Many group health plans provide that reimbursement of “out-of-network” claims will be based on a percentage of the “reasonable and customary” (R&C) charges. In most cases, the determination of an R&C charge is based on data obtained from third-party sources. A new investigation by the office of the New York Attorney General (NYAG) should prompt plan administrators to take a second look at the source of such data.
The NYAG began an industry-wide investigation after receiving numerous complaints concerning the data provided by Ingenix, a leading provider of R&C data. Ingenix is a wholly owned subsidiary of UnitedHealth Group (UHG). The complaints alleged that inaccuracies in the Ingenix data resulted in significantly lower reimbursements to providers. The NYAG claimed that the major health insurers have a conflict of interest in using the Ingenix database because the insurers, who provide some of the underlying billing information on which Ingenix bases its R&C rates, have an incentive to manipulate the data they submit to Ingenix.
Both UHG and Aetna, another major insurer that uses Ingenix data, have entered into agreements with the NYAG to fund an independent, not-forprofit entity to develop and maintain a database on which R&C reimbursement levels will be based. UHG has agreed to contribute $50 million to the establishment of the new entity, and Aetna has agreed to contribute $20 million. The agreements also call for the new entity to establish a website so that consumers can easily determine in advance the out-of-network reimbursement rates in their own geographic areas.
At the same time, UHG has also agreed to pay $350 million to settle a class action lawsuit brought on behalf of providers and plan participants alleging similar Ingenix inaccuracies and under-reimbursements for out-of-network claims. Plan sponsors should consult with legal counsel to determine whether the plan and its participants are part of the class that will share in these settlement funds.
Under the terms of the agreements with the NYAG, UHG and Aetna may continue using Ingenix data until the new entity is operational, but they must clearly communicate that Ingenix is owned by UHG and clarify how out-of-network reimbursements are calculated. Plan sponsors should determine whether their insurers and/or third-party administrators use Ingenix data to determine out-of-network reimbursement rates and, if so, whether to continue that relationship.
Unfortunatley, the fallout from the NYAG investigation is likely to increase plan costs, particularly if the overall out-of-network reimbursement rates rise as a result of the new entity’s independent determination of R&C charges.