UnitedHealth Settles Suit Over Systemic Underpayment
New York Attorney General Andrew Cuomo announced a settlement on Tuesday with UnitedHealth Group, one of the nation's largest insurers, which will require an overhaul of the databases used to determine out-of-network medical bill payments nationwide.
The settlement resulted from a year-long investigation into what Cuomo's office called "a scheme to defraud consumers" by underpaying patients by hundreds of millions of dollars over the last decade.
Ingenix, a subsidiary of UnitedHealth, operated the databases for determining 'reasonable and customary' rates for care. However, the attorney general's office claims Ingenix understated the market rates of medical care by up to 28%. Because insurers often reimburse patients for out-of-network expenses based on a percentage of the local market rate, many patients were getting shortchanged, according to investigators.
Although the operation is based in New York, the settlement will have a nationwide impact because the databases are used by the entire industry.
The investigation was initially sparked by a 2000 lawsuit from the American Medical Association, which was concerned that the underpayments were driving a wedge between patients and doctors. "Unfortunately, patients were getting mad not only at insurers, but they were also mad at their doctor. The insurer said they were paying what's 'usual, reasonable, and customary.' If you're a patient and you hear that, you think your doctor charged you an unreasonable fee. That's not what was happening at all," says AMA President Nancy H. Nielsen, MD.
America's Health Insurance Plans (AHIP) responded to the settlement by saying the announcement is an opportunity to shed light on out-of-network charges, which is "one of the root causes of rising medical costs."
In a statement, Karen Ignagni, president and CEO of AHIP, said that provider networks ensure affordable access to high-quality healthcare providers, and consumers and employers would pay "significantly higher healthcare costs" if not for networks.
"Consumers would be shocked to see the wide variation in charges billed by out-of-network providers. As policymakers pursue healthcare reform, they should look carefully at the dramatic differences in billed charges for out-of-network services, especially as experts report that there is no correlation between the level of charges and the quality of care provided," said Ignagni.
Although UnitedHealth has not acknowledged any wrongdoing, the company has agreed to pay $50 million toward the creation of a new, independent database that will be used to determine market rates for medical costs in specific regions. The new database will be operated by a university, although the location has not yet been determined. In the meantime, Ingenix will continue to run operations.
Elyas Bakhtiari is a managing editor with HealthLeaders Media. He can be reached at firstname.lastname@example.org.
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