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 1   NEW YORK STATE INSURANCE DEPARTMENT
 2   ---------------------------------X
 3   In the Matter of:
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 5   LIMITED BENEFIT HEALTH PLAN HEARING
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 7   ---------------------------------X
 8   
 9                         New York State Insurance
10                         Department
11                         25 Beaver Street
12                         New York, New York
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14                         Monday,
15                         September 21, 2009
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17           The above entitled matter came on 
18   for hearing at 10:07 a.m.
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 1   A P P E A R A N C E S :
 2   
 3        MITCHELL GENNAOUI
 4   
 5        DANIEL GUMAER
 6   
 7        D. MONICA MARSH
 8   
 9        IVAN LAFAYETTE
10   
11        EUGENE BIENSKIE
12   
13        JOE FELDMAN, Audiographer
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 1               P R O C E E D I N G S
 2              MR. GENNAOUI:  Good morning.  Can
 3        everyone hear us well?
 4              Welcome to the first of three hearings
 5        being conducted by the New York State
 6        Insurance Department to gather information
 7        about limited benefit health insurance
 8        policies.  Thank you all for taking the time
 9        to attend this hearing, and we look forward to
10        hearing your testimony today.
11              I will begin by introducing our panel.
12        Starting with myself, my name is Mitch
13        Gennaoui.  I am the deputy superintendent with
14        charge over the consumer services bureau.
15              To my right is Mr. Daniel Gumaer, and he
16        is a supervising insurance examiner with the
17        life bureau.
18              To my left is Monica Marsh, who is the
19        supervising attorney with our office of
20        general counsel.
21              And we have Mr. Ivan Lafayette.  He is
22        deputy superintendent for community affairs.
23              And lastly, we have Eugene Bienskie.  He
24        is assistant deputy superintendent and chief
25        of the consumer services -- chief of the
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 2        health bureau.
 3              The purpose of these hearings is to
 4        gather information about the limited benefit
 5        health insurance plan, with the goal of
 6        assessing their value in the marketplace and
 7        measuring the extent of any concerns about
 8        these products or harmful practices associated
 9        with the solicitation and sale of these
10        policies.
11              While the impetus for these hearings
12        have been the recent finding of deceptive
13        marketing of this product, our assessment
14        needs to value both the advantages of this
15        product to the consumer as well as any
16        shortcomings this product or its marketing
17        could have for a consumer.
18              These hearings are part of a process
19        that will evaluate the need to undertake
20        regulatory action related to limited benefit
21        health insurance products and the marketing
22        and sales of these plans.  Such actions may
23        include issuing circular letters for
24        interpretive guidance on existing regulation,
25        the promulgation of new department regulation,
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 2        or the introduction of proposed legislation to
 3        the New York legislature.
 4              In making its determinations, the
 5        department is particularly interested in the
 6        following issues:  The role of limited benefit
 7        health insurance plans in the New York
 8        marketplace and the advantages that this
 9        product offers to the consumer, the extent of
10        any concern related to the misrepresentation
11        of the benefits of these policies in the
12        marketing and sale of this product, the
13        marketing and sale of this product by
14        unlicensed individuals, whether the proper
15        disclosures that are required by law are being
16        executed and that they are being done so at
17        the appropriate time, concerns related to the
18        requirement for consumers to join associations
19        or groups for the sole purpose of obtaining
20        health insurance and how consumers are
21        affected by these groups; whether additional
22        oversight and regulation is needed to protect
23        the consumer, from strengthening advertising
24        rules and disclosure requirements to
25        restricting or prohibiting the sale of such
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 2        policies.
 3              We welcome your oral testimony today,
 4        and we will value any written testimony you
 5        may wish to provide.  I am going to go over
 6        the hearing procedures for those of you who
 7        wish to speak or wish to submit oral
 8        testimony.
 9              If you would like to speak but have not
10        yet registered, please register with the
11        department representatives at the back of the
12        room.
13              We will be accepting any written
14        comments until October 30, 2009.  All
15        comments, both oral and written, will be made
16        part of the public record.  Written comments
17        may also be sent via e-mail or through regular
18        mail.  There is more information on where to
19        send your comments on our website,
20        WWW.INS.STATE.NY.US, or you can get more
21        information from the department
22        representatives at the back.
23              The stenographer will be taking a
24        verbatim transcript of today's hearing.
25        Speakers will be called in the order shown on
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 2        the agenda.  If you miss your turn, you will
 3        be able to speak at the end.
 4              Please step up to the microphone when
 5        you see your turn coming up.  Please be
 6        concise and limit your oral comments to 15
 7        minutes, so everyone gets a chance to speak.
 8              In order to help with time management,
 9        we will indicate when you have five minutes
10        left to speak and again when there is one
11        minute left.
