State Of New York Fines Capital District Physicians Health Plan $600,000, Directed To Review Denied Claims

Insurer Failed to Explain Benefits Process and Appeal Rights

Albany, NY  (CompNewsNetwork) - Capital District Physicians Health Plan (CDPHP), an Albany, New York based health maintenance organization (HMO), and CDPHP - Universal Benefits, Inc., an affiliated health insurer, have been fined $600,000 because they failed to advise consumers how to appeal when their claims were denied, Insurance Superintendent Eric Dinallo announced today.

“The Insurance Department has directed CDPHP and UBI to contact all members who were denied claims in situations where the companies failed to provide Explanation of Benefits (EOB) notices, or provided inadequate EOB information,” Superintendent Dinallo said.

The companies have agreed to contact members who filed claims for health care services to make sure they received proper denial notices. The settlement includes 121,911 claims submitted between 2004 and 2006. CDPHP and UBI cover more than 400,000 people in 29 New York counties in the central and eastern parts of the state.

“These notices are required by law and they give consumers important information regarding coverage under insurance policies. For example, an EOB spells out how a claim has been processed, what costs are covered by the insurer, what costs must be paid by the member, and specifically what steps a consumer can take to appeal the denial of a claim.”

“The right to appeal the denial of claims is one of the most important protections that consumers have today, but it isn't as meaningful if people are not told of their rights by the company. This is yet another example of how important it is for vigorous consumer protection in the private insurance marketplace. We also support the Insurance Department in its efforts to reinstate prior approval of health insurance rates,” said Karen Scharff, Executive Director of Citizen Action of New York, a statewide consumer group.

CHPHP members who receive reissued EOBs will be able to appeal previously denied claims if they have not already done so. CDPHP will be responsible for paying interest to members if additional payments are made in connection with these claims.

The deficiencies in the EOBs were uncovered in an examination of the insurer's practices covering a period from 2001 through the first quarter of 2006. The Department said the deficiencies were specifically related to the insurer's EOBs and notice of appeal rights and not with the company's appeals process procedures.

The Department has directed CDPHP to review its procedures and submit a plan for improving its compliance with EOB requirements. The plan must be submitted to the Department within 90 days.

The insurer was also found to have sent rate increase notices to consumers containing inaccurate information as to rate increases and falsely suggesting that the Department had approved the increases. Under current law, health plans like CDPHP are permitted to increase rates without the prior approval of the Insurance Department. The Department has urged the Legislature to restore its ability to approve or disapprove such increases before they are put in place by health insurers.

Other violations by the insurer included failing to use a licensed claims adjuster to negotiate out-of-network provider claims, instances of failing to adjudicate claims in a timely manner, and instances of claims adjudication errors.

The complete reports on the examination of CDPHP and UBI are available on the Department's website, www.ins.state.ny.us. Consumers may access information on the Department's website, or contact the Department's Consumer Services Bureau toll-free at 1-800-342-3736 if they have questions about EOB notice requirements or their rights to appeal the denial of claims.

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