UnitedHealth Settlement May Reduce Some Healthcare Bills

New York Attorney General Cuomo's investigation could lead to lower out-of-network charges.

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Consumers can soon expect to see fewer surprise charges on their medical bills when they visit a doctor outside their health plan's provider network, New York Attorney General Andrew Cuomo announced today. The happy change will occur thanks to the settlement of an ongoing investigation into UnitedHealth Group's Ingenix, a medical billing information company whose data are used to determine reimbursement amounts for consumers.

Most consumers know that it's going to cost more out of pocket to use an out-of-network provider, typically about 20 percent of the total bill. But what people don't expect is that they may be hit up for a much larger amount if the provider's fee (say, $160 for an office visit) is higher than the prevailing rate for a similar service in the area (perhaps $85), as determined by Ingenix. So, instead of $32 (20 percent of $160), the unwitting patient gets a bill for $92, because the insurer pays only 80 percent of the prevailing $85 rate rather than 80 percent of the $160 billed charge.

Since announcing his investigation last February, Cuomo has been looking into whether these "reasonable and customary" rates were set artificially low, sticking consumers with a too-hefty bill. (For a more detailed explanation, check out my original post on the investigation.) United, without admitting wrongdoing, has agreed to close its database and put $50 million toward the establishment of a new, independent database that will be run by a nonprofit. 

The good news is that in about six months when the new database is up and running, reasonable and customary rates should be "significantly" more consumer friendly, according to a Cuomo spokesperson. In addition, the new nonprofit will create a website where consumers can go to find how much they can expect to be reimbursed for out-of-network services in their area. 

The bad news: no restitution. This agreement doesn't address past overpayments, so don't look for a check in the mail (though there are reportedly several class-action lawsuits in the works). 

Not everyone thinks the settlement will do much to change business as usual. As health policy consultant Bob Laszewski wrote today on his blog, "The industry gets to continue determining what customary and reasonable physician charges are through this nonprofit, and just exactly how they do it will continue to be done by systems gurus the way systems gurus do things—pretty much in a 'black box.' " Stay tuned.