Insurers subpoenaed by NY's Cuomo

March 1, 2008

Washington, D.C.-The campaign to combat rising healthcare costs is now targeting industry methods for calculating "reasonable and customary" rates for coverage of out-of-network medical expenses. New York Attorney General Andrew Cuomo filed lawsuits last month against UnitedHealth Group and several subsidiaries for allegedly using "rigged data" and fraudulent methods to manipulate reimbursement rates.

WASHINGTON, D.C.-The campaign to combat rising healthcare costs is now targeting industry methods for calculating "reasonable and customary" rates for coverage of out-of-network medical expenses. New York Attorney General Andrew Cuomo filed lawsuits last month against UnitedHealth Group and several subsidiaries for allegedly using "rigged data" and fraudulent methods to manipulate reimbursement rates.

Cuomo also issued subpoenas to 16 other major insurers, including Aetna, CIGNA, and Empire Blue Cross Blue Shield. The investigators want information on how these and other insurers calculate the cost of prevailing healthcare and how they handle complaints and appeals from beneficiaries.

At issue is the Prevailing Healthcare Charges System database operated by Ingenix Inc., a subsidiary of UnitedHealth Group. This service provides a way for insurers to assess appropriate rates for out-of-network and non-negotiated services based on the typical cost of similar medical care by providers in certain geographical locations.

UnitedHealth Group responded in a company statement that it will continue to cooperate fully and believes in delivering high-quality and dependable database tools.

"The reference data is rigorously developed, geographically specific, comprehensive and organized using a transparent methodology that is very common in the healthcare industry," UnitedHealth says. "We believe these reference tools add substantial value to the healthcare system by providing all participants-providers, payers and consumers-with a long-standing transparent, consistent, and neutral line of sight into the healthcare market, its costs and performance."

OUT-OF-NETWORK DATA

Providers usually negotiate in-network rates with insurers, but reimbursement is more difficult to calculate for out-of-network services, which are used more frequently by the growing number of consumers in preferred provider organizations. The health insurance industry created a system more than 30 years ago to collect broad information on reasonable and customary rates for physician and hospital services across the country to address this issue.

However, Cuomo claims that Ingenix manipulates the data to underestimate prevailing provider rates. Such calculations can greatly reduce health plan reimbursement and boost bills that patients have to pay way beyond anticipated copays of 20% to 30%. Health plan members pay higher premiums for the right to use out-of-network doctors, the investigators say.

In exchange, insurers promise to cover up to 80% of the doctor's bill or of reasonable and customary charges. By reducing such charges, insurers "keep their reimbursements artificially low and force patients to absorb a higher share of the costs," prosecutors claim.