A Computer Database to Overcharge Millions of Customers. UnitedHealth Group used a computer database to overcharge millions of customers, the New York Attorney General said today. According to Andrew Cuomo’s office, UnitedHealth Group has agreed to pay $50 million to settle these charges. As part of the settlement with the New York State Attorney General’s Office, UnitedHealth Group will also revise the process that health insurers across the country use to determine reimbursements when members receive services from out-of-network providers.
Under the terms of the UnitedHealth settlement, the company will pay $50 million to establish a new, independent database for determining out-of-network reimbursements. It will be run by a qualified nonprofit organization. The nonprofit will own and operate the new database, and will be the sole arbiter and decision-maker with respect to all data contribution protocols and all other methodologies used in connection with the database. The nonprofit will also develop a website where, for the first time, consumers around the country can find out in advance how much they may be reimbursed for common out-of-network medical services in their area.
“Our agreement with United removes the conflicts of interest that have been inherent in the consumer reimbursement system. This has been an industry-wide problem, and it demands an industry-wide reform.” New York Attorney General Andrew Cuomo said in the press release. “We commend United for leading the industry on this issue, and we encourage other insurers to follow suit.”
Health Insurers Unfairly Saddle Consumers
According to the Attorney General’s office, the settlement stems from an industry-wide investigation begun last February into allegations that health insurers unfairly saddle consumers with too much of the cost of out-of-network health care. The New York investigation concerned allegations that UnitedHealth Group’s Ingenix database intentionally skewed “usual and customary” rates downward through faulty data collection, poor pooling procedures, and the lack of audits. That means many consumers were forced to pay more than they should have. The investigation found the rate of underpayment by insurers ranged 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 – a large portion of which the insurer then reimburses – creates an incentive for the insurer to manipulate the rate downward.
According to a press release issued by the office, seventy percent of insured working Americans pay higher premiums for insurance plans that allow them to use out-of-network doctors. In exchange, insurers often promise to cover up to eighty percent of the “usual and customary” rate of the out-of-network expenses, and consumers are responsible for paying the balance of the bill. United and the largest health insurers in the country rely on the Ingenix database to determine their “usual and customary” rates, the press release said. The Ingenix database uses the insurers’ billing information to calculate “usual and customary” rates for individual claims by assessing how much the same, or similar, medical services would typically cost, generally taking into account the type of service and geographical location. Under this system, insurers control reimbursement rates that are supposed to fairly reflect the market.
In February 2008, Cuomo also announced that he had issued subpoenas to the nation’s largest health insurance companies that use the Ingenix database, including Aetna WellPoint/Empire BlueCross BlueShield. The Attorney General’s industry-wide investigation is ongoing.
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