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New York Targets Health Insurers

Cuomo opens industry-wide probe of reimbursement schemes

February 14, 2008

At the center of the scheme is Ingenix, Inc., the nation’s largest provider of healthcare billing information, which Cuomo says serves as a conduit for rigged data to the largest insurers in the country.

The AG also announced that he has issued 16 subpoenas to the nation’s largest health insurance companies including Aetna, CIGNA, and Empire BlueCross BlueShield, and that he intends to file suit against Ingenix, Inc, its parent UnitedHealth Group and three additional subsidiaries.

The six-month investigation found that Ingenix operates a defective and manipulated database that most major health insurance companies use to set reimbursement rates for out-of-network medical expenses.

Further, the investigation found that two subsidiaries of United dramatically under-reimbursed their members for out-of-network medical expenses by using data provided by Ingenix.

Under the United insurers’ health plans, members pay a higher premium for the right to use out-of-network doctors. In exchange, the insurers promise to cover up to 80% of either the doctor’s full bill or of the “reasonable and customary” rate depending upon which is cheaper.

The investigation found that by distorting the “reasonable and customary” rate, the United insurers were able to keep their reimbursements artificially low and force patients to absorb a higher share of the costs.

“Getting insurance companies to keep their promises and cover medical costs can be hard enough as it is,” said Cuomo. “But when insurers like United create convoluted and dishonest systems for determining the rate of reimbursement, real people get stuck with excessive bills and are less likely to seek the care they need.”

Cuomo’s investigation also found a clear example of the scheme: United insurers knew most simple doctor visits cost $200, but claimed to their members the typical rate was only $77. The insurers then applied the contractual reimbursement rate of 80%, covering only $62 for a $200 bill, and leaving the patient to cover the $138 balance.

The United insurers and many other health insurance companies relied on the Ingenix database to determine their “reasonable and customary” rates. The Ingenix database used the insurers’ billing information to calculate a “reasonable and customary” rate for individual claims by assessing how much a similar type of medical service would typically cost, generally taking into account the type of service, physician, and geographical location.

However, the investigation showed that the “reasonable and customary” rates produced by Ingenix were remarkably lower than the actual cost of typical medical expenses.

The United insurers and Ingenix are owned by the same parent corporation, United HealthGroup. When members complained their medical costs were unfairly high, the United insurers hid their connection to Ingenix by claiming the rate was the product of “independent research.”

The AG’s notice to United expressed concern that the company’s ownership of Ingenix created a clear conflict of interest because their relationship gave Ingenix an incentive to set rates that benefited United and its subsidiaries.

Cuomo’s notice of intent to sue names the following potential defendants: UnitedHealth Group and its subsidiaries, United HealthCare Insurance Company of New York, Inc., United Healthcare of New York, Inc., United Healthcare Services, Inc. and Ingenix.

The subpoenas request documents showing how the insurer computes reasonable and customary rates, copies of member complaints and appeals, and communications with members and between Ingenix and the insurer on the issue.

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