UnitedHealth Agrees To Pay $350M To Settle Class-Action Lawsuits Filed Over Alleged Underpayment For Out-of-Network Services

UnitedHealth Group on Thursday agreed to pay $350 million to settle three class-action lawsuits filed by physicians and health plan members over allegations that the company underpaid for out-of-network medical services, the New York Times reports (Abelson, New York Times, 1/16). On Tuesday, UnitedHealth agreed to settle an investigation by New York state Attorney General Andrew Cuomo (D) that found health insurers understated the portion of reimbursements for which they are responsible for such services by as much as 28% in some cases, or hundreds of millions of dollars over the last 10 years.

Health insurers pay for a certain percentage of the usual and customary rates for such services, based on an estimate of the cost for such procedures in the same geographic area. Ingenix, a subsidiary of UnitedHealth, operates the Prevailing Healthcare Charges System, a database used by most health insurers that determines the usual and customary rates. The database contains information on more than one billion claims from more than 100 health insurers. Health insurers compare out-of-network claims with those found in the database and reduce the claim to a "reasonable" amount before they reimburse providers or members.

Under the agreement with Cuomo, UnitedHealth will pay $50 million to finance the development of a new database that an undetermined university will operate (Kaiser Daily Health Policy Report, 1/13). The latest settlement, which requires court approval, will pay health plan members and physicians for out-of-network services provided since 1994 (Fuhrmans, Wall Street Journal, 1/15). UnitedHealth will admit no wrongdoing under the settlement.

Reaction
Reed Tuckson, chief medical officer and a vice president at UnitedHealth, said, "We are so pleased to put the issue behind us so we can focus on the important work of assisting physicians."

Nancy Nielsen -- president of the American Medical Association, which participated in a federal class-action lawsuit filed against UnitedHealth in New York state -- said, "The Ingenix database has corrupted the system for paying out-of-network medical bills, resulting in patients and physicians being cheated by health insurers" (Japsen, Chicago Tribune, 1/15).

Plaintiff attorney Barbara Quackenbos filed an objection with one of the judges involved in the lawsuits over concerns about the amount of the settlement. She said, "We believe the amount agreed to is inadequate and does not reflect as meaningful a settlement as could be negotiated."

Objections from Quackenbos and other plaintiff attorneys raise questions about whether the two judges in New York state and New Jersey who have overseen the lawsuits will approve the settlement, the Times reports (New York Times, 1/16). According to the Chicago Tribune, the settlement could prompt other health insurers that use the database operated by Ingenix to reach similar agreements (Chicago Tribune, 1/15).

Aetna
In related news, Aetna on Thursday agreed to contribute $20 million to help finance the development of the new database, the AP/Minneapolis Star Tribune reports (Murphy, AP/Minneapolis Star Tribune, 1/15). Aetna will pay the $20 million in installments over five years.

Cuomo said, "With this agreement, the tide is turning against the corrupted reimbursement system that took hundreds of millions of dollars from the pockets of patients nationwide," adding, "Health insurers will no longer be able to distort their data, leaving patients with unfair bills" (Levick, Hartford Courant, 1/16). In addition, Cuomo said, "We will not stop until the entire industry has been reformed. We are aggressively pursuing the other health insurance companies" (Yaniv, New York Daily News, 1/16).

Reprinted with kind permission from http://www.kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, or sign up for email delivery at http://www.kaisernetwork.org/dailyreports/healthpolicy. The Kaiser Daily Health Policy Report is published for kaisernetwork.org, a free service of The Henry J. Kaiser Family Foundation.