witnesses testifying before a senate committee on the methods used
by many US health insurers to reimburse policyholders using
out-of-network health service providers. Though insurers are acting
to curb abuse, it is too late to prevent a wave of class actions
against them.
Medical costs in the US are the leading cause of individual
bankruptcy, even though individuals involved usually have health
insurance, Linda Lacewell told a Senate Commerce Committee hearing
chaired by Senator John D Rockefeller.
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Lacewell represented the Office of the New
York State Attorney General in a hearing held in late-March
entitled “Deceptive Health Insurance Industry Practices – Are
Consumers Getting What They Paid For?”
The outcome of her testimony and that of other
experts does not bode well for US health insurers as a scathing
comment from Rockefeller clearly indicated.
“The health insurance industry has been
promising to pay a certain share of consumers’ medical bills, but
then they have been rigging health charge data to avoid paying
their fair share,” said Rockefeller. “The result is that billions
of dollars in health care costs have been unfairly shifted to
millions of American consumers.”
The hearing’s focus was on the way health
insurers calculate “usual, customary and reasonable” (UCR)
reimbursement rates for consumers who choose to receive care from
doctors and other health care providers that do not form part of an
insurer’s provider network for medical care. This is termed
out-of-network reimbursement.
Throwing more light on the UCR approach Chuck
Bell, representing the Consumers Union, explained to the committee:
“The key problem with the out-of-network reimbursement system is
that the UCR rates were not calculated in a fair and impartial way.
For the last 10 years or so, the primary databases that are used by
insurers to determine UCR rates have been owned by Ingenix, a
wholly-owned subsidiary of UnitedHealth Group.”
UnitedHealth is the US’ second-largest health
insurer.
In her testimony Lacewell noted that of
insured Americans, about 70 percent pay higher premiums for the
right to select their own doctor.
“That’s 110 million people,” she said, adding
that reasons for doing so include a desire to make decisions about
their family’s health care and the inability to find the best
physician to treat a particular condition in their insurer’s
network.
Referring to an investigation conducted by the
Office of the New York Attorney General into how health insurers
reimburse consumers for out-of-network health care services,
Lacewell said: “During the course of the investigation we uncovered
a fraudulent and conflict-of-interest-ridden reimbursement scheme.
These deceptive, industry-wide practices affected millions of
patients and their families and cost them hundreds of millions of
dollars in unexpected and unjust medical costs.”
Specifically, she stressed: “Reasonable and
customary rates are supposed to fairly reflect market rates, but
our investigation revealed that Ingenix is nothing more than a
conduit for rigged information that is defrauding consumers of
their right to fair reimbursements for their out-of-network health
care costs.”
Commenting on the investigation, Rockefeller
said: “Armed with this information, the New York Attorney General
was able to force insurance companies operating in New York to
change their practices,” commented Rockefeller.
“Because many of the country’s largest
[health] insurance companies – including UnitedHealth, CIGNA,
Aetna, and Wellpoint – do business in New York, Attorney General
Cuomo’s work had a national scope.”
In an agreement with Cuomo UnitedHealth agreed
to stop making the Ingenix database available to insurers to
calculate UCR rates and to contribute $50 million dollars for the
creation of an independent not-for-profit database that will become
a new industry standard. Notably, six of the other top 24 health
insurers operating in the state have changed their UCR
practices.
This is a first step towards full reform,
noted Lacewell: “We believe there is a need for a new regulation to
end once and for all the conflicts of interest that derailed the
previous system and to bring new rigor to the system.”
In particular, insurers should disclose to
consumers ahead of time how much they will be reimbursed and should
not be permitted to use as a source or basis for determining UCR
reimbursement rates any entity that has a financial interest in the
rates.
The committee hearing has the makings of a
costly problem for many health insurers suggests a class action
brought against UnitedHealth by the American Medical Association’s
(AMA), Nancy Nielsen, and the medical associations of the states of
New York and Missouri.
In her testimony before the committee Nielsen
said: “After nearly a decade of litigation, the AMA is very pleased
that UnitedHealth Group recognised the importance of restoring its
relationship with patients and physicians and is settling the AMA’s
lawsuit by agreeing to pay $350 million toward reimbursing the
patients and physicians it short-changed.”
The settlement in January 2009 was preceded by
a similar settlement in the state of New Jersey in July 2008 in
which insurer HealthNet agreed to pay to $215 million in damages to
its members. Plaintiffs alleged that HealthNet used improper means
for determining UCR rates.
Encouraged by the UnitedHealth settlement, the
AMA has this year filed class actions against Aetna, CIGNA and the
US’ largest health insurer, WellPoint, alleging that they colluded
with others to underpay for out-of-network medical services.
Rockefeller is also on the warpath, noting
that hundreds of thousands of federal workers have health insurance
coverage with an out-of-network option. He has asked the Inspector
General of the Office of Personnel and Management to investigate
how many federal workers’ out-of-network reimbursements may have
been reduced by the use of the Ingenix databases.
