New York's attorney general subpoenaed 16 insurers as he launched an investigation into health insurance reimbursement practices.
Led by New York Attorney General Andrew Cuomo, a phalanx of interests charged Minnetonka-based UnitedHealth and its Ingenix division with denying millions of dollars in claims for millions of Americans when they use doctors outside of their insurer's network.
Cuomo said Wednesday that he plans to sue UnitedHealth, launch an industrywide investigation into billing procedures and seek unspecified restitution for consumers. He has sent subpoenas to 16 insurers -- including the nation's five largest insurers -- that use Ingenix data to determine how rates are computed.
"This is an industrywide investigation because we believe this is an industrywide scheme to deceive and defraud consumers," Cuomo said in a New York press conference. "Ingenix is at the center of this."
UnitedHealth said it intends to "cooperate fully" in Cuomo's inquiry, but it defended Ingenix and its ability to analyze 1.3 billion fresh records of actual doctors' charges to determine a range of costs for medical procedures.
"It gives the health care marketplace a snapshot of the average cost for a given service in a given area," said spokesman Don Nathan.
Cuomo's announcement came as UnitedHealth Group, the nation's largest insurer, already was off to a rocky start with regulators in 2008. A UnitedHealth subsidiary was fined $3.5 million in California last month over problems involving the handling of medical-treatment claims, with more fines possible.
Ingenix is a $1.65 billion arm of UnitedHealth that collects, sorts and analyzes a large array of data, including therapeutic outcomes and billing information.
At the heart of Cuomo's assertion that consumers are short-shrifted by Ingenix is the common health insurance term "reasonable and customary." The term is used to describe a typical cost for treatment of a condition.
In the world of health care, insurers negotiate with providers to develop a network where there is an agreed-upon cost for procedures. In a typical 80 percent/20 percent cost-sharing arrangement, everyone basically knows what everyone is paying.
But patients who go outside of the network can pay more for those services based on the insurer's determination of "reasonable and customary."
Cuomo's investigation found that a simple doctor's visit cost $200, but that UnitedHealth -- using Ingenix data -- placed the typical rate at $77. With an 80-20 copay, the insurer paid just $62 of the $200 bill instead of $160, leaving the patient with a bill of $138 instead of $40.
"For too long, too many people have been hurt by this, and it has to stop," Cuomo said.
He also said it was a conflict of interest by UnitedHealth Group to use data provided by a company it owns to determine the reimbursement rates it will pay doctors and other providers for its customers.
Linda Lacewell, head of Cuomo's health care industry task force who led the attorney general's investigation, used the terms "deception, manipulation of data and outright fraud" to describe Ingenix and UnitedHealth's use of data.
"Our investigation revealed that Ingenix is nothing more than a conduit for rigged information," Lacewell said. "Garbage in, garbage out."
AMA weighs in
There is a profit motive for keeping reimbursements low, said Dr. Nancy Nielson, president-elect of the American Medical Association. She also complained that there is no oversight of the data provided by Ingenix.
"It's shocking and unacceptable for an insurance company to hide behind a shroud of secrecy," Nielson said. "Its another example of UnitedHealth playing by its own rules."
The AMA is involved in a lawsuit against UnitedHealth in federal court in New York over the same reimbursement issues. That suit was filed in 2000.
Cuomo said his office's probe is an independent investigation and does not involve attorneys general in other states, at least for the time being.
In its statement, UnitedHealth said Ingenix provides a reference tool to other insurers "to independently negotiate their own reimbursement schedules, establish fees for out-of-network care, negotiate provider service contracts and review claims for their members and consumers."
Minnesota's two largest insurers -- Blue Cross and Blue Shield of Minnesota and Medica do not use Ingenix to determine reimbursement rates.
On Wednesday, UnitedHealth shares closed down 2.7 percent, or $1.30, to $46.97.
David Phelps • 612-673-7269