Investigation Reveals Majority of Insurers Underpaying Claims

When American consumers purchase most products and services, they know up-front what the cost will be; clothing has price tags, grocery stores have shelf tags, and restaurant menus display their prices. But when it comes to health-care costs, consumers are left in the dark, unsure of how much their physician charges for services rendered and not knowing how much of those fees their insurance provider, if they have insurance at all, will cover. So how does a consumer know if they are getting the proper reimbursement?

The bottom line is: THEY DON’T, and a report out of U.S. Senator Jay Rockefeller’s Commerce Committee shows that this lack of transparency has forced Americans to pay billions of dollars for medical bills that should have been covered by their insurance. “People don’t know what they’re buying, what they’re getting, why they’re getting underpaid, why they’re being forced to pay more of the difference,” Senator Rockefeller said as he opened a hearing on underpayments to consumers on Wednesday.

Senator Rockefeller’s investigation revealed that roughly two-thirds of the health insurance companies in the U.S. have been using a faulty database to determine what the industry calls “usual and customary” reimbursement rates for doctors outside their insurance network. The flawed database is operated by Ingenix, the only commercial source of such data.

For more than ten years, Ingenix has gathered data from insurance companies to determine the typical cost for medical care received outside their networks. But investigators say insurers deliberately skewed data to underestimate the cost of services, driving up out-of-pocket expenses for patients. According to the Commerce Committee’s report, in one instance Aetna omitted the highest 20 percent of medical charges before sending data to Ingenix. Once at Ingenix, officials there “scrubbed” the figures again to further temper charges. “The result of this practice is that American consumers have paid billions of dollars for health care services that their insurance companies should have paid,” the report states.

Earlier this year, a probe by New York Attorney General Andrew Cuomo found that calculations used by Ingenix to determine reimbursement rates produced numbers that were as much as 30 percent lower than actual market rates. Cuomo described it as “a scheme by health insurers to defraud consumers by manipulating reimbursement rates.” About a dozen New York insurers, including UnitedHealth, have already reached settlements with Cuomo, which consists of not only changing their practices but also funding the replacement of Ingenix with a new not-for-profit database.

At recent committee hearings, health care specialists testified to the underhanded practices insurers use to avoid responsibility and mislead consumers about benefits. One of those witnesses was Wendell Porter, who until early last year was vice president for corporate communications at CIGNA, and is now blowing the whistle. “What we have today, Mr. Chairman, is Wall Street-run health care that has proven itself an untrustworthy partner to its customers, to the doctors and hospitals who deliver care and to the state and federal governments that attempt to regulate it,” Potter said.

Potter told lawmakers that insurers deliberately use difficult language to confuse and mislead consumers about their benefits. “Insurers know that policyholders are so baffled by those notices they usually just ignore them or throw them away,” he said. “And that’s exactly the point. If they were more understandable, more consumers might realize that they are being ripped off.” Potter urged senators to pass the public health option proposed by President Obama, saying it would bring more transparency and quality to the health insurance industry. The idea is strongly opposed by Republicans and insurance industry executives, who say a public plan would drive private companies out of business.

Senator Rockefeller and other lawmakers are calling for more transparency, overall, in the health insurance industry. “Deceptive practices by insurance companies are not only misleading and widespread, they are absolutely unacceptable to me and I won’t give up the fight for consumers until we bring this to a stop forever,” Senator Rockefeller said in a statement. “We are at the very precipice of doing something or doing nothing or doing something poor or doing something really good in the national debate on health care reform. We have to do it right.”