N.Y. AG Andrew Cuomo. Source: www.nndb.com

New York Attorney General Andrew M. Cuomo is conducting an industry-wide investigation into a scheme by health insurers to defraud consumers by manipulating reimbursement rates. 

In a statement released by the AG’s office, Cuomo intends to file suit against Ingenix, its parent UnitedHealth Group, and three additional subsidiaries, over practices that limit payments to customers by claiming their medical charges were unreasonably high. He also has issued 16 subpoenas to additional health insurance companies including Aetna, CIGNA, and Empire BlueCross BlueShield.

He claims that United insurers knew most simple doctor visits cost $200, but told their members the typical rate was only $77.  The insurers then applied the contractual reimbursement rate of 80 percent, covering only $62 for a $200 bill, and leaving the patient to cover the $138 balance.

A six-month investigation found that Ingenix operates “a defective and manipulated database that most major health insurance companies use to set reimbursement rates for out-of-network medical expenses,” Cuomo claimed. Further investigation found that two subsidiaries of United under-reimbursed their members for out-of-network medical expenses by using data provided by Ingenix, he said.

The AG’s investigation found that by distorting the “reasonable and customary” rate, the United insurers were able to keep their reimbursements artificially low and force patients to absorb a higher share of the costs, Cuomo said.

According to the AG release, the Ingenix database used the insurers’ billing information to calculate a “reasonable and customary” rate for individual claims by assessing how much a similar type of medical service would typically cost, generally taking into account the type of service, physician, and geographical location.  However, the investigation showed that the “reasonable and customary” rates produced by Ingenix were remarkably lower than the actual cost of typical medical expenses.

“The lack of accuracy, transparency and independence surrounding United’s process for setting a ‘reasonable and customary rate’ is astounding.  United’s ownership of Ingenix coupled with the inherent problems with the data it is using clearly demonstrate a broken reimbursement system designed to rip off patients and steer them towards in-network doctors that cost the insurer less money,” Cuomo said.