Attorney General Cuomo Expands Historic Health Insurance Reform; Two Leading Insurance Companies End Relationship With Ingenix

BUFFALO, N.Y. (February 10, 2009) - Attorney General Andrew M. Cuomo today announced the expansion of his historic reform of the nationwide healthcare reimbursement system. Cuomo has reached an agreement with Independent Health (“Independent”) and HealthNow NewYork, Inc. (“HealthNow”), two of the Buffalo area’s largest health insurers, in his ongoing drive to end industry-wide conflicts of interest and generate fair reimbursement rates for working families nationwide. In a separate agreement, HealthNow also adopted the Attorney General’s Doctor Ranking Model Code, which has become the national standard for the industry on this issue.

Independent and HealthNow are both non-profit health insurers covering patients across Western New York and Upstate. Independent covers 365,000 people across the eight counties of Western New York. Headquartered in Buffalo, NY, HealthNow covers 800,000 patients across the state and does business as BlueCross BlueShield of Western New York, BlueShield of Northeastern New York, HealthNow New York, and MedUS Services, a Medicare claims processing operation in Binghamton.

Both companies have agreed to end their relationships with the conflict-of-interest ridden Ingenix database - a defective system insurers use to calculate reimbursement rates for patients who go out of network. Independent did not contribute data to Ingenix, but has proactively signed onto the Attorney General’s agreement, while HealthNow was a contributor to the database.

“With two of the largest insurers in the Buffalo area signing on to our agreement today, we’ve taken an enormous step towards protecting consumers across Western New York from the skewed rates of a corrupt system,” said Attorney General Cuomo. “Companies like Independent and HealthNow that proactively embrace reform are an essential part of our continued momentum towards change that is nationwide and industry-deep.”

Earlier this month, Attorney General Cuomo announced sweeping reforms to end the manipulation of reimbursement rates at the expense of patients across the country. After a year-long investigation revealed that the health insurance industry relied on a faulty database to help set rates, Cuomo reached groundbreaking agreements with UnitedHealth Group Inc. (NYSE: UNH), the owner of the Ingenix database and the second-largest insurer in the country, along with Aetna (NYSE: AET), the nation’s third-largest health insurer. Last week, Cuomo announced the expansion of his reform efforts to Upstate New York, after securing an agreement with the non-profit insurer MVP Health Care, Inc. in Albany. On the same day, the Attorney General announced his intent to sue Albany-based Capital District Physician’s Health Plan (CDPHP) for consumer fraud, as the company has failed to embrace reform and discontinue use of Ingenix.

Attorney General Cuomo’s investigation concerned allegations that as a subsidiary of UnitedHealth, Ingenix had a vested interest in helping set rates low, so companies could underpay patients for out-of-network services. The investigation revealed that the database intentionally skewed “usual and customary” rates downward through faulty data collection, poor pooling procedures, and the lack of audits, meaning consumers were forced to pay more than they should have. The investigation found the rate of underpayment by insurers ranged from ten to twenty-eight percent for various medical services across the state. The Attorney General found that having a health insurer determine the “usual and customary” rate - a large portion of which the insurer then reimburses - creates an incentive for the insurer to manipulate the rate downward. The establishment of a new database, independently owned and operated by a nonprofit organization, is designed to remove this conflict of interest.

Under the agreement secured with UnitedHealth, the database of billing information operated by Ingenix will close. United also agreed to pay $50 million to a qualified nonprofit organization that will establish a new, independent database to help determine fair out-of-network reimbursement rates for consumers throughout the United States. Cuomo’s agreement with Aetna, which will also end their relationship with Ingenix, secured another $20 million for the database.

Under the terms of today’s agreement:

  • Independent and HealthNow will cease using the Ingenix databases to calculate out-of-network reimbursement rates;
  • Independent and HealthNow will also amend their member disclosures to provide clearer information to its members about their method of determining reimbursement rates;
  • If Independent and HealthNow continue to promise its members that they will be reimbursed based on “usual and customary rates,” Independent and HealthNow will use the new database;
  • Independent Health will contribute $475,000 over a five-year period to help fund the new, independent database.
  • HealthNow will contribute $212,500 over a five-year period to help fund the new, independent database. HealthNow's payment is lower because it will also contribute its valuable data to the new database.
  • A nonprofit will own and operate the new database, and will be the sole arbiter and decision-maker with respect to all data contribution protocols and all other methodologies used in connection with the database;
  • The nonprofit will develop a website where, for the first time, consumers around the country can find out in advance how much they may be reimbursed for common out-of-network medical services in their area;
  • The nonprofit will make rate information from the database available to health insurers;
  • The nonprofit will use the new database to conduct academic research to help improve the health care system;
  • The nonprofit will be selected and announced at a future date

In February 2008, Cuomo announced that he had issued subpoenas to the nation’s largest health insurance companies that use the Ingenix database, including Aetna, CIGNA and WellPoint/Empire BlueCross BlueShield (NYSE: WLP). The Attorney General’s industry-wide investigation is ongoing.

