United agreements: Fair payments ahead

Thanks to organized medicine's efforts, physicians and patients everywhere who have ever been shortchanged by insurance companies may soon feel they are getting the straight deal they always deserved. UnitedHealth Group last month agreed to settle an important class-action lawsuit brought on behalf of doctors and patients by the Litigation Center of the American Medical Association and State Medical Societies, the Medical Society of the State of New York and the Missouri State Medical Assn. The lawsuit came about because United had been running a system designed to reduce the amounts the insurer was obligated to pay for services rendered by out-of-network physicians.

Here's the way it worked: When a patient chose to see a doctor who was not in the United network, the insurer agreed to pay a certain percentage of the "usual, customary and reasonable" payment rate for those services. The problem was that it calculated this base rate by referencing databases maintained by Ingenix, a company that conveniently was owned by United itself.

Given this massive conflict of interest, United and many other insurers who used the Ingenix data not surprisingly were offering lower rates that were neither usual nor customary. And they certainly were not reasonable. In some cases, the level of these underpayments neared 30%.

This situation put physicians in an awkward position. They could either charge the patient the difference between the faulty UCR-based payment and the actual charges for the services, or they could settle for a smaller amount and charge the patient less. With the first option, they risked alienating patients who thought the physicians -- not the insurance executives -- were taking advantage of them. By choosing the second option, physicians risked not being able to cover their costs of seeing these patients.

As part of the settlement, United has agreed to pay $350 million to make amends to doctors and patients who were squeezed by this unfair system.

But the issue is about much more than just atoning for the past. In a separate agreement with New York Attorney General Andrew Cuomo, United also agreed to abandon the two faulty databases going forward and instead start committing funding to a new, nonprofit and fully independent entity that will accurately determine how much out-of-network physicians should be paid for their services.

UnitedHealth Group does not admit any wrongdoing in either of those agreements, and a judge must still approve the cash settlement. But the health plan has acknowledged that a conflict of interest existed, and other insurers are starting to come to the same realization.

Within days, Aetna also said it would stop referencing the Ingenix databases and pledged a contribution of its own to the new entity.

By abandoning these tainted databases, United, Aetna and any other insurer that meets the challenge to do the right thing will operate much more transparently in the future when it comes to determining fair payments. That's good news for physicians who want to do right -- by their patients and themselves -- without being made to look as if they are the ones doing wrong.