Consider the Risks: An Insurance Law Blog
In 2007 and 2008 the New York Office of the Attorney General (OAG) investigated complaints by consumers regarding how certain health insurers set reimbursement rates for out-of-network services. The investigation focused on large databases gathered from various insurers and other entities by Ingenix, a wholly-owned subsidiary of UnitedHealth Group, to create schedules widely used by the country’s largest insurers, including UnitedHealth,
Aetna, CIGNA and Wellpoint, as the benchmark for determining “usual and customary” charges for out-of-network medical services.
Following its investigation, the OAG made a number of findings, including that Ingenix had a conflict of interest in creating schedules used as a basis for reimbursing United Healthcare. The OAG also determined that health insures have an incentive to manipulate data submitted to Ingenix so as to depress reimbursement rates; there was no incentive for Ingenix to audit the data it received and pooled; and Ingenix databases intentionally skewed usual and customary rates downward through faulty data collection, poor pooling procedures and lack of audits. OAG stated that the industry had engaged in a “scheme to defraud consumers” by systematically underpaying for out-of-network services by hundreds of millions of dollars over the last decade, with rates understated by up to 28%. The results were underpayments to physicians and unpaid balances billed to consumers.
In a January 2009 settlement with the OAG, Ingenix agreed to pay $50 Million to set up an independent not-for-profit database to be run by a university which would be used as a tool for rate reimbursement and academic research. The database will be transparent and available to the public via a consumer website. In a series of additional settlements that followed,
Aetna agreed to pay $20 Million, Cigna agreed to pay $10 million and Wellpoint agreed to pay $10 million, with all agreeing to participate in the new database. Up to a dozen other
New York
State healthcare plans and insurers have subsequently settled with the OAG, bringing the total settlements with the OAG from health plans and insurers to $94.6 million.
In related litigation, United Health Group agreed to pay $350 Million to settle a class-action lawsuit on behalf of physicians and patients alleging the company’s health plans used flawed Ingenix data to justify low reimbursements for out-of-network care. Similar American Medical Association Class-Actions were filed against Cigna and
Aetna in February 2009 and against Wellpoint in March 2009.
In even more recent developments, on June 24, 2009, the Senate Committee on Commerce, Science and Transportation, chaired by Senator Jay Rockefeller, published a report essentially confirming the OAG’s conclusions that the practices and harm from those practices were pervasive throughout the healthcare industry, not just among the largest national insurers involved in the New York settlement.
The Committee reports that 17 of the 18 insurance companies to which the Committee had sent inquiries had responded that they or their affiliates used Ingenix data to play claims for out-of-network services. The Committee indicates that these responses “suggest that the number of American consumers who were harmed by the under-reimbursements based on the Ingenix data may be substantially higher than previously estimated.”
Significant additional litigation by attorneys general in various states and through private class-actions is likely to follow. The Ingenix story is far from over.
