Out-of-network charges: unusually high and customarily secret

More evidence emerged from a recent Senate investigation that the insurance industry has routinely underpaid for out-of-network care. The investigation by the Senate Committee on Commerce, Science and Transportation* found that health insurance companies in every region of the United States have used faulty databases from Ingenix, Inc. to underpay the insurance claims of millions of Americans. As a result, billions of dollars in bills that should have been paid by insurance companies have been shifted to consumers, the report said.

The revelations build upon those from an investigation by the attorney general of New York, which found that Ingenix, a wholly owned subsidiary of one of the largest insurance companies in the country, UnitedHealth, systematically understated market rates up to 28 percent across New York state. Further, the company’s databases were never accessible to consumers, and none of the insurers disclosed that the data used to calculate the rates was compiled by a major health insurer.

More than 100 million Americans pay extra for health insurance that allows them to go out of their network to receive care from doctors of their choice. Consumers who use such PPOs can expect their insurance company to pick up a percentage of the bill when they use out of network providers. But insurers don’t pay a portion of the whole bill—just a percentage of the portion that they deem to be "usual and customary."

That’s where Ingenix comes in. The company’s allegedly flawed data was used by 17 of the 18 private insurance companies in the Senate investigation, and 12 companies in the New York state investigation, as well as some government plans. And according to the Senate investigation, it may not just be Ingenix’s faulty methodology that kept usual and customary rates down for insurers: There’s evidence that some of the insurance companies that provide data to Ingenex scrubbed the highest rates from their reports.

We detailed the attorney general’s plan for a new database to be run by an independent, non-profit organization in a previous post. That plan has now been accepted by the 12 companies that settled with the New York attorney general—each also agreed to provide funding for the new institution. Additionally, the state has moved to pass legislation that would require health insurers to use independent sources for establishing "usual and customary" rates, and eliminate conflicts of interest. These are good ideas, and hopefully they can prevent consumers nationwide from being shortchanged in the future.

But what do you do if you’ve already overpaid for care?

If you believe your insurer underpaid for out-of-network care, track down your records and contact your insurer. Check out the Consumers Union Guide for Handling Disputes for more assistance. If you’re not satisfied with the results, contact your state attorney general or state insurance department. New Yorkers can file complaints about billing problems here. For more, see our full coverage on How to Avoid Expensive Health-Insurance Errors, and more insurance coverage in our Health Insurance section.

Those in New York who were covered by Excellus or Capital District’s Physician Health Plan (CDPHP) between 2002 and 2008, may be able to claim restitution. The attorney general’s office in New York has negotiated a settlement that includes a provision to re-process claims made under the flawed system and reimburse consumers across the state. You should receive information in the mail, but go to the attorney general’s Web site to learn more. Additionally, Aetna previously agreed to pay back $5 million to students who were overcharged by their Aetna Student Health plans.

If all else fails, there are some class action lawsuits in the works against UnitedHealth, Aetna, and Cigna. You may also look into a private lawsuit for unpaid claims if you believe you were wronged.

—Kevin McCarthy, associate editor

For more on out-of-network health care, visit our section Make Sense of Your Hospital Bills, and read our blogs on Medical Insurance Booby Traps and negotiating your medical bills and checking for errors.

*links to PDF

Comments

[John Covello]

I have worked in the health insurance field since 1981, well before the advent of HMOs and Managed Care.

In those simpler times, the amounts charged by doctors were fairly consistent, since most insurance policies covered fees at 80%, with 20 % being the patient’s responsibility, and this cost to the patient allowed the market to self-regulate against excessive amounts charged.

Once HMOs, PPOs, and other forms of managed care appeared, most doctors, in order to avoid losing established patients and attracting new patients, signed Network agreements and accepted Network rates.

However, the amounts “charged” by doctors is not consistent with the amounts they will ACCEPT as payment in full as part of their Network agreement.

There is nothing to prevent them from charging 5, 10, or even 20 times more than what the actual payment will be. From my viewpoint, there is no financial difference if a participating doctor charges $500 for an office visit, since we will pay the $100 network fee regardless.

Other than certain co-pays, the patient cannot be billed for this difference either.

We would therefore consider that a reasonable or a usual fee is an amount that is widely accepted as payment in full by a majority of doctors in the area, certainly NOT the “price” listed on the bill.