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New York, October 30, 1997

Attorney General Dennis C. Vacco and State Insurance Superintendent Neil D. Levin announced today they have reached a major settlement on late payment problems with The Health Insurance Plan of Greater New York Inc. (HIP).

The agreement resolves a joint investigation by Attorney General Vacco and the Insurance Department into payment problems that at their peak in 1995 reached 450,000 outstanding claims amounting to millions of dollars.

"This agreement will allow consumers to recoup financial losses stemming from the late payments by HIP," said Attorney General Vacco. "Due to the late payments, some consumers were actually dunned by collection agencies for fees that should have been paid by HIP. Now it's time for HIP to pay the piper."

The costs that will be reimbursed by HIP could range from collection and attorney fees, court costs, interest and other related fees assessed against members who were dunned as a result of not receiving payments in a timely fashion.

"It is clear that HIP failed to pay consumers' claims or make payments to doctors and hospitals in a timely fashion for a significant period of time," said Superintendent Levin. "This is unacceptable. Through this agreement reached with the Insurance Department and Attorney General Vacco, not only will HIP promptly pay overdue claims, but the company will also pay subscribers costs if they have suffered financial loss due to HIP's delay in payment."

The agreement will also require HIP to maintain adequate procedures for the future prompt handling of claims. Future "clean" claims (those that are not subject to challenge or audit by HIP payment agents) that are not paid within 45 days will be subject to a 12 percent annual interest charge.

HIP, with about 800,000 members in New York State, mainly in the Metropolitan New York area and on Long Island, will also pay the State $75,000 to cover the cost of its investigation.

The joint investigation found that between July 1994 and December 1996, HIP had experienced significantly delays in the processing of claims from both subscribers and providers -- sometimes as long as several years.

In some cases, HIP even denied receiving claims.

HIP claimed the problems were a result of difficulties with its conversion to a computerized processing system.

"That explanation is simply insufficient. HIP now has to make up for business practices that were deceptive and unfair to consumers," said Attorney General Vacco.

"The Pataki Administration will continue to aggressively pursue any HMO or insurance company that fails to make prompt payment to consumers, health providers or hospitals," said Superintendent Levin. "The Governor's bill, which requires prompt payments and imposes significant penalties on companies that don't comply with the law, sends a strong message that these practices will no longer be tolerated. We look forward to continuing to work closely with Attorney General Vacco on these matters."

Consumers will be able to get a letter from HIP for submission to credit bureaus acknowledging that HIP was responsible for the payments of claims and that the delay in payment was not the fault of the individual subscriber.

HIP denied any wrongdoing in entering into the agreement.

Department of Financial Services


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