Investigation of health insurers is a long time coming

New York Attorney General Andrew Cuomo continues to make big news targeting the questionable actions of some health insurers. Earlier this month, the attorney general announced his intention to sue UnitedHealth Group and four of its subsidiaries, including Ingenix Inc., the nation's largest provider of health care billing information, after a six-month, industry-wide investigation into an alleged scheme by health insurers to defraud consumers by manipulating reimbursement rates.

This announcement comes on the heels of agreements that Cuomo, with significant input from the AMA and the Medical Society of the State of New York (MSSNY), reached late last year with several large health insurers regarding physician profiling (or "economic credentialing") programs, and it could have significant implications for physicians and patients alike.

At the center of the investigation is Ingenix. During a Feb. 13 news conference that included AMA President-elect Nancy H. Nielsen, MD, PhD, Cuomo alleged that Ingenix is channeling rigged data to health insurers, which use these data to reimburse patients at less than the "usual, customary, and reasonable" (UCR) rates for physician services. In the process, the insurers are pocketing billions of dollars. Cuomo's investigation has discovered what the AMA has been saying for years: that Ingenix operates a defective and manipulated database that some health insurers use to set reimbursement rates for out-of-network medical expenses.

The probe also found that two subsidiaries of United dramatically under-reimbursed patients for out-of-network medical expenses by using data provided by Ingenix. And, as part of the case, Cuomo's office has issued 16 subpoenas to some of the nation's largest insurers, including Wellpoint's Empire BlueCross BlueShield, Cigna, Humana, and Aetna.

Ingenix's reimbursement method works like this: Members of a health insurer pay a higher premium for the right to use out-of-network physicians, and in exchange, the insurer promises to cover up to 80 percent of either the physician's full bill or of the UCR rate, whichever is less. Cuomo's investigation found that by distorting the UCR rate, United and its subsidiaries keep their reimbursements artificially low and force patients to take on a higher share of the costs.

In some cases, this system has instigated acrimony between physicians and their patients. When a low payment rate is reimbursed to a patient, a physician simply trying to collect payment for the cost of delivering care sometimes gets accused by the patient of overcharging—a scenario that can impair or destroy a patient-physician relationship.

I'm hopeful that Cuomo's lawsuit and ongoing investigation will aid legal action the AMA took against United regarding this ploy nearly eight years ago. In 2000, the Litigation Center of the AMA and State Medical Societies joined MSSNY, the Missouri State Medical Association, a number of individual physicians and patients, and several New York unions in filing a class-action lawsuit against United and Metropolitan Life Insurance. In the suit, we allege that Ingenix's database to determine UCR charges uses unreliable or insufficient data to make that determination, and that the UCR charges for certain procedures are substantially higher than the insurance companies allow. The case is pending in the U.S. District Court for the Southern District of New York.

A recent decision in Massachusetts also could help our lawsuit. Last month, a state appellate court ruled in favor of chiropractor Michael Davekos in holding that Ingenix's database is not an accurate representation of UCR rates. The court remanded a previous ruling in favor of Liberty Mutual Insurance Company, which used Ingenix's system to determine reimbursements to Davekos, and returned the case to the trial court.

News of Cuomo's investigation and lawsuit made headlines nationwide. In a Feb. 18 editorial (site registration required), the New York Times described Ingenix's system as "an invitation for abuse" and called for reforms that would make the system truly independent and objective. "No consumer can reasonably trust numbers generated by a company whose loyalties and financial interests lie with the health insurers," the Times wrote. I couldn't agree more.

Meanwhile, Cuomo's lawsuit is just the latest in a series of recent legal actions against United. Following a joint investigation of United's conduct after it acquired PacifiCare HealthCare Systems, the state of California is seeking up to $1.3 billion in fines from the insurer for more than 133,000 alleged violations of state law. In December, William McGuire, MD, former chief executive officer of United, agreed to $468 million in penalties to settle a Securities and Exchange Commission investigation into improper stock-option backdating. And in September, United agreed to a $12 million settlement with regulators in 36 states and Washington, D.C., that requires the insurer to reach specific benchmarks for claims accuracy by next year or risk being hit with further penalties.

Patients and physicians have a right to expect fair and accurate payment for services promised to them by health insurers, and lawmakers and regulators have an important public responsibility to establish proper oversight of insurers. I commend Cuomo and his office for their interest and leadership in protecting consumers, and I hope this is just the beginning of increased efforts by states to hold health insurers accountable for their actions.

Please send comments, questions, and replies to amaprez@ama-assn.org.