Unpacking the Ingenix Settlement

Earlier this week, New York Attorney General Andrew Cuomo  announced a "victory" in his battle with the insurance industry over how out-of-network physician claims are paid. Cuomo had argued that the industry’s use of its out-of-network "customary and reasonable" database "defrauded" consumers and he sued the database’s manager, United Health’s Ingenix, over the controversy.

In a February 2008 post I said, "In a few months, we will hear that Ingenix paid a big fine and agreed to fix something (that no one will understand)  and Cuomo will have another notch in his belt."

Here’s how the settlement will work: Ingenix will pay $50 million to
set up an independent not-for-profit to operate the customary and
reasonable database. The industry gets to continue determining what
customary and reasonable
physician charges are through this non-profit and just exactly how they
do it will continue to be done by systems gurus the way systems gurus
do things–pretty much in a "black box." While an undetermined
university will operate the system, the industry, who will finance it,
will presumably have a great deal of input into
it. The industry’s use of the database will be more defensible since
one of its own is no longer arguably directly controlling the entity.

$50 million is peanuts compared to the out-of-network customary and reasonable savings
any one of the big health plans achieves every year and this settlement
makes the ability of state medical societies and trial lawyers to
attack the system much harder.

What will be better is that
consumers, presuming they know about the new "transparency" website,
will be able to go on-line to see what their allowable charges will be
in advance. So, if Joe Middle America is on vacation in Orlando and
needs to go out-of-network to the emergency room,
prior to rushing off for treatment they can go find a computer, find
the website, and shop around for emergency rooms that have the lowest
out-of-network payments. Gosh, Andy, thanks!!!

The big losers
here are the docs. The result is going to be about the same and their
medical societies will now have less reason to challenge the customary and reasonable system than they did before.

"In a few months, we will hear that Ingenix paid a big fine and
agreed to fix something (that no one will understand)  and Cuomo will
have another notch in his belt."

Why poor Andy is being passed over for the Senate I just don’t know!

Robert Laszweski has been a fixture in Washington health policy
circles for the better part of three decades. He currently serves as
the president of Health Policy and Strategy Associates of Alexandria,
Virginia. Before forming HPSA in 1992, Robert served as the COO, Group
Markets, for the Liberty Mutual Insurance Company. You can read more of
his thoughtful analysis of healthcare industry trends at The Health Policy and Marketplace Blog.

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12 replies »

  1. Is it possible to get back any of the money that we the insured paid out of pocket in the past.

  2. Bob,
    While I agree that there is serious problem with how the information acquired from the PHCS database is used, evidence shows that Ingenix did not manipulate data and that the manipulation occured at the insurer level.
    Having been involved in this industry since 1976, I am fairly familiar with UCR development. The database itself was created first by HIAA in 1973 in an attempt to normalize self-reported charges by providers. Ingenix purchased the database in 1998 and essentially updates data and reports/sales data sets requested by insurers using a methodology that has been widely accepted and deemed sound. However, as you will note in the following link to a claim arbitrated through the State of NJ, while Ingenix reported correctly the UCR amounts through the PHCS database, the insurer reduced these amounts considerably when using the data for reimbursement. The State ruled to use Ingenix’ data. http://www.state.nj.us/dobi/chap352/selectarbitration/nj07_0255_r.pdf
    Since UnitedHealth Group owns both Ingenix and United Healthcare it was much less damaging to have Ingenix take most of the fire (scapegoat) than its more profitable insurance company.
    Yeah, too bad Cuomo did not get Hilary’s job. After all he does have a very high popularity rating with the people of NY – especially those against insurance companies (those insureds who go out-of-network). Cheers.

  3. With nation wide single-pay administered through the states there would be no need to fight over out-of-network as everyone would be in-network. Nate is right about the fact that no matter what you do you lose in this system, if you want to call it a system.

  4. Darrell,
    If only real life worked the way logic and the law said it should. We are a TPA, process insurance claims, we aren’t an insurance company, we don’t assume any risk, we just push paper on behalf of of employers and insruance companies.
    We had offices in NV and CA with a particilar client in a small town in UT. Provider did some procedure that wasn’t covered, we denied the claim and thus it was patient responsibility. The provider sued us in court. Not the employee cause that would look bad. Not the employer because they where local and that wouldn’t go over well. They sued us, it’s not even our money that pays claims, per ERISA we couldn’t pay the claim if we wanted to. Also as an ERISA plan Federal Law says it had to be filed in Federal court. Welcome to small town justice, not only did the judge refuse to throw it out and make them file in the proper jurisdiction he ruled against us. We got dragged into some small town court 500 miles away from our closest office and lost when not a single cause of action was legit.
    Thats the reality, every doctor who doesn’t like your 200% of medicare allowable will drag you into the local court and eat your lunch. Another example of the idiot tax our system is burdened with, even when you follow the law you lose in our system.

