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AIS's Health Business Daily
Featured Story February 29, 2008 N.Y.
AG Cuomo's Allegations of Flawed UCR Rates Could Lead to Rate-Setting
Rules Reprinted from HEALTH PLAN WEEK (formerly Managed Care Week), the industry's leading source of business, financial and regulatory news of health plans, PPOs and POS plans. A six-month investigation into rate-setting practices of health plans uncovered "a scheme to defraud consumers," New York Attorney General Andrew Cuomo (D) asserted at a highly publicized Feb. 13 press conference. While results of the investigation quickly earned praise from provider and consumer groups, and could lead to similar probes in other states, industry observers said the attorney general uncovered little more than the strategy behind having provider networks. At the heart of the investigation is Ingenix, Inc., a subsidiary of UnitedHealth Group that operates a database used by more than 1,500 health plans and insurers to determine "usual, customary and reasonable" (UCR) rates for out-of-network services. Cuomo contends that Ingenix operates "a defective and manipulated database." Two United subsidiaries, he said, relied on those data to "dramatically under-reimburse" members for out-of-network medical expenses. The attorney general's office intends to sue Ingenix, its parent company and three other United subsidiaries. The attorney general also issued 16 subpoenas to other health plans — including Aetna, Inc., CIGNA Corp., Humana Inc. and WellPoint, Inc. subsidiary Empire Blue Cross Blue Shield — to determine how they calculate UCR rates. Cuomo said that the United subsidiaries under investigation charge higher premiums for members who want to use non-network providers. In exchange for the higher premiums, the insurer agrees to pay up to 80% of the bill, or the UCR for similar care, depending on which is cheaper, according to Cuomo's office. However, by setting the UCR rates artificially low, members are forced to cover more of the cost, the office contends. The investigation in New York could prompt regulators in other states to launch similar probes, says Ed Kaplan, national health practice leader in Segal Company's New York City office. A similar high-profile investigation would be a politically good move for an attorney general in other states, he says. One issue that regulators are likely to consider is the regularity at which Ingenix updates its data, he says. "If they are dragging their feet and physicians are seeing inflation that isn't reflected in their database, maybe physicians have a legitimate issue," Kaplan says. The action in New York eventually could lead to the creation of formal rules that ensure consistency in the way fee schedules are established and require price "transparency" from providers and insurers, adds William DeMarco, president of DeMarco & Associates, an Illinois-based health care consulting firm. However, providers often are reluctant to share the rates they've negotiated with health plans, he adds. "They don't want their competitors to know what discounts they've agreed to in exchange for market share." Payment Strategies Keep Costs in Check The backlash against tightly controlled managed care networks in the 1990s prompted health plans to develop looser provider networks and allow for more out-of-network arrangements. But there is a different payment mechanism under those arrangements, explains Leslie Moran, a spokesperson for the New York Health Plan Association. Offering lower non-network reimbursement rates gives members an incentive to consider lower-cost in-network providers. Contractually, the health coverage is linked to the in-network status of providers, explains Sara Rosenbaum, a law professor at George Washington University School of Public Health. "I must say I am at a loss to understand the investigation," she tells HPW. "The higher premium is to get the insurer to pay something for out-of-network care. If one buys PPO coverage that allows partial payment for out-of-network care, the insurer is completely free to come up with any methodology it wants to figure out the out-of-network amount. The UCR can be whatever it desires. Otherwise the premium would be astronomical, since it is in-network use that controls pricing for the plan." Kaplan agrees and adds that health premiums would be even higher "if physicians were able to completely control [UCR] rate increases by submitting inflated and sometimes unsupported charges." According to Karen Ignagni, president and CEO of industry trade group America's Health Insurance Plans, cost-containment strategies used by health plans have helped to keep soaring coverage costs in check. The results of the New York investigation, she asserted, "failed to address the appropriateness of charging out-of-network patients $200 for 'simple doctor visits' lasting '15 minutes,' which equates to a billing rate of at least $800 an hour," she said in a prepared statement. Rosenbaum says she agrees with Ignagni. "There is no point to paying full charges for out-of-network use; it completely misses the point of having networks and preferred providers. I think the investigation is lacking in basic understanding of modern insurance products, which depend on networks and which provide little coverage for out-of-network use." Lower payments for out-of-network providers also can create an incentive for providers to join or remain in a network. "What we have seen is some providers opt to remain out of network because they feel they are able to get a much higher reimbursement," Moran tells HPW. In some cases, high reimbursement rates for non-network providers "can help erode a plan's network," she says. But Cuomo asserts that UCRs used by United's subsidiaries were dramatically lower than rates actually charged by providers. "United insurers knew most simple doctor visits cost $200, but claimed to their members the typical rate was only $77. The insurers then applied the contractual reimbursement rate of 80%, covering only $62 for a $200 bill, and leaving the patient to cover the $138 balance," according to Cuomo. Cuomo Cites Conflict of Interest United's ownership of Ingenix creates a conflict of interest, Cuomo said at his press conference. He also maintained that when members complained about low reimbursement rates, United hid its connection to Ingenix, "claiming the rate was the product of 'independent research.'" Health insurers have long been secretive about how they determine UCRs, says Lawrence Gelb, CEO of CareCounsel, a California-based firm used by employers to help employees resolve insurance claims. UCRs "have always been a black box from a consumer's standpoint." Gelb says the fact that Ingenix is owned by one of the nation's largest health plans could be seen as a conflict of interest. But, he adds, providers aren't any more likely to explain their rates to patients. He suggests that health plans should make their databases available to consumers so that they can use the data to make more fiscally responsible decisions about where they seek care. UCR Questions Are Not New A class-action lawsuit filed in 2000 by the American Medical Association (AMA) questioned United's practice of calculating UCR charges when paying out-of-network providers. AMA cited "substantial evidence" that either the [United] database is flawed or that [United] does not systematically follow that database when making payments," according to AMA's online Litigation Center. AMA filed a Fourth Amended Complaint on July 11, 2007. United moved to dismiss most of the counts, according to AMA, but the case is still pending. Aetna faced similar charges in 2001 when the American Dental Association (ADA) alleged in a class-action lawsuit, among other things, that the insurer "used improper guidelines and criteria" to determine UCR fees for out-of-network dentists, according to the complaint. Under terms of an agreement reached in August 2003, Aetna agreed that when a dentist appeals a claim because the requested fee exceeds the UCR, Aetna will "identify any external database used in making the UCR determination, and will provide to the dentist a summary of the factors known by Aetna to have been used in the development of that database," according to a November 2003 article in the Journal of the American Dental Association. In a prepared statement issued shortly after Cuomo's press conference, United said it is cooperating with the investigation. In defense of the Ingenix data, United said it is "rigorously developed, geographically specific, comprehensive and organized using a transparent methodology that is very common in the health care industry. The company added that health plans "use these reference tools 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." The way in which UCR rates are set has long been an issue between providers and insurers, DeMarco says. "You are surveying charges from what is paid by the health plans by virtue of a contract the doctor has signed. So you always have this rolling, revised number," he says. For more information about Cuomo's investi-gation, visit www.oag.state.ny.us/press/2008/feb/feb13a_08.html. To see a copy of the settlement agreement between Aetna and ADA, visit, www.ada.org/prof/advocacy/legal/aetna.asp. |
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