New York Takes it to Fatcat Insurance Companies

On February 13, 2008, New York State Attorney General Andrew M. Cuomo launched a nation-wide investigation into a scheme by insurers defrauding the consumers by manipulating the reimbursement rates. He has issued 16 subpoenas to the nation’s largest insurance providers such as Aetna (NYSE: AET), CIGNA (NYSE: CI), and Empire BlueCross BlueShield (NYSE:WLP). He also has future plans to file suit against Ingenix, Inc, and its parent company UnitedHealth Group (NYSE: UNH), along with three additional subsidiaries.

Ingenix, Inc. provides data used by most major health insurance companies to determine reimbursement rates for out-of-network medical expenses. After six-month investigation, it was revealed that Ingenix has been operating on a defective and manipulated database, by placing an artificially low reimbursement rates to patients. Under the United insurers’ health plans, members pay a higher premium to have the option to use out-of-network doctors, while the insurers promise to cover up to 80% of either the doctor’s full bill or of the “reasonable and customary” rate depending on which is cheaper. While United insurers knew most simple doctor visits estimate around $200, they claimed that “reasonable and customary” rate is only $77. The insurers then only reimburse 80%, covering $62 for a $200 bill, and leaving the patients to cover the $138 balance.

However, insurers argue that Mr. Cuomo’s investigation does not take into account how the doctors determine what they charge for their services.