12              Please do not just read your written
13        comments aloud.  We will read all written
14        submissions.  Use your allotted time to
15        highlight the most important points of your
16        submission.  Your testimony must address only
17        issues outlined in the hearing notes.
18              Members of the audience, please be
19        courteous and do not interrupt speakers.
20        Everyone here has taken the time to share her
21        or his views and deserves to be treated with
22        respect.
23              The panel may choose to question the
24        various participants.  Please do not attempt
25        to interfere -- to infer any positions or
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 2        leanings on behalf of the department, based on
 3        the questions we ask or choose not to ask.  We
 4        have not made any decisions about what actions
 5        the department will take, if any.  Our
 6        questions and statements today are designed to
 7        facilitate and open a discussion of the
 8        issues.
 9              Once again, thank you for coming and for
10        your input today.  We had two individuals who
11        were going to testify this morning, and
12        unfortunately their schedules would not allow
13        that testimony, so we have decided to read
14        their testimony into the record.
15              Mr. Gumaer will read first.
16              MR. GUMAER:  This is from Mary Cranon,
17        who represents the United States Association
18        For Health Care, hereinafter referred to as
19        USA Plus.  She is the executive director.
20              "Thank you for the opportunity to
21        provide public comments on the upcoming public
22        hearing regarding limited benefit health
23        plans.  USA Plus is a nonprofit corporation
24        chartered in Washington DC in 1983.  The
25        organization was formed to promote the
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 2        adoption of equitable health care policy in
 3        the United States, engage in nonpartisan
 4        research, study and analyze for the benefit of
 5        the general public regarding the health care
 6        system of the United States and, on occasion,
 7        publish the results of our research.
 8              "USA Plus is committed to the promotion
 9        of equal access to health care for all
10        Americans.  We assist charitable, educational
11        and social welfare organizations in the
12        conduct of similar activities.  Our foundation
13        has donated nearly $7 million to charities,
14        including the American Diabetic Association,
15        Cystic Fibrosis Foundation, Muscular Dystrophy
16        Association and St. Jude's Children's Research
17        Hospital, to name just a few.
18              "USA Plus provides home, travel, health,
19        entertainment, scholarship and other benefits
20        to its members.  One of the benefits of
21        membership includes coverage under a group
22        limited benefits policy, which is sold by
23        licensed insurance agents.  The agents that
24        market the USA Plus membership will typically
25        attempt to write a health insurance
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 2        application on an individual or family.
 3        Unfortunately, one or more of those
 4        individuals will not qualify for the health
 5        insurance or cannot afford it, so the USA Plus
 6        program is offered.  All of our other
 7        marketing materials include disclaimers that
 8        the limited benefit insurance is neither a
 9        substitute nor replacement for major medical
10        insurance, preexisting limitation, and terms
11        and conditions.
12              "After a sale has been completed and
13        submitted by an agent, members of our staff
14        contact the member to discuss the product
15        purchased to ensure the member understands the
16        benefits and to again reiterate that the
17        USA Plus program is not a substitute or
18        replacement for major medical insurance.
19              "The bottom line is that these programs
20        serve a specific market:  Individuals that
21        simply cannot afford health insurance or they
22        have been rejected by insurers, due to health
23        history.  And although many states have high
24        risk pools, many individuals find the premiums
25        unaffordable.
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 2              "The rising cost of health insurance,
 3        coupled with the increased number of
 4        uninsureable Americans, has created an
 5        opportunity for some individuals to exploit
 6        unsuspecting consumers by promising that the
 7        limited benefit plan being sold is real health
 8        insurance, and some have even placed HIPAA
 9        compliant seals on their advertising materials
10        and websites.  Although these claims should
11        seem obviously too good to be true,
12        unfortunately, individuals that are desperate
13        for insurance fall prey to these scams.  These
14        fraudulent acts should be stopped, and good
15        practices up front can prevent a
16        misunderstanding and mitigate complaints from
17        consumers when claims are incurred.
18              We respectfully suggest that the
19        department consider requiring an organization
20        that offers a limited benefit plan should be
21        required to disclose the following to members
22        at time of sale:  One, preexisting
23        limitations.  Two, the limited benefit plan is
24        neither a substitute nor replacement for major
25        medical insurance.  Three, the limited benefit
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 2        plan may not qualify as credible coverage
 3        under HIPAA.
 4              "This action will prevent fraudulent or
 5        misleading advertising and provide consumers
 6        with adequate protections.  The insurance
 7        products themselves are already regulated by
 8        the department, and we do not believe
 9        additional legislation is required in that
10        regard.
