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Attorney General Says Insurers Defraud Consumers and Providers Via Rigged Rates

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Attorney General Andrew M. Cuomo today announced an investigation into a scheme by health insurers to defraud consumers by manipulating reimbursement rates. At the center of the scheme is Ingenix, Inc., the nation’s largest provider of health care billing information, which serves as a conduit for data to the largest insurers in the country.

Attorney General Cuomo issued 16 subpoenas to the nation’s largest health insurance companies including Aetna, Cigna, and Empire BlueCross BlueShield, and 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 Attorney General’s 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 Attorney General Andrew 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.”

HANYS President Daniel Sisto issued a statement saying, “If the Attorney General’s allegations are proven true, we believe that United and Ingenix’s practices have cheated the entire health care provider community by artificially lowering reimbursement for the services they provided. The ‘Usual, Customary and Reasonable’ (UCR) methodology is often used as a baseline for determining contract rates with health care providers. If the UCR is artificially low, then it follows that the discounted contract rates are also artificially low. Put more simply, if these allegations are true, this activity has been nothing short of hi-tech price rigging.”

“HANYS remains fully supportive of efforts designed to bring accountability to the health care insurance industry and to ensure providers are appropriately paid for the services they provide to their patients,” added Mr. Sisto. “We are therefore pleased to see Attorney General Cuomo weighing in to challenge this apparent improper market conduct.”

HANYS has been pursuing an aggressive multi-prong approach, including legislative and regulatory relief, to combat managed care companies’ misconduct and unfair business practices. HANYS is also considering intervening into an existing lawsuit challenging UnitedHealth Group and Ingenix practices.– Stacey Montalto

Published February 13, 2008