Health insurer reaches $3.5 million settlement over out-of-network disclosures

Group Health Inc. ("GHI"), a subsidiary of EmblemHealth, Inc., New York's largest health insurer, has reached a settlement with New York regulators that requires improved plan disclosures for out-of-network provider benefits to those members who sign up for GHI's comprehensive benefits plan ("CBP").

The settlement also requires that GHI establish a $3.5 million consumer assistance fund to provide financial relief to members, most of them New York City employees, and pay $300,000 in penalties to the New York attorney general's office.

"Because GHI failed to adequately disclose its out-of-network benefits, individuals and families across New York City lost out on millions of dollars in reimbursements. Consumers need to have accurate information in order to make informed decisions when selecting their health plans," Attorney General Eric T. Schneiderman said. "By improving communications describing the out-of-network benefit, GHI is committing to helping members and prospective members make important decisions concerning their health care coverage and treatment. Health insurance companies owe it to their members to be transparent about the costs members will incur. Those costs, no matter how big or small, must not be unexpected."

The attorney general said that his office's Health Care Bureau opened an investigation into GHI in 2013, after receiving numerous consumer complaints. The investigation focused on GHI's CBP, one of several health plans offered to New York City employees and retirees. Historically, the CBP has been offered at no cost to employees. The CPB also appeals to employees because the plan includes an out-of-network benefit, which allows plan members to seek care from doctors who are not in the plan's provider network. However, the CPB's reimbursement rate for out-of-network providers is tied to a 1983 fee schedule that has rarely been updated, and thus rarely covers – or comes close to covering – the amount billed, according to the attorney general's office.

The settlement requires that GHI make the fee reimbursement schedule accessible and transparent to members and prospective members.

The attorney general's investigation found that the disclosures regarding the out-of-network benefit were inadequate to apprise members and prospective members about low reimbursement rates and the potential of facing large balance bills from out-of-network providers. New York regulators said that, for example, the plan did not adequately describe that services at an in-network hospital might be performed by out-of-network providers and the likelihood that the member would incur substantial out-of-pocket expenses for that work.

In addition, according to state regulators, in many instances, GHI's materials did not accurately set forth the potentially wide gap between the out-of-network reimbursement and out-of-network charges, and potentially substantial out-of-pocket amounts for which GHI Plan members will be responsible. Regulators noted that, for example, if a CBP member sought a hip replacement in Queens, New York, from an out-of-network provider, the estimated charge was $7,375. Under the plan benefit, the reimbursement rate was $2,732 and the member was responsible for the difference. If a member saw an out-of-network provider for a 25-minute outpatient office visit, the estimated charge in Manhattan for this service was $247. CBP's hard-to-find reimbursement rate was $36, according to the attorney general's office.

The government said that its investigation revealed four overall problematic areas for consumers in that GHI's communications did not adequately explain:

how members can access the reimbursement schedule;
the financial consequences of using out-of-network providers;
the circumstances by which members may unknowingly encounter out-of-network providers; and
the frequency with which the out-of-network reimbursement schedule is updated.

The settlement requires GHI to modify its communications regarding the CBP so consumers are presented with clear information as to how to obtain out-of-network reimbursement rates from GHI in advance of receiving services; the likelihood plan members will incur substantial out-of-pocket expenses when out-of-network providers are used; that in the context of a hospital admission, services may be provided by out-of-network providers (even if the facility is in-network and some or many of the other providers are in-network) and the member would incur substantial out-of-pocket expenses; and that the out-of-network fee schedule was based on 1983 procedure rates that have not been increased since that time.

The settlement also provided that GHI will:

Create a web portal that provides information on how much GHI will reimburse members for services provided by out-of-network providers;
Assist members who contact GHI prior to receiving pre-scheduled medical procedures in finding participating providers so that the members can stay in-network;
Assist members who seek help from GHI for balance bills from out-network providers, including collections and legal actions, so members are held harmless for those bills;
Update its member complaint policies and practices so as to increase functionality that will permit GHI to better log, search, and prepare electronic reports regarding out-of-network services; and
Train its staff and modify its out-of-network services practices, procedures, and policies in order to fully comply with the requirements of the settlement, and to prepare new training materials, together with a specific script for customer service, for approval by the attorney general's office.