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February 14, 2008
NY Investigates Insurers over Reimbursements for Medical Expenses

New York Attorney General Andrew M. Cuomo says that he is conducting an industry-wide investigation into how health insurers compute reimbursement rates for out-of-network medical expenses.

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Cuomo also says he intends to sue UnitedHealth Group and four of its subsidiaries, including Ingenix, Inc., the nation's largest provider of healthcare billing information. Cuomo alleges that Ingenix operates a defective database that most major health insurance companies use to set reimbursement rates for out-of-network medical expenses.

In addition, he alleges that two subsidiaries of UnitedHealth 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 promise to cover up to 80 percent of either the doctor's full bill or of the "reasonable and customary" rate depending upon which is cheaper.

Cuomo says that 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, Cuomo alleges, the "reasonable and customary" rates produced by Ingenix were significantly lower than the actual cost of typical medical expenses.

Cuomo's notice of intent to sue names the following companies: UnitedHealth Group and its subsidiaries, United HealthCare Insurance Company of New York, Inc., United Healthcare of New York, Inc., United Healthcare Services, Inc., and Ingenix.

UnitedHealth Group released a statement denying the allegations.

"The reference data is rigorously developed, geographically specific, comprehensive and organized using a transparent methodology that is very common in the health care industry," the statement says. "We believe these reference tools add substantial value to the healthcare system by providing all participants--providers, payers and consumers--with a long-standing transparent, consistent, and neutral line of sight into the health care market, its costs and performance."

Cuomo also issued 16 subpoenas to the nation's largest health insurance companies, requesting documents showing how the insurers compute reasonable and customary rates, copies of member complaints and appeals, and communications with members and between Ingenix and the insurer on the issue.

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