  5. The best way to fix this is:
    1. Have a broad enough network available so that you REALLY have to work hard to find an out-of-network provider. We have 3 tiers: (a) directly-contracted local providers (where we have the greatest leverage); (b) a state-wide rent-a-network that we use on a “so-called” %-of-savings basis that includes almost every hospital, physician and witch-doctor in the state; (c) an even larger wrap-around network (something like Beech Street) for the rest of the country. At this point, almost everybody is IN network.
    2. For those rare providers who just refuse to contract with anybody (and therefore agree to a reimbursement rate in advance), build a “cap” into your plan/policy that is NOT based on UCR; base it on Medicare instead. State that, under no circumstances will the plan ever pay more than Xty % of Medicare (150%, 200%, whatever). Since the (rare) out-of-network provider will not be subject to any contract, he will not be barred from charging whatever he wants (3000% of Medicare???). However, he will look like the greedy “wicked” person that he, in fact, is.
    3. The final cherry on this sundae is the willingness to retain and pay an attorney to help defend your plan member when the provider refers the unpaid bill (you paid 200% of Medicare; they want 3000% of Medicare) for collection. Take it to court. Get it onto the nightly news on ABC, CBS, NBC, CNN, MSNBC and in the local newspapers every morning. Explain that the case is all about provider greed (“gee, we’ve already paid them TWICE what they accept from Medicare as payment in full. Now they want more.”). Soon, you’ll have citizens picketing outside the providers’ office.

  6. What’s frustrated me most about coverage and discussion of the issue is that nobody mentions that UCR is probably close to a reasonable approximation of a fair price for services, but provider billed charges are 2x to 3x what a fair price is. We’re all bickering over UCR, while the patient going out of network is virtually guaranteed to have to pay 100% to 200% of the costs of his services out of pocket, regardless of what percentage the payor has decided to pay of UCR or what level they set UCR at.
    News coverage feigns outrage over the 5% the insurance company is screwing the patient over for without looking at the 50% the doctor is screwing the patient over for. Fix billed charges and this issue wouldn’t matter as much.

  7. Nate is on target. In fact, even without the $50 million fine the settlement does not do anything to fundamentally address cost issues. While the settlement may improve transparency to some extent (a good thing) any increase in insurance plan payments to providers will inevitably show up as premium increases. If N.Y. Attorney General Andrew Cumo was intellectually honest, he would have acknowleged this in his press release announcing the settlement.

  8. Pat you really have no clue what UCR is do you? There is no fraud corruption or abuse involved. If you understood the system before you jumped on your soapbox you might actually effect the status quo.
    UCR is a number which in of its self has no meaning or relevance. Carriers, Payors, Plans et al decide and disclose at what percent of that number they will reimburse non ppo doctors. The Ingenix number has no impact on provider payment or participant cost. The percentile the payor reimburses at determines the allowable.
    There is no science to how the percentile is picked, it is a combination of what customers can afford and participants will bear. If you force Ingenix to raise, lower, or recalculate their base numbers that does nothing to stop the payors and plans from changing the percentile they use to accomplish the same outcome they had before.
    This suit has all the stupidity of suing car manufactures for phony MSRP because dealers discount it heavily. You can change MSRP but that doesn’t stop the dealer from discounting.
    A perfect example of why healthcare is so expensive, the huge idiot tax we pay. Igenix pays a $50 million dollar fine. So now they are going to charge the plans and payors $50 million more to recoup it. That means we are going to have to charge our clients 120% to recover the added cost to us, premium tax means the states get their cut to, which means the American Healthcare consumer just blew $60 million so Cuomo could get patted on the back. Nothing better we could have used that for right?

  9. I am frankly appalled. This situation exposes a Pandora’s Box of issues that point to some of the key reasons why Healthcare reform is needed in the USA and now.
    For some time I have been working on breakthrough plans and ways to dramatically and positively change the Healthcare status quo. The use of technology has been my primary focus but the business conscious part of my brain has always reminded me of an undisputable fact; that one of many “wicked” problems that exist today is that there are too many hands stuck in the Healthcare cash register. And here we have one such company in one of those sectors, health insurance, apparently not only profiting on the back of citizens needing care but abusing the very people they are supposed to serve.
    If proven true these allegations point to a massive defrauding of the consumer over 10 years and no doubt involving billions of dollars. If true, they show that at best bad management practices were at play and at worst collusion and corruption existed. A settlement of $50 million in my humble opinion is laughable and only scratches the surface of what should be done to any confirmed perpetrators.
    If I was advising President Obama on Healthcare reform I’d advocate looking at the heart of this “wicked” problem and those many hands in the Healthcare cash register as a pivot point where real change can be made. I would focus on those companies who suck money out of the direct line provision of care for consumers and patients. And if a “universal care for all” paradigm is where our President wishes to take us, he needs to seriously consider to the relevancy, need, nature and role of healthcare insurance going forward.

  10. I predict the Ingenix settlement will do almost nothing to reduce the confusion, anger, and frustration when health plan subscribers use out-of-network providers. As long as there are consumers who insist on retaining the option of going out of network for elective services (as well as emergency services) and providers with sufficient market power to avoid negotiated fee schedules this problem will not go away.