HealthLawProf Blog

Editor: Katharine Van Tassel
Concordia University School of Law

Thursday, February 14, 2008

Health Insurers in the Spotlight

The LA Times reports on the recent investigations of health insurers.  Lisa Girion writes,

With medical costs rising, record numbers of people losing their coverage and healthcare at the top of the domestic agenda, health insurers found themselves Wednesday in the cross-hairs of regulators, elected officials and law enforcement in California and across the nation.

New York Atty. Gen. Andrew Cuomo said the nation's largest health insurers have rigged rates they pay for physician visits, leaving patients with higher medical bills.  In Los Angeles, City Atty. Rocky Delgadillo has assembled a team of investigators and prosecutors to probe industry practices such as canceling patients' coverage after they get sick. Today he is set to unveil a first-of-its-kind website to solicit information about insurance cancellations and delays and denials of treatment.

The announcements follow a yearlong string of fines and citations against insurers in California. Just last month, amid widening state probes, state Insurance Commissioner Steve Poizner decided to seek as much as $1.3 billion in penalties from Cypress-based PacifiCare as a result of widespread claim problems. . . .

Insurers defend their business practices, saying one of their top goals is to keep health insurance affordable for all. In fact, they say, many of the practices in the spotlight actually are good examples of their value in holding down healthcare costs.  "At a time when the costs of medical services soar above inflation every year, health insurance plans' tools and techniques are mitigating the damage done to consumers and employers," said Karen Ignagni, president of America's Health Insurance Plans, a Washington-based trade group, speaking about the Cuomo announcement. . . .

Cuomo alleged in a news conference Wednesday that a company called Ingenix helped its parent, UnitedHealth Group, and other insurers low-ball payments to physicians who provided care to patients outside their healthcare networks.  The company sells data to insurers who decide how much they will reimburse patients for out-of-network visits. If insurers pay less, physicians may bill patients for the difference.  For example, he said, a market survey showed physicians typically charge $200 for a routine visit. But the insurers, using Ingenix data, claimed to their members that the typical rate was $77. Applying the 80% reimbursement rate, they covered $62, leaving the patient to pay $138 out of pocket.

"Getting insurance companies to keep their promises and cover medical costs can be hard enough as it is," Cuomo said in a news conference. "But when insurers like United create convoluted and dishonest systems for determining the rate of reimbursement, real people get stuck with excessive bills and are less likely to seek the care they need."  Cuomo said Ingenix data are used by the nation's five largest insurers, including UnitedHealth, which purchased California's PacifiCare two years ago. Cuomo added that the alleged scheme could affect 70% of Americans with health coverage. His office issued subpoenas for information to several big health insurers, including Health Net Inc., Aetna Inc. and Cigna Corp.

The insurers pledged to cooperate with the investigation. United defended the integrity of Ingenix data, saying it was "rigorously developed, geographically specific, comprehensive and organized using a transparent methodology that is very common in the healthcare industry." . . . .

Insurance trade groups said the use of data to standardize medical reimbursements shows the value insurers bring to healthcare.  "It's unfortunate that today's media event ignored these facts and 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," said Ignagni of America's Health Insurance Plans. "As medical costs continue to soar, this is the discussion that public policy leaders need to have."

Working for several months, the Los Angeles city attorney's task force is focused on industry practices that affect patients financially as well as medically.  The website to be launched today -- "> -- invites patients, physicians and hospitals, as well as current and former insurance employees, to provide information on problems they've had with insurers.

"At a patient's most vulnerable moment, the insurance company won't pay for care or will cancel the policy altogether," Delgadillo said. "Industry schemes to maximize profits at the expense of patients are unfair and unlawful, and must be stopped." . . .

The city attorney could seek restitution for victims -- such as restoration of insurance coverage -- as well as civil penalties and other remedies. The task force was initially focusing on insurers' widely disputed practice of canceling patients with individual policies after they submitted claims for medical care.

Here is some further information on the New York reimbursement suits.

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