Major health insurers accused of rigging rates

The nation’s largest health insurers – including UnitedHealth Group, Health Net, Aetna and Cigna – have been cheating patients by rigging the rates companies pay physicians and forcing consumers to pay higher medical bills, New York law enforcement authorities said today.

New York Atty. Gen. Andrew M. Cuomo said the alleged scheme could affect 70% of Americans with health insurance coverage.

At the heart of the case, he said, is Ingenix, a company that sells data the insurers use to decide how much they will reimburse patients for out-of-network visits to physicians.

Cuomo said that insurance companies typically use the data to lowball the amount they pay these out-of-network doctors and that most policies require consumers to make up the difference.

Ingenix data are used by the nation’s five largest insurers, including its parent company, UnitedHealth Group, which also operates PacifiCare in California.

Cuomo notified Ingenix, UnitedHealth and three other subsidiaries today that he intended to sue them over practices he said were unfair, riddled with conflicts of interest and costly for consumers.

United said it would cooperate with the investigation and defended the integrity of Ingenix data, saying it was “rigorously developed, geographically specific, comprehensive and organized using a transparent methodology that is very common in the healthcare industry.”

Cuomo’s office also delivered subpoenas demanding information from 16 other insurers that do business with Ingenix, including Aetna, Cigna and a New York-based subsidiary of WellPoint Inc., the parent of Blue Cross of California.

WellPoint’s New York subsidiary, Empire Blue Cross Blue Shield, said it had relied on the Ingenix data for many years because it was “one of the only companies that could provide” it. Empire also said it was cooperating.

“We have been providing information for the past several years to the office of the attorney general as they reviewed various related market questions,” Empire Chief Executive Mark Wager said in a statement.

If any of the information is found to be inaccurate or improperly determined, he said, the company would consider all remedies to protect its members in New York.

It was not clear whether Blue Cross of California and other WellPoint companies relied on the Ingenix billing data in question.

The allegations come on the heels of a complaint filed against United by California Insurance Commissioner Steve Poizner last month. Poizner is seeking a $1.3-billion fine after his investigators found 133,000 alleged instances of mishandled patient claims by United after its purchase of PacifiCare in 2006.

Noting the California allegations, American Medical Assn. President-elect Nancy Nielsen said Cuomo’s complaint suggested a broader pattern of improper business practices and “calls into question the validity of a system that health insurers have used for years to reimburse physicians and their enrolled members.”

Cuomo said his investigation targeted different practices than were under scrutiny in California. But he said the two agencies could share information as necessary. He also said he would seek changes in insurers’ reimbursement practices that would help patients nationwide.

The investigation began six months ago and found that Ingenix operates an allegedly defective and manipulated database that most major health insurance companies use to set reimbursement rates for out-of-network medical expenses, New York state officials said.

New York officials said 70% of people with health insurance are on plans that require them to pay a higher fee for the right to use physicians who are not under contract with their carrier. Such out-of-network arrangements often require the patient to pay 80% of “reasonable and customary” rates for physician services.

The investigation found that poor and distorted data from Ingenix allowed insurers to keep their reimbursements down by lowballing local market rates for various types of physician services, investigators said.

For example, the investigators said, insurers knew that most physicians charged $200 for a routine visit. But the insurers, using Ingenix data, claimed to their members that the typical rate was $77. Applying the 80% reimbursement rate, they covered only $62, leaving the patient to pay $132 out of pocket.

“Getting insurance companies to keep their promises and cover medical costs can be hard enough as it is,” Cuomo said at a news conference. “But 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.”

lisa.girion@latimes.com