Scheme (skēm) n.
- A systematic plan of action
- A secret or devious plan
- An orderly combination of related parts
“Usual and customary” just became “Transparency and consistency”
The United Health Group, in what will become a sweeping decision (interesting interview with author here) within the Health Insurance industry, was just levied a $50M wrist slap by New York Attorney General Andrew Cuomo for their participation in “a scheme to defraud consumers by systematically underpaying the nation’s patients by hundreds of millions of dollars over the last decade.” While United denied any wrong doing and continues to stand by the database their subsidiary Ingenix developed to determine what appropriate reimbursement rates should be, they appear to be on the wrong side of both history and reality.
So what was the nature of the scheme?
Essentially, members of health plans who go “out of network” (to physicians who are not on the approved panel of the insurer) to receive care agree to pay a higher rate for this freedom of choosing their own provider. This typically shows up in the form of higher co-pays as well as having the consumer pay the out of network provider cash for the service during the visit and then seek reimbursement from the insurer later. The insurers would then use the Ingenix database to determine what the reasonable and customary charge for that particular geography should be. Therein lies the rub. Insurers were relying on a data” base, owned and maintained by another insurer, to tell them the “usually and customary” (UNC) price for that service in that area. The formula to determine the UNC was not known, was not shared, and apparently was a little too low for AG Cuomo. As a result, insurers who relied on this database systematically “under reimbursed” patients for years.
This would be like if you were an employee seeking reimbursement from your employer for travel mileage. You would submit the appropriate documentation and they would reimburse you 25 cents per mile. You never really knew how or why they arrived at 25 cents but you just took it for years. Later on, one fellow traveler complained about this and after some investigation you found out that they were supposed to be reimbursing you 50 cents per mile all along and they knew it. Now that would be bad.
That fellow traveler is Mary Jerome, (great video!) a professor at Columbia who was diagnosed with Ovarian cancer at age 46. She was met with crushing medical bills for “out of network” services that should have been reimbursed at higher rates. As her personal finances began to bleed out, she was smart enough to make contacts with the sharks at the AG office who went right into attack mode (“I am having fish tonight“). They were able to determine that indeed both the idea and the input of Ingenix database was both suspect and potentially criminal. Instead of dragging this out in court, United wisely chose to settle.
But what of the settlement? It seems that it only solved one of the two major problems behind the case. The first issue of the conflict of interest of United owning Ingenix that owns this data was clearly a conflict of interest. The second issue, how prices by physicians are set and what insurance companies are obligated to pay remains completely unsolved. The $50M that United is required to pay could go a long way toward removing the opacity.
In fact, I have an idea . . . why not use $1M (~2%) of the settlement) to build a simple consumer portal for NY State to accept real consumer EOB’s? Consumers would be paid 50 cents for each valid EOB submitted and the organizer of the site would receive the other 50 cents to design, build, analyze, report, and maintain the transparency information gathered. As momentum and publicity build around the project, self insured companies could begin to contribute their claims data (which contain infinitely quantity and quality of information), and soon you would be well on your way to “surfacing” the actual prices that are paid. I am serious and will be providing information on how to do this shortly.
All of this, interesting enough, could be obviated if insurance companies just made the information transparency to begin with and competed on value as opposed to the proprietary pricing schemes by which they have lived on the spread for decades. But no longer, consumers are not going going to go to the back of the bus anymore.
Thanks Mary. May you continue to “do good. be well. enjoy life“