As most of you know today, an industry-wide investigation into the reimbursement practices of health insurers has been launched by New York Attorney General Andrew M. Cuomo.  From this, a threatened law suit is in play against Ingenix regarding Ingenix’s Usual and Customary database which it sells and most insurers use, to set reimbursement rates for out-of- network medical expense.  The AG described the U&C rates as “defective and manipulated.”

So, how could U&C be a problem in the commercial group health world?  Once a plan member goes out of network in some plans they will have the lesser of 80% of billed charges or U&C rates covered under the plan, but will pay higher premiums in exchange for the “right” to go out of network.  So, a $100 bill that is generated from an office visit to an out of network provider would lead to an $80 payout from the carrier to the provider leaving the plan member to pay $20.  Yet, if U&C takes the $100.00 bill down to $60 (being the lesser), then the patient could be on the hook to pay $40 instead of the $20.  In other words, the patient will be balanced billed.

The main problem with this potential suit to me is not if Ingenix’s data base of rates are perfect, but the fact that the AG of New York could be taking away a control mechanism for keeping medical costs down.  As usual, individuals in the government don’t completely understand how the system works, and that valid controls are in place.  Using U&C simply helps to control unfair billing.  The legal system will determine the validity of the U&C rates, but the concept is a good one.

On the other side of this of course is the fact that carriers need to represent correctly their plans and understand the states they are working in.  With so many laws and rules/regulations it is a challenge to keep up with them all.  So, I understand and agree that the AG has to defend the citizens against anything that is unfair.

Also, more than likely, Mr. Cuomo saw that attacking the insurance industry is good politics.  The last time this happened in New York the situation gave them a new governor, Mr. Spitzer.