N.Y. Attorney General Investigation Highlights Problems in Navigating Out-of-Network Charges
The New York Times on Tuesday examined how an investigation of health insurers announced last week by New York Attorney General Andrew Cuomo (D) "raised the lid on a particularly confusing part of the nation's health care system": how insurers calculate reimbursements for out-of-network medical services. According to the Times, the "issues go beyond whether insurers are underpaying for 15-minute visits to out-of-network doctors" and extend to the "vast array of tests, services and even hospitalizations [consumers] may encounter on their medical journey -- and the puzzle of determining which ones will be considered in-network, out-of-network or paid for at all."
Insurers use "reasonable and customary" calculations to determine how much to reimburse for services out-of-network, which is determined using a database of insurance claims. Insurers pay a percentage of this calculation, and patients are responsible for the remaining percentage, along with any difference between the actual charge and insurers' estimation of the actual cost. The reasonable and customary calculation is "frequently much less than the doctor's or hospital's actual bill," and patients "may be startled to find out just how much more they may end up spending" on out-of-network care, the Times reports.
In addition, even when a patient seeks care from an in-network physician, some services could be billed as out-of-network if doctors involved in the care are not in the network. According to Mary Beth Senkewicz, a deputy insurance commissioner in Florida, people "really need to check" beforehand if any care will be labeled as out-of-network to avoid substantial bills (Abelson, New York Times, 2/19).
The "disturbing possibility" raised by Cuomo's investigation is that insurers have been "systematically cheating patients and doctors of fair reimbursement for medical services" through the industry's "arcane procedures for calculating 'reasonable and customary' rates," according to a Times editorial. The system that insurers use to calculate the rate is determined by data from Ingenix, a company owned by UnitedHealth Group. The editorial continues that this system "is an invitation for abuse" because Ingenix affects UnitedHealth's "costs and profitability," so "both have a strong financial interest in keeping reimbursement rates low."
Cuomo and the American Medical Association, which also has sued Ingenix over the system, claim that "health insurers and Ingenix disproportionately eliminate high charges, thus skewing the numbers for customary charges downward," among other charges of fraud, according to the Times. The editorial states, "Whatever that investigation unearths, it is already clear that the system for calculating 'reasonable and customary' charges ought to be reformed by making it truly independent and objective" (New York Times, 2/18).