Dr. John Gillespie, Chief Medical Officer of Independent, said: “In keeping with our history of working cooperatively with the Attorney General’s office, we have signed this agreement because Independent Health shares the Attorney General’s goal of providing consumers with more transparent and independent information on medical costs and we recognize the Attorney General’s concern about conflicts of interest in the Ingenix database. This agreement furthers our leadership role in transforming health care by helping to give consumers resources they need to make more informed health care decisions.”

Jay I. Pomerantz, M.D., Chief Medical Officer and Senior VP of HealthNow, said: “The creation of an independent entity that establishes and publishes the usual and customary rates health plans utilize to pay for out-of-network services will provide additional transparency and rid the industry of the conflicts of interest presented by the Ingenix database. HealthNow supports the opportunity to introduce health care reform to members across New York, and believes that both consumers and providers will benefit whenever we can assist them in making more informed decisions about their health.”

Nancy Nielsen, M.D., President of the American Medical Association, said: “The American Medical Association is pleased that both Independent and HealthNow will now join United Healthcare, Aetna and MVP in working to restore fair medical bill reimbursements to patients and physicians. The solution proposed by New York Attorney General Cuomo will remove the grossly flawed database from the control of health insurers and trust its repair and operation to a not-for-profit institution.”

Chuck Bell, Programs Director of Consumers Union, said: “The plan set out in the agreements with HealthNow and Independent Health will help bring comprehensive, sweeping reform to the out-of-network reimbursement system. By establishing a new nonprofit organization to maintain the database on “usual and customary charges,” consumers can have confidence that out-of-network charges will be calculated and maintained in a fair, up-to-date and ethical way.”

Hillary Clarke, Regional Advocacy of the Eastern Division of the American Cancer Society, said: "Your financial strength shouldn't be as important as your physical strength when it comes to overcoming cancer. But, sadly, report after report has shown cost can be a huge barrier to survival. Out-of-network referrals can be critical for some patients and we fully support any effort to reform and reduce cancer's terrible costs. The American Cancer Society applauds Attorney General Cuomo's visionary efforts to reform this broken system and we commend Independent Health and HealthNow for their leadership.”

Doctor Ranking Agreement

Also today, HealthNow signed an agreement with the Attorney General adopting the Attorney General’s Doctor Ranking Model Code. Under the Doctor Ranking Model Code, the company will:

  • Ensure that rankings for doctors are not based solely on cost and clearly identify the degree to which any ranking is based on cost;
  • Use established national standards to measure quality and cost efficiency, including measures endorsed by the National Quality Forum (NQF) and other generally accepted national standards;
  • Employ several measures to foster more accurate physician comparisons, including risk adjustment and valid sampling;
  • Disclose to consumers how the program is designed and how doctors are ranked, and provide a process for consumers to register complaints about the system;
  • Disclose to physicians how rankings are designed, and provide a process to appeal incorrect rankings; and
  • Nominate and pay for the Rx who will oversee compliance with all aspects of the new ranking model.

“I commend HealthNow for joining other major insurers in adopting our Doctor Ranking Model Code,” said Cuomo. “The core principles of the Code are transparency and accuracy of information for consumers and doctors, and oversight of the process. The Code was developed with the input of national consumer advocacy and medical organizations, and it is now the national standard in this emerging area.”

Several of the nation’s largest health insurance companies have agreed to adopt Cuomo’s Doctor Ranking Model Code and use it nationwide: CIGNA Healthcare, Aetna, Empire Blue Cross Blue Shield, UnitedHealthcare, Oxford Health Plans, Group Health Incorporated (“GHI”) and Health Insurance Plan of Greater New York (“HIP”), which are subsidiaries of EmblemHealth, Inc., Excellus, and MVP Health Care and its affiliate Preferred Health.

The agreement announced today regarding the Ingenix database is the result of an investigation by Deputy Chief of the Health Care Bureau James E. Dering, Senior Trial Counsel Kathryn E. Diaz, and Assistant Attorneys General Brant Campbell and Sandra Rodriguez, under the direction of Linda A. Lacewell, the head of the Attorney General’s Healthcare Industry Taskforce. The doctor ranking agreement is part of a separate industry-wide initiative by the Taskforce.

In January, Cuomo also issued a report on his investigation, “Health Care Report: The Consumer Reimbursement System is Code Blue.” The report highlights the conflicts of interest and other defects in the current system and calls for the reforms announced today. To access the report, get consumer tips for out-of-network care, or to file a complaint, please visit http://www.ag.ny.gov/.

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