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WellPoint Faces Class Action Lawsuit Over Reimbursement Rates

Mar 26, 2009 | Parker Waichman Alonso LLP

WellPoint Inc. is the latest large insurer to face a lawsuit over the use of the Ingenix database.  According to Reuters.com, the American Medical Association (AMA) class action lawsuit accuses WellPoint of using the Ingenix database to underpay doctors for out-of-network care.

The database in question is operated by Ingenix  Corp., a wholly-owned subsidiary of UnitedHealth Group.  The AMA statement said that the WellPoint class action lawsuit was an expansion of its ongoing effort to expose and prohibit an industry-wide health insurance scheme to defraud patients and physicians of proper reimbursement.  The AMA filed a similar class action lawsuits last month against Aetna Health, Inc. and CIGNA Corporation.

The three AMA lawsuits claim that each insurance company conspired with Ingenix on a price fixing scheme that relied on an the Ingenix database to set artificially low reimbursement rates for out-of-network care. A year-long investigation by the New York attorney general confirmed that the Ingenix database is intentionally rigged to allow insurers to shortchange reimbursements, the AMA statement said.

“Physicians will not tolerate an apparent conspiracy that allows health insurers to play by their own rules without regard to patients, or the legitimate costs required to care for them,” said AMA President Nancy H. Nielsen, MD.

In addition to seeking reforms for the invalid payment systems used by Aetna, CIGNA and WellPoint, the class action lawsuits seeks relief for physicians who were seriously harmed by the insurers’ long-term use of the flawed Ingenix database.

Last year, the New York Attorney General’s office began an investigation into allegations the Ingenix database intentionally skewed “usual and customary” rates downward through faulty data collection, poor pooling procedures, and the lack of audits.  The investigation found that because of Ingenix, many consumers were forced to pay more than they should have for out-of-network care, with underpayment by insurers ranging from ten to twenty-eight percent for various medical services across the state.  The Attorney General’s investigation also  found that having a health insurer determine the “usual and customary” rate  for a service – a large portion of which the insurer then reimburses – creates an incentive for the insurer to manipulate the rate downward.

In January, the New York Attorney General announced that it had reached a deal with UnitedHealth in which the company would pay $50 million to set up a new database for determining reimbursement.  The database is to be owned and operated by a non-profit organization in order to eliminate insurance company conflicts of interest.

Cigna, Aetna and Wellpoint have also have also reached agreements with the New York Attorney General.  In addition to ending their use of the Ingenix database, WellPoint and Cigna agreed to pay $10 million each toward the new database.  Aetna also recently agreed to end its relationship with Ingenix and contribute $20 million to the new database.