11              "We trust that the department will
12        determine that limited benefit health plans
13        play a role in the marketplace.  We appreciate
14        the opportunity to make these comments and
15        look forward to working cooperatively with the
16        department.  Kindly include me in any further
17        interested parties communications on this
18        issue.  Thank you."
19              MR. GENNAOUI:  The second testimony will
20        be given by Mr. Bienskie.
21              MR. BIENSKIE:  Thank you, Mitch.
22              The testimony that was given to us in
23        writing was from Kathleen Shure, who is senior
24        vice president of the managed care insurance
25        expansion for Greater New York Hospital
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 2        Association.  This is her written testimony.
 3              "GNYHA represents nearly 250 hospitals
 4        and continuing care facilities concentrated in
 5        the New York City region but also located
 6        throughout New York State, New Jersey,
 7        Connecticut and Rhode Island.  All the GNYHA's
 8        members are either not-for-profit, charitable
 9        organizations or publicly sponsored
10        institutions that provide services ranging
11        from state of the art tertiary services to
12        basic primary care necessary to support their
13        surrounding community, many of which are
14        medically undiscerned.  GNYHA members and
15        their affiliated medical schools also provide
16        extensive medical education and training and
17        undertake cutting edge medical research,
18        benefitting patients all over the world.
19              "I appreciate the opportunity to testify
20        today on the subject of limited benefit health
21        insurance plans and commend Governer Paterson
22        and the New York State Insurance Department
23        for exploring this important topic."
24              MR. GENNAOUI:  Gene, Ms. Shure did just
25        arrive.  It would be best if she continued her
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 2        testimony.
 3              MR. BIENSKIE:  Okay, Ms. Shure, I
 4        apologize.  Here I am, going on a hundred
 5        miles an hour.  Forgive me.
 6              Do you want your testimony?
 7              MS. SHURE:  Where did you leave off?
 8              I actually didn't intend to read it.  I
 9        thought I would just go over kind of the high
10        points.
11              I am Kathleen Shure from Greater
12        New York Hospital Association.  We are not
13        entirely clear what the scope of the problem
14        is here.  We know there is a problem with
15        these benefit packages, but from our
16        perspective as hospitals, it's not clear what
17        the volume is, in terms of the number of
18        people that are covered under these types of
19        policies.
20              We do know, from your information that
21        was provided during the hearing, that there is
22        a big issue with how these policies are
23        marketed and whether or not people really
24        understand the coverage that they have when
25        they are covered under these policies.  And
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 2        although that's a problem that needs to be
 3        addressed, needs to be monitored, we think
 4        that the bigger problem is that the policies
 5        themselves don't provide adequate coverage.
 6              From our perspective, they don't really
 7        represent insurance.  The basic purpose of
 8        insurance is to provide protection against
 9        catastrophic expenses, in the event of
10        whatever you are being covered for, and these
11        policies, by definition, don't do that.
12        Instead they provide protection for insurers
13        from catastrophic expenses, but not for the
14        consumers that are covered under the policies.
15              In terms of how we perceive this as
16        hospitals, there is clearly a ripple impact
17        when consumers are left, our patients are left
18        with high medical debt.  Whether or not they
19        understood the coverage that they have or not,
20        they frequently cannot pay that debt.  And
21        then what happens is frequently the hospitals
22        are left uncompensated for the care that they
23        provide.
24              Right now New York State hospitals
25        provide $1.6 billion a year in uncompensated
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 2        care, and that's a combination of charity care
 3        and bad debt.  One of our concerns is that
 4        this number is increasing, and there has also
 5        been a change in state policy with respect to
 6        how they will cover uncompensated care.
 7        Hospitals have always been partially
 8        reimbursed for the uncompensated care that
 9        they provide.  Probably about half of it does
10        get covered through a state pool.  Over the
11        years that has been a combination of --
12        uncompensated care is charity care and bad
13        debt.  More of it has been bad debt than
14        charity care, but the line has been blurred
15        between the two definitions.
16              But the state has changed its policy,
17        starting this year, and basically has said,
18        since we have limited funds to cover
19        uncompensated care, we want to focus it on
20        services provided to people that are
21        uninsured.  So they have basically said going
22        forward we are going to reduce the coverage
23        for bad debt.  We want to separate it out.
24        And when you report it to us, we want to first
25        cover charity care and then, to the extent
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 2        there is dollars left over, we will cover bad
 3        debt.  That's being phased in over a period of
 4        time.  It began this year.
 5              The concern we have is that at the same
 6        time that's happening, bad debt is increasing.
 7        One thing that we have noted is just the
 8        increase in not necessarily these policies
 9        because, again, it's hard for us to figure out
10        what the scope of this coverage is, but high
11        deductibles are increasing.  High deductible
12        health plans are increasing.
