New York Launches Probe Into Insurers’ Out-of-Network Fees

New York Attorney General Andrew Cuomo (D) on Wednesday announced an investigation into whether health insurers systematically have required members to pay excessive fees for services performed by out-of-network health care providers, the New York Times reports.

As part of the investigation, Cuomo will file a lawsuit against UnitedHealth Group and subsidiary Ingenix (Abelson, New York Times, 2/13). Cuomo also will file a civil lawsuit against three other UnitedHealth subsidiaries that seeks restitution for consumers. In addition, he has issued subpoenas to 16 other health insurers.

The subpoenas seek documents on the processes that the health insurers use to determine reimbursement rates, copies of member complaints and appeals, and communications between members, Ingenix and health insurers (Kerr, Long Island Newsday, 2/13).

The investigation will focus on the process that health insurers use to determine the portion of reimbursements for which they are responsible when members receive services from out-of-network providers. Health insurers pay for a certain percentage of the usual and customary rates for such services, based on an estimate of the cost for such procedures in the same geographic area (New York Times, 2/13).

Ingenix operates the Prevailing Healthcare Charges System, a database used by most health insurers that determines the usual and customary rates. The database contains information on more than one billion claims from more than 100 health insurers. Health insurers compare out-of-network claims with those found in the database and reduce the claim to a "reasonable" amount before they reimburse providers or members (Fuhrmans/Francis, Wall Street Journal, 2/14).

Cuomo alleges that health insurers have underestimated the usual and customary rates for services, a practice that requires members to pay larger out-of-pocket fees than they should pay (New York Times, 2/13). The practice most affects members who have indemnity insurance or are enrolled in PPOs, according to Cuomo (Wall Street Journal, 2/14).

Cuomo said his investigation found problems with the estimates used to determine the usual and customary rates for services performed by out-of-network providers. In some cases, health insurers used outdated information to determine the estimate, and they manipulated data in other cases, Cuomo said (Appleby, USA Today, 2/14).

Cuomo said, "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" (Freifeld, Bloomberg/Washington Post, 2/14).

UnitedHealth officials in a statement said that the company is "in the midst of ongoing discussions with the Attorney General's Office" and remains "committed to fair and appropriate payments for physicians, the state's other health care providers and consumers" (Dicker, New York Post, 2/14). In addition, UnitedHealth spokesperson Don Nathan said that the database operated by Ingenix "gives the health care marketplace a snapshot of the average cost for a given service in a given area" (Phelps, Minneapolis Star Tribune, 2/13).

Karen Ignagni, CEO of America's Health Insurance Plans, in a statement questioned the appropriateness of the prices of services. "As medical costs continue to soar, this is the discussion that public policy leaders need to have," Ignagni said (USA Today, 2/14).

NPR's "Morning Edition" on Thursday reported on the investigation (Inskeep, "Morning Edition," NPR, 2/14).

Audio of the segment is available online.