DiNapoli Calls for Transparency From Companies Regarding Affordability Concerns

The New York State Common Retirement Fund has filed shareholder proposals with portfolio companies from credit card issuers to health care providers, to challenge business practices that may impact shareholder value, hurt consumers, and raise affordability concerns, New York State Comptroller Thomas P. DiNapoli, trustee of the Fund, announced today.

"Consumers are being squeezed financially and that, in turn, is threatening long term shareholder value," DiNapoli said. "The affordability crisis is very real. We are actively tackling risks around problematic practices ranging from predatory pricing to the improper denial of health care coverage. As an investor, we need to know how companies in the Fund's portfolio are addressing these issues and what they are doing to protect the public and their own business interests."

DiNapoli's actions come when affordability issues are under heightened scrutiny from regulators, policymakers, the media and the public. Certain business practices that may adversely affect affordability may expose companies to various regulatory, financial, legal, and reputational risks.

Surveillance Pricing

DiNapoli filed shareholder proposals requesting a surveillance pricing transparency report with credit card companies American Express Co. and Mastercard Inc. Both proposals were withdrawn following productive engagements in which the companies clarified that they did not offer surveillance pricing products or services. DiNapoli also wrote to Visa Inc., the second largest credit card issuer, and Capital One Financial Corp., owner of the Discover credit card network, about surveillance pricing. Capital One stated that it does not use surveillance pricing either. The Fund is awaiting Visa's response.

Surveillance pricing is the practice of using individualized consumer data (such as identity, credit history, or browsing history) to charge different prices to customers for the same product. This largely opaque practice may create business, regulatory, legal, and reputational risks for companies that engage in it. The current FTC chairman in voicing his concern noted that the data used in surveillance pricing includes "some of our most intimate details - our identities, interests, locations, credit histories, medical conditions, sexual interests, and religious and political views."

State attorneys general and federal and state regulators are scrutinizing this practice due to concerns that it may negatively impact the markets and harm consumers. New York state recently enacted a law requiring disclosure to a consumer if a price was set by an algorithm using their personal data.

'Buy Now, Pay Later'

In January, DiNapoli wrote to PayPal Holdings Inc., Affirm Holdings Inc., Block Inc. and Sezzle Inc. regarding their management of potential regulatory, operational, consumer and financial risks related to their offering of short-term installment lending products and services, also known as "Buy Now, Pay Later" (BNPL).

According to a study by the Consumer Financial Protection Bureau, growth in the BNPL industry is being driven disproportionately by young consumers and borrowers with low or no credit scores. Market analysts have identified consumer overspending across multiple issuers, and high delinquency and default rates as areas of particular concern. Since most BNPL loans are not reported to credit bureaus, they may result in "phantom debt" that can lead lenders to extend credit without knowledge of borrowers' full existing liability.

Use of AI in Health Care Decisions

DiNapoli also filed shareholder proposals with insurance companies Humana Inc. and The Cigna Group, calling on them to prepare transparency reports that summarize what oversight their boards are exercising over the use of AI and algorithms in making prior authorization determinations, claims reviews, care management processes, and other decisions.

A recent study found that nearly 40% of insured adults received a bill for a service they thought was covered but fewer than half had challenged an unexpected bill. At a time when AI is increasingly used by insurance companies to review claims, a January poll found that a third of insured adults experienced a negative financial impact due to a prior authorization denial or delay, with 15% saying it had a "major financial impact."

According to a 2024 study by the American Medical Association, 61% of physicians report that they are concerned that augmented intelligence "increases or will increase prior authorization denial rates." An advisory group to the National Association of Insurance Commissioners called on commissioners to take "urgent action to protect patients from discrimination and harm arising from the use of AI in coverage decisions."

The New York State Common Retirement Fund is one of the largest public pension funds in the United States and has consistently been ranked as one of the best managed and best funded plans in the nation.