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State probing report of overcharges

By Carol Gentry
7/31/2009 © Health News Florida

State Insurance Commissioner Kevin McCarty confirmed Thursday that regulators are looking into whether some Florida health plans have been using a flawed database to figure out how much to pay out-of-network doctors. If so, patients may have been shouldering more than their share of the bill for years.

McCarty confirmed the inquiry in a letter to Consumer Advocate Sean Shaw shortly after Health News Florida posted a story about Shaw's request for an investigation. The Office of Insurance Regulation's press office provided a copy of McCarty's letter.

McCarty’s letter doesn’t make clear when Florida’s inquiry started, but New York’s Attorney General announced in January that the abuse was widespread. The Senate Commerce Committee held hearings in the spring and released a report in June that said millions of Americans could have been overcharged billions of dollars.

The alleged overcharges occurred in plans that used a payment schedule produced by Ingenix Inc., a subsidiary of UnitedHealth Group. New York’s probe said 10 major insurers – including United, WellPoint, Aetna, Cigna, and Humana – used the product dating back to 1994.

Blue Cross and Blue Shield of Florida was also a customer of Ingenix, according to the Senate report, “Underpayments to Consumers by the Health Insurance Industry.” But the Florida insurer told Health News Florida that it used the product only in figuring dental claims.

Ingenix, based in Eden Prairie, MN., says the company did nothing wrong. “We absolutely stand behind the integrity of our databases, the methodology used and the people who worked on them,” said Karin Olson, corporate communications director.

In any event, the health plans developed their own fee schedules from the database products they bought from Ingenix, Olson said. She said she didn't know which companies had used them in Florida.

New York Attorney General Andrew Cuomo announced an agreement with UnitedHealth Group in January that said Ingenix would stop selling the databases as soon as another organization, a not-for-profit, was able to take over the business. United agreed to put up $50 million toward that effort.

According to the Senate report, the health plans that used the Ingenix databases to develop their fee schedules include major insurers that enroll employees in both the public and private sectors. Those affected, according to the report, include members of the military and their dependents and employees of major national companies that have self-funded plans but use insurers as administrators. The Commerce Committee has asked the federal employees' health benefit plan to look into how many of its enrollees were affected.

The report says the problem arose in managed-care plans – such as preferred provider organizations (PPOs) or point-of-service plans (POS’s) -- that allowed patients to go outside the network if they were willing to pay more.

When a member of a health plan goes to a doctor (or other treatment provider) in that plan’s network, there’s no question about how much to bill because the plan and the doctor have a contract. But when doctors aren’t in a plan’s network, there can be disagreements over the payment.

Health plans tell their members that the plan will pay a certain percentage for out-of-network care. Actually, it pays a percentage of the “usual and customary charges” for that region.

Where does the plan get the numbers to determine the “usual and customary charges”? The major supplier of the data is Ingenix.

The Senate report says Ingenix fudged the numbers, throwing out the highest charges so that the charges in the database were lower than they should have been.

If that is so, then the fee schedules the plans created would have been low. This is how it would play out in a plan that is supposed to pay 70 percent for out-of-network care:

If the plan’s fee schedule says the “usual and customary” charge is $100, and that’s how much the charge actually is, the plan would pay $70 and the patient $30. But if the usual charge was really $120 and that’s how much was billed, the plan still paid $70 but the patient would pay $50.

New York Attorney General Andrew Cuomo said in January that patients in his state had been overcharged anywhere from 2 to 28 percent because of low-balling in the Ingenix databases. UnitedHealth agreed to pay $50 million to set up the not-for-profit database producer, taking Ingenix out of that business.

Separately, the company agreed to pay $350 million to settle class-action lawsuits from health plan members and out-of-network providers who said they were harmed by the databases. The agreement contained no admission of wrongdoing.

Shaw’s letter to McCarty earlier this week said: “If an investigation reveals that Ingenix has been used by insurers in Florida, I encourage you to not only recommend solutions for halting this practice but also to work toward securing restitution for Florida consumers who were underpaid by their health insurers.”

In his letter to Shaw, McCarty said the Office of Insurance Regulation “is aware of this issue in the health-care market” and has been “looking into the matter.”

--Carol Gentry can be reached at 727-410-3266 or by e-mail.