UnitedHealth Divesting Ingenix Will Have Long-Term Significance

Friday, January 16, 2009 | 0

By Joe Paduda


What Does the UnitedHealth-Ingenix Settlement with the N.Y. AG Mean?

Likely quite a bit. But not for a while.

Here's the quick and dirty: N.Y. Attorney General Andrew Cuomo has been after UnitedHealth's Ingenix subsidiary for more than a year, accusing it and other insurers of defrauding consumers by manipulating reimbursement rates.

This week, the first round came to a conclusion with the announcement of a settlement. According to the NY Times, Cuomo "ordered an overhaul of the usual, customary and reasonable (UCR) databases the industry uses to determine how much of a medical bill is paid when a patient uses an out-of-network doctor."

Ingenix will pay $50 million to help fund development of an independent database by a nonprofit; until the new vendor is selected Ingenix will continue to provide the unified charge data data through its Medical Dispute Resolution (MDR) and Prevailing Healthcare Charges System (PHCS) products. Cuomo is still pursuing negotiations with other payers including Aetna.

Cuomo voiced concern that UnitedHealth, a very large payer, owned the company that determined how much it should pay in some circumstances to some providers (out-of-network physicians, primarily) and therefore an inherent conflict of interest existed.

Some background is in order. Years ago, the health insurance industry's lobbying and service arm (Health Insurance Association of America, or HIAA) aggregated and compiled physician charge data as a service to its members. HIAA collected the data and fed it back to members, who then used the data to determine how much they should pay providers in specific areas for specific services (services defined by current procedural terminology, or CPT codes). HIAA was taken over/disappeared about a decade ago, and Ingenix took over the aggregation and distribution of such data. , which has become known as "UCR" for "Usual, Customary, and Reasonable".

For about 10 years, all was fine, at least as far as most insurers were concerned. Sure, physicians complained at times and consumers railed about the low reimbursement paid by companies citing their UCR, but the complaints didn't really make any difference until Cuomo got involved. The problem arose when a few folks in New York complained about the amount they still owed providers after their insurers had paid their portion - according to Ingenix' UCR. After a lengthy investigation, Cuomo found reason to bring charges against UHC and other insurers, and that action resulted in Tuesday's announcement.

It is too early to tell how this will affect insurers, but there's no doubt it will. Here are a couple things to consider.

•  Providers that are paid by UCR guidelines will find it much easier to challenge the reimbursement, and payers will likely be plenty nervous if all they have to stand behind is a largely-discredited Ingenix database. Expect higher payments to providers and claimants.
• Attorneys in other states may see this as a big opportunity for class action on behalf of physicians and claimants.
• Payers will redouble their efforts to negotiate reimbursement prospectively with out-of-network providers.
• Policy language is going to change, and change fast. Look for significant changes in the SPD (summary plan description) and other plan documents more clearly describing the payer's liability for non-network provider charges. There may even be some movement back to scheduled payments.
• In the work comp world, there's going to be turmoil and drama in states that do not have physician fee schedules (e.g. N.J., Mo.). Expect employers and insurers to work much harder to get claimants to network providers, where the UCR issue is much less significant.