UnitedHealth Settles Suit with New York Attorney General Cuomo

I have posted a number of previous notes about the various shenanigans of UnitedHealth, one of the largest healthcare insurance companies in the U.S. The company has now agreed to settle a suit brought by Andrew Cuomo, the attorney general of New York. The company is described by Cuomo's office as having engaged in "a scheme to defraud consumers" of hundreds of millions of dollars over the last decade (see: Big Health Insurer Agrees to Update Its Fee Data). I covered the specific issue to which this article alludes in a previous note (see: UnitedHealth Draws Criticism for Its Out-of-Network Reimbursement Policies). As part of the settlement, United has agreed to pay $50 million to fund a nonprofit to create a new, independent database to replace Ingenix’s and “educate health care consumers more directly about market prices for health care services.” Below is an excerpt from the New York Times article about the latest news with boldface emphasis mine:

The [database overhaul], to be announced Tuesday, is part of a settlement with the insurance giant UnitedHealth Group, which operates the industry databases. It results from a yearlong investigation by Mr. Cuomo’s office that concluded the data had understated the true market rates of medical care by up to 28 percent. The settlement will have a nationwide impact because UnitedHealth, the biggest health insurer in New York, operates the databases used by the entire industry, through its Ingenix business unit. The deal calls for creation of a new independent database, to be run by a university that is still to be selected. Because insurers typically reimburse patients for only 70 to 80 percent of the “reasonable and customary” cost of medical services when they visit doctors outside the insurer’s designated network of physicians, the patient can get shortchanged if the insurer understates the prevailing local fees. The patient might receive a doctor’s bill for $100, for example, and expect the insurer to pay at least $70. But if the insurance database says that doctor bill should have been only $72, based on local rates, the patient might get back less than $55.

So here's the angle that UnitedHealth was working if you skipped the small print above. As a health insurance company, it was required to reimburse its policy holders about 70-80% of the local "usual and customary" costs of out-of-network medical services. However, it turned out that UnitedHealth also owned the database company, Ingenix, that was developing and maintaining the databases that were used across the health insurance industry to determine the level of these usual and customary costs. And guess what? It was setting those levels inappropriately low in order to reduce the amount of money required to reimburse claimants.

Everyone in the industry has long known that UnitedHealth owned Ingenix and this fact was plainly stated on the UnitedHealth web site. Foe me, this simple fact provides prima facie evidence of a serious conflict of interest. One has to wonder why no one else but the attorney general of New York was able to "diagnose" and take some action on problem. It's important to understand that all of the other insurance companies were reaping the financial benefits of having Ingenix "cook the books." How about the hospital executives? They were probably anxious not to offend United Health which could have made life difficult for them. As a result of this mess, at least one columnist is calling for database auditors to provide some type of governmental regulatory oversight over the various companies that provide reference databases in various industries in addition to the health insurance field (see: Ingenix scandal points to need for database auditors).