bargaining among independent practices.

• Address various loopholes and exclusionary clauses in Timothy’s Law.