13              The Kaiser Foundation just came out with
14        their employer benefit survey, and in that
15        survey report they indicate in the last three
16        years the percentage of population covered
17        with high deductible policies, with
18        deductibles from at least a thousand dollars,
19        has gone from three percent to 13 percent.  In
20        just three years that is a big increase.
21              And people in this economy don't have
22        the money to cover the bills, when they get
23        those high deductibles.  So as we see bad debt
24        increasing, as we see these policies
25        increasing, as we are in the middle of a
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 2        national debate on what coverage should be, we
 3        think we need to be very careful about what
 4        kind of policies that we sort of promote going
 5        forward.
 6              We know that employers, because of
 7        rising health care costs, have turned to
 8        policies that push more costs onto insureds,
 9        and that is a concern to us.  We are
10        encouraged by some of the national debate, in
11        terms of establishing standards for benefits
12        going forward and establishing basically an
13        essential benefits plan or minimum benefit
14        plan that would cover a set actuarial value of
15        set health care costs.  That, to us, is the
16        way to go.  And we would be concerned about
17        whether or not these type of policies actually
18        replace policies that have more comprehensive
19        coverage, and we certainly wouldn't want to
20        see that happen.
21              So those are our main concerns in
22        looking at these policies, but again, as I
23        said earlier, from our perspective we haven't
24        seen a whole lot of them here in New York.
25        You probably know a lot better than I do
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 2        whether or not this is becoming an increasing
 3        source of coverage for people.  It does
 4        happen, but it hasn't been a major source of
 5        bad debt, as far as we can tell.
 6              MR. GENNAOUI:  Thank you.
 7              Are you hearing from your members that
 8        the individuals that have these limited
 9        benefit plans believe that the plans have more
10        extensive coverage?
11              MS. SHURE:  I think the bigger problem
12        is they may understand the basic benefits that
13        they have.  I think people are unaware of what
14        the true cost of medical care is, so they may
15        think they have a policy that covers several
16        hundred dollars a day in the hospital and not
17        realize that the cost of care they receive in
18        the hospital is a multiple of that.  So I
19        think that's a basic problem in them
20        understanding how much of their core care is
21        going to be covered.
22              MS. MARSH:  What percentage of your
23        patients would you say have this kind of
24        policy that you have seen?
25              I know you have said not much.  What
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 2        percentage would you say who are --
 3              MS. SHURE:  I don't know.  We don't know
 4        that.
 5              We do know that bad debt is increasing,
 6        but that's not because of this.  That's
 7        because of a lot of other things going on.
 8              MR. GENNAOUI:  Thank you very much for
 9        your testimony.
10              MS. SHURE:  Thank you.
11              MR. GENNAOUI:  Linda, do we have any
12        more speakers scheduled?  Any more speakers
13        scheduled?
14              LINDA:  No.
15              MR. GENNAOUI:  These hearings are part
16        of a process.  That process began, I would
17        say, six to eight months ago when we began to
18        receive complaints in the department about
19        misleading and deceptive marketing of limited
20        health insurance plans.
21              We began several investigations of at
22        least two insurance companies that were
23        selling this and several producers that were
24        doing the marketing for those companies.  This
25        hearing was -- these hearings are to solicit
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 2        additional information from as broad a
 3        spectrum as organizations and industry players
 4        as we can put together, and I notice that our
 5        attendance roster did show that.  So we
 6        encourage anyone here who would like to come
 7        up to the podium to say a few words from their
 8        perspective.  We would appreciate any comments
 9        they may have.  And if you are not prepared
10        today, we do have two more hearings, one on
11        September 24 in Newburgh and one on September
12        30 in Rochester, New York, where you can make
13        your presentations at those two hearings.
14              We also encourage you to submit any
15        written testimony, as I mentioned earlier.
16        The information concerning all of this is on
17        our website.  Anyone else interested in
18        stepping up and commenting today?
19              Thank you very much for attending, and
20        that's it for our testimony today.
21              Thank you.
22              (Time noted:  10:29 a.m.)
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 1                C E R T I F I C A T E
 2   
 3   STATE OF NEW YORK   )
 4                       ) ss.
 5   COUNTY OF NEW YORK  )
 6   
 7              I, YAFFA KAPLAN, a Notary Public within
 8        and for the State of New York, do hereby
 9        certify that the within is a true and accurate
10        transcript of the proceedings taken on
11        September 21, 2009.
12              I further certify that I am not related
13        to any of the parties to this action by blood
14        or marriage and that I am in no way interested
15        in the outcome of this matter.
16              IN WITNESS WHEREOF, I have hereunto set
17        my hand this ______ day of October, 2009.
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20                      _____________________________
21                      YAFFA KAPLAN
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