Profession

Court OKs Health Net deal over out-of-network pay

An opinion in the settlement detailed several "flaws" with a UnitedHealth Group subsidiary's database used industrywide to set physician payment rates.

By Amy Lynn Sorrel — Posted Sept. 22, 2008

Print  |   Email  |   Respond  |   Reprints  |   Like Facebook  |   Share Twitter  |   Tweet Linkedin

A federal judge's approval of a $255 million settlement in a case alleging that Health Net used a faulty database to underpay members for out-of-network care may bode well for physicians in their fight against the managed care industry's widespread use of the database.

The agreement resolved three class-action lawsuits targeting Health Net's reliance on Ingenix, a UnitedHealth Group subsidiary that sells a database used by most insurers to determine the usual, customary and reasonable charges for out-of-network services. Plaintiffs alleged that Ingenix underset UCR rates and that Health Net used the database to shortchange patients on medical bills.

Health Net admitted no liability but agreed to pay $215 million to more than 2 million members. The company also consented to several business practice changes -- valued at $40 million -- including ceasing use of Ingenix within the four-year expiration date of the agreement in 2012. Until then, Health Net will pay 14.5% above Ingenix-determined rates when reimbursing physicians' or patients' out-of-network claims.

Noting several "serious flaws" with the database, New Jersey District Court Judge Faith S. Hochberg, in an Aug. 8 opinion, said the settlement "raises a clarion call for greater disclosure about the databases used for health care coverage." The pact -- among the largest of its kind -- had changes "that will have a lasting impact" on Health Net's out-of-network reimbursement practices, she said.

Health Net promised to:

  • Establish a process for health plan members to obtain accurate cost estimates before treatment.
  • Negotiate fees with physicians ahead of time to avoid balance billing.
  • Set up an independent appeals process allowing patients to contest excessive claims.

Rate-setting a long-standing concern

The settlement echoes concerns long held by organized medicine over insurers' rate-setting tactics and is the latest in a series of actions questioning the integrity of the database.

In 2000, the American Medical Association, Medical Society of the State of New York and Missouri State Medical Assn. sued United and Metropolitan Life Insurance, alleging that the database uses unreliable data to determine UCR rates and fails to adequately compensate doctors and patients. The class-action lawsuit is pending in the U.S. District Court for the Southern District of New York.

Similar concerns prompted New York Attorney General Andrew M. Cuomo to launch an industrywide investigation into alleged rate manipulations. In February, Cuomo subpoenaed 16 health insurers, including Health Net, that used what he called a "defective" database operated by Ingenix to shift costs to patients. The attorney general also announced his intent to file suit against United but has yet to file suit. United has denied any wrongdoing. The AMA endorsed the ongoing probe.

Meanwhile, the Health Net settlement puts other insurers on notice and could help set the stage for other such cases, said D. Brian Hufford, an attorney representing Health Net members.

"Now there's knowledge and understanding of the defects [with Ingenix], and it's not the black box it used to be," said Hufford, who also is assisting in the AMA's case. "The court's analysis of those problems is something other courts and parties can focus on."

The New Jersey court detailed what it considered "numerous errors" with Ingenix' process for calculating UCR rates, including:

  • Compiling data voluntarily submitted by insurers.
  • Editing out so-called "high fees" without determining whether the charges are valid.
  • Inaccurately standardizing CPT codes.

Hufford said Health Net's move toward transparency will help preserve a physician-patient relationship often disrupted when insurers fail to cover patients' bills and doctors are forced to collect outstanding balances.

Health Net spokeswoman Alice Ferreira characterized the settlement as "good news" for patients.

"The business practice changes will just add to the transparency in out-of-network claims so we can help patients make better health care decisions," Ferreira said. Health Net is cooperating with Cuomo's investigation, she added.

Neither United nor Ingenix were parties in the Health Net dispute and did not participate in the settlement. A spokesman said United did "not have any obligations arising out of the settlement" but declined to comment further. In past statements, United has stood by the Ingenix database.

Joan Schimml, Ingenix spokeswoman, called the firm's database a "sound tool" for giving health plans "reliable data on what physicians charge," and helping consumers find affordable out-of-network care.

Back to top


ADDITIONAL INFORMATION

Promises made

Health Net agreed to business practice changes aimed at improving transparency in out-of-network claims. In a recent settlement with members, the health plan promised to:

  • Stop using an allegedly flawed database run by Ingenix and used industrywide for calculating usual, customary and reasonable charges for health care services.
  • Pay physicians and patients 14.5% above Ingenix rates, excluding co-insurance, for out-of-network claims.
  • Establish a process for patients to obtain accurate information on usual, customary and reasonable charges before treatment.
  • Negotiate physician charges ahead of time to avoid leaving patients responsible for balances higher than the agreed-upon rates.
  • Set up an independent appeals process for patients to contest excessive claims.
  • Revise explanation of benefits forms, train personnel and set up a Web portal to provide patients with more accurate coverage information.

Back to top


ADVERTISEMENT

ADVERTISE HERE


Featured
Read story

Confronting bias against obese patients

Medical educators are starting to raise awareness about how weight-related stigma can impair patient-physician communication and the treatment of obesity. Read story


Read story

Goodbye

American Medical News is ceasing publication after 55 years of serving physicians by keeping them informed of their rapidly changing profession. Read story


Read story

Policing medical practice employees after work

Doctors can try to regulate staff actions outside the office, but they must watch what they try to stamp out and how they do it. Read story


Read story

Diabetes prevention: Set on a course for lifestyle change

The YMCA's evidence-based program is helping prediabetic patients eat right, get active and lose weight. Read story


Read story

Medicaid's muddled preventive care picture

The health system reform law promises no-cost coverage of a lengthy list of screenings and other prevention services, but some beneficiaries still might miss out. Read story


Read story

How to get tax breaks for your medical practice

Federal, state and local governments offer doctors incentives because practices are recognized as economic engines. But physicians must know how and where to find them. Read story


Read story

Advance pay ACOs: A down payment on Medicare's future

Accountable care organizations that pay doctors up-front bring practice improvements, but it's unclear yet if program actuaries will see a return on investment. Read story


Read story

Physician liability: Your team, your legal risk

When health care team members drop the ball, it's often doctors who end up in court. How can physicians improve such care and avoid risks? Read story

  • Stay informed
  • Twitter
  • Facebook
  • RSS
  • LinkedIn