Ingenix settlements: don't drop your guard

Skin & Allergy News, March, 2009 by Joseph S. Eastern

The recent Ingenix settlements have been hailed as "'an enormous step toward pricing transparency and consumerism in health care," but given the insurance industry's track record in sidestepping similar agreements, physicians have little cause to celebrate, or to lower their guard.

If you haven't been following this issue, the controversy centers around UnitedHealth Group and its wholly owned subsidiary, Ingenix, which for the last decade has controlled the insurance industry's pay rates for out-of-network care. In 2000, the American Medical Association sued UnitedHealth and Ingenix, charging they were routinely low-bailing "usual, customary, and reasonable" (UCR) rates, thereby shortchanging both patients and their physicians. New York State Attorney General Andrew Cuomo subsequently launched his own investigation and filed a separate legal action.

In a typical scenario, according to the complaints, an out-of-network doctor might charge $200 for an office visit. The insurer would claim, based on Ingenix data, that the "usual and customary" fee was, say, $77, of which the insurer would pay 80%, leaving the patient responsible for the difference of $138.

Mr. Cuomo and the AMA charged that the UCR numbers, derived from claims data created and maintained by Ingenix and sold to other insurers, were fundamentally skewed in favor of the insurers themselves. It was a "closed loop," he said, tainted by an inherent conflict of interest: United and other insurers (notably Aetna) allegedly entered lower payments in the database and omitted higher ones, which lowered the resulting UCR rate by as much as 28%, Cuomo's office found.

Over a 10-year period, this cost patients and their physicians hundreds of millions of dollars. Patients were saddled with unfairly high balances, despite the fact that they had paid extra for access to out-of-network care; and physicians often did not collect those balances, because many patients assumed they were being overcharged and refused to pay them.

In January, Cuomo's office reached a settlement with UnitedHealth that requires Ingenix to scrap its database and contribute $50 million to help establish a new, independent database to be overseen by a nonprofit (and presumably impartial) third party. Two days later, United settled the AMKs class action suit, agreeing to pay $350 million to shortchanged patients and physicians. Aetna has also agreed to stop using Ingenix data and to contribute $20 million to the nonprofit entity holding the independent data (possibly Syracuse University).

The new database will be viewable by patients and doctors alike on a public Web site, theoretically allowing fast and easy determination of the "usual and customary" payment for a given service in a given area.

Many observers on the provider side have been quick to praise the agreement as a major watershed. AMA President Nancy H. Nielsen said that new, reliable data will eliminate "that wedge driven between patient and doctor." Patients will be more comfortable going out of network, she maintained, because they will have a reasonable idea of what they will have to pay out of pocket. Physicians will stand to receive fairer out-of-network compensation. There were even predictions that the balance of power in physician/health plan negotiations would shift in physicians" favor.

Physicians would certainly welcome an end to insurance companies" unilateral and secretive determination of what is fair and reasonable, but it is not at all clear that this, or any of the other promised reforms, will be realized, or that physicians" practices will be affected in any meaningful way.

Although details of the agreements have not been released, it would appear that there is little motivation for other insurers to change their ways. United and Aetna, after all, did not even have to admit to any wrongdoing.

The new nonprofit database is meant to be used industrywide, but insurance companies not bound by the Cuomo and AMA agreements will be under no obligation to do so. And while United and Aetna will be barred for 5 years from developing a competing database, the rest of the industry will have no such restriction.

Cuomo said that his office intends to pursue agreements from other insurers to use the new database, but whether that will come about, especially outside of New York State, is far from certain.

The settlements are undoubtedly a step in the right direction, but it will be months, maybe years, before we know if the new database is truly transparent or differs significantly from the old one, and even longer before we know whether anyone, patients or physicians, will see any lasting benefit.

In the meantime, given the insurance industry's long history of finding creative detours around any and all obstacles put in their path, physicians cannot afford to relax and assume that the out-of-network problem has been solved.

BY JOSEPH S. EASTERN, M.D.

DR. EASTERN practices dermatology and dermatologic surgery in Belleville, N.J.