Insurer pays a little so patient pays a lot

A Times Editorial
Published February 17, 2008

Call it the Gotcha! of private health insurance policies. Visit a doctor or medical facility outside your plan's list of network providers, and the insurer promises to pay 80 percent of the cost. Yet when the bill for your portion comes, it's often more than 20 percent of the actual charge, sometimes even more than the amount paid by the insurer.

The catch is that the insurer pays 80 percent of the "reasonable and customary charges." Those charges are often substantially less than the amount doctors actually bill, according to a recent investigation by New York Attorney General Andrew Cuomo of one of the largest insurers.

Cuomo says he intends to sue United Health Group over the discrepancy, calling the underpayments "an industrywide scheme ... to deceive and defraud consumers." Here is a curious detail at the center of Cuomo's investigation: One company, Ingenix, sets the reasonable and customary charges for the industry - and that company is owned by United Health Group.

Cuomo's office found that a New York City area doctor typically charges $200 for a 15-minute office visit, but Ingenix sets the reimbursement rate (based on the supposed median fee charged by doctors in the same geographic area) at $77. So United Health covers only $62 of the $200 bill.

Other insurance companies that also use Ingenix to set reimbursement fees are cooperating with the investigation. And because the same practice goes on throughout the United States, the action in New York should set a precedent for other states to open similar investigations. It certainly looks as though it could be a conflict of interest for one corporate entity of United Health Care to set out-of-network rates for another entity of the same corporation. Meanwhile, United Health Group reported an earnings increase of 12 percent last year.

Florida Attorney General Bill McCollum's office said it would look into the New York case to see if it has jurisdiction to act here in the matter. Cuomo is earning a reputation as an aggressive defender of consumer rights. McCollum should follow his lead.