By David S. Hilzenrath
Washington Post
Wednesday, June 24, 2009
Health insurers have forced consumers to pay billions of dollars in medical bills that the insurers themselves should have paid, according to a report released today by the staff of the Senate Commerce Committee.
The report is part of multi-pronged assault today on the trustworthiness of private insurers by Commerce Committee Chairman John D. Rockefeller IV (D-W.Va.). It comes at a time when the insurance industry is battling efforts to offer consumers a public alternative to private health plans.
At a hearing this afternoon, Rockefeller’s panel is slated to air allegations by a former industry insider that insurers have put profits before people’s health.
The report released this morning alleges that insurers have systematically underpaid for so-called out-of-network care. The issue has been brought to light in past litigation and investigations, including a probe by New York Attorney General Andrew Cuomo.
Cuomo described it last year as “a scheme by health insurers to defraud consumers by manipulating reimbursement rates.” A dozen insurers have reached settlements with Cuomo agreeing to change their practices.
Many Americans pay higher premiums for the freedom to go outside an insurer’s network of doctors and hospitals. When they do, insurers typically pay a percentage of what they call the “usual and customary” rates for the services. How insurers determined the usual rates had long been opaque to consumers and difficult if not impossible for them to challenge.
As it turns out, insurers typically used numbers from Ingenix Inc., which was a wholly owned subsidiary of the big insurer UnitedHealth Group. As such, Ingenix had an incentive to produce benchmarks that low-balled usual and customary rates and shifted costs from insurers to their customers, the report said.
Making matters worse, Ingenix got all of its data from the same insurers that bought its benchmark information, the report said. Insurers that contributed data to Ingenix often “scrubbed” their data to remove high charges, and Ingenix further manipulated the numbers, removing valid high charges from its calculations, the report said.
Cuomo found that insurers systematically under-reimbursed New York consumers by up to 28 percent, the report said. Earlier this month, New York’s Department of Insurance issued a regulation prohibiting insurance companies in New York from obtaining data on usual and customary charges from anyone with a conflict of interest.
In March testimony to Rockefeller’s committee, UnitedHealth Group’s chief executive expressed regret that there was a conflict of interest inherent in his company’s relationship with Ingenix, the report said.
But chief executive Stephen J. Hemsley also said UnitedHealth stands by “the integrity of the Ingenix data” and the way UnitedHealth “used the data to make reimbursement decisions.” He said the company worked with Cuomo to transfer its databases to an independent, nonprofit entity.
Ingenix bought one of its original databases in 1998 from the Health Insurance Association of America, a precursor to the industry’s main trade association and lobbying group.