“This will lead to consumers getting what they paid for,” Attorney General Cuomo explained to the press on Tuesday.
Cuomo has reached an agreement with UnitedHealthGroup Inc., the nation’s second largest health insurer, after conducting an industry-wide investigation into a scheme to defraud consumers by manipulating reimbursement rates.
At the center of the scheme is Ingenix, Inc., a wholly-owned subsidiary of United, which is the nation’s largest provider of health care billing information. Under the agreement with United, the database of billing information operated by Ingenix will close. United will pay $50 million to a qualified nonprofit organization (yet to be chosen) that will establish a new, independent database to help determine fair out-of-network reimbursement rates for consumers throughout the United States.
“For the past ten years, American patients have suffered from unfair reimbursements for critical medical services due to a conflict-ridden system that has been owned, operated, and manipulated by the health insurance industry. This agreement marks the end of that flawed system,” said Attorney General Cuomo.
“During these tough economic times, this agreement will keep hundreds of millions of dollars in the pockets of over one hundred million Americans.”
In February, 2008, Cuomo announced an industry-wide investigation into allegations that health insurers unfairly saddle consumers with too much of the cost of out-of-network health care.
Seventy percent of insured working Americans pay higher premiums for insurances plans that allow them to use out-of-network doctors. In exchange, insurers often promise to cover up to eighty percent of the “usual and customary” rate of the out-of-network expenses, and consumers are responsible for paying the balance of the bill.
United and the largest health insurers in the country rely on the United-owned Ingenix’s database to determine their “usual and customary” rates. The Ingenix database uses the insurer’s billing information to calculate “usual and customary” rates for individual claims by assessing how much the same, or similar, medical services would typically cost, generally taking into account the type of service and geographical location. Under this system, insurers control reimbursement rates that are supposed to fairly reflect the market.
Attorney General Cuomo’s investigation concerned allegations that the Ingenix database intentionally skewed “usual and customary” rates downward through faulty data collection, poor pooling procedures, and the lack of audits. That means many consumers were forced to pay more than they should have, ranging from 10 to 28 percent across the state.
The investigation found that having the health insurer determine the “usual and customary” rate – a large portion of which the insurer then reimburses – creates an incentive for the insurer to manipulate the rate downward.
The creation of a new database, independently maintained by a nonprofit organization, is designed to remove this conflict of interest.
In February 2008, Cuomo also announced that he had issued subpoenas to the nation’s largest health insurance companies that use the Ingenix database, including Aetna, CIGNA, and WellPoint/Empire BlueCross BlueShield. The Attorney General’s industry-wide investigation is ongoing.
“Our agreement with United removes the conflicts of interest that have been inherent in the consumer reimbursement system. This has been an industry-wide problem, and it demands an industry-wide reform,” said Cuomo. “We commend United for leading the industry on this issue.”
Representatives from United and from leading medical and consumer organizations joined Cuomo in making the announcement at the Saint Vincent Catholic Medical Center in Manhattan on Tuesday.
“We are committed to increasing the amount of useful information available in the health care marketplace so that people can make informed decisions,” said Thomas L. Strickland, Executive Vice President and Chief Legal Officer of UnitedHealth Group. “We are pleased that a not-for-profit entity will play this important role for the marketplace.”