N.Y. AG Conducts Health Fraud Investigation

New York Attorney General Andrew Cuomo reported that he is conducting an industry-wide investigation into a reported scheme by health insurers to defraud consumers by manipulating reimbursement rates. At the center of the reported scheme is Ingenix Inc., a provider of healthcare billing information, which reportedly serves as a conduit for rigged data to the largest insurers in the country. Cuomo also announced that he has issued 16 subpoenas to the nation’s largest health insurance companies including Aetna, CIGNA, and Empire BlueCross BlueShield, and that he intends to file suit against Ingenix Inc, its parent UnitedHealth Group, and three additional subsidiaries. The six-month investigation reportedly 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. Further, the investigation reportedly found that two subsidiaries of United (the “United insurers”) dramatically under-reimbursed their members for out-of-network medical expenses by using data provided by Ingenix. Under the United insurers’ health plans, members pay a higher premium for the right to use out-of-network doctors. In exchange, the insurers reportedly promise to cover up to 80% of either the doctor’s full bill or of the “reasonable and customary” rate depending upon which is cheaper. The Attorney General’s investigation found that by distorting the “reasonable and customary” rate, the United insurers were reportedly able to keep their reimbursements artificially low and force patients to absorb a higher share of the costs. Cuomo’s investigation also found a clear example of the scheme: United insurers knew most simple doctor visits cost $200, but reportedly claimed to their members the typical rate was only $77. The insurers then applied the contractual reimbursement rate of 80%, covering only $62 for a $200 bill, and leaving the patient to cover the $138 balance. The United insurers and many other health insurance companies relied on the Ingenix database to determine their “reasonable and customary” rates. 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.