Nation’s Two Largest Health Insurance Companies Chastised

We are barely two weeks into the New Year and already the two largest health insurance companies in the country have been chastised by the government for defrauding the people.

1. Wellpoint has been ordered to stop marketing its Medicare private health and drug plans and to stop enrolling any new members.

The Centers for Medicare and Medicaid Services (CMS), the federal agency that administers Medicare, ordered the insurer, which covers about 1.4 million people with Medicare, to immediately suspend all marketing and enrollment activities. According to Congressional Quarterly HealthBeat News (CQ), the letter informing the company of the order stated that "WellPoint's conduct poses a serious threat to the health and safety of Medicare beneficiaries." CQ added that:

"WellPoint failed to provide beneficiaries with access to needed medications, charged beneficiaries co-payments higher than allowed and improperly disenrolled seniors from health plans, the Centers for Medicare and Medicaid Services (CMS) said Tuesday...

"WellPoint also 'failed to follow through on its assurances to CMS that the problem was immediately and fully corrected.'"

The Wall Street Journal helps put a human face on the problem:

"Several Medicare advocacy groups said dozens of beneficiaries reported problems early this month. Jocelyne Watrous, a beneficiary consultant for the Center for Medicare Advocacy in Mansfield Center, Conn., said one woman couldn't get the AIDS drug she needs for nearly two days because her pharmacy was mistakenly told her WellPoint benefits had been cancelled. 'She was in tears,' Ms. Watrous said."

This is not the first time CMS has had to take such drastic measures to protect people with Medicare from bad private insurance plan practices. In 2007, for example, CMS ordered seven private insurance companies that contract with the government to provide medical benefits to people with Medicare, to stop marketing their Medicare plans because they were engaging in deceptive practices.

2. UnitedHealth Group agreed to pay $50 million to settle a New York Attorney General investigation into a scheme by health insurers to defraud consumers by manipulating reimbursement rates, plus another $350 million to resolve class action lawsuits on the same problem.

At the center of the investigation is Ingenix, Inc., the nation's largest provider of health-care billing information, which serves as a conduit for data to the largest insurers in the country, including Aetna, UnitedHealth and CIGNA.

Ingenix was found to operate a defective and manipulated database that most major health insurance companies use to set reimbursement rates for out-of-network medical expenses. It was also found that two subsidiaries of United dramatically under-reimbursed their members for out-of-network medical expenses by using data provided by Ingenix. By distorting the "reasonable and customary" rate, the insurers were able to keep their reimbursements artificially low, forcing patients to absorb a higher share of the costs.

The NY Attorney General, Andrew Cuomo, called it "an industry-wide scheme perpetuated by some of the nation's largest health insurers to deceive and defraud consumers."

The $50 million paid by UnitedHealth will be used to create a nonprofit organization that will determine reimbursement rates for patients. Added to that will be $20 million from Aetna as part of a separate agreement the company has reached with the NY Attorney General.

According to Congressional Quarterly HealthBeat News (CQ), the American Medical Association issued a statement saying it had requested the investigation:

"The settlement announced today will initiate drastic change to the rigged system that allowed UnitedHealth Group to profit while shortchanging patients and physicians," the statement said. 'While today's settlement is with UnitedHealth, circumstances suggest the scheme may extend to insurers across the nation and calls into question the validity of system the insurance industry has used for years to pay for out-of-network care.'"

The New York Times reports that UnitedHealth Group operates the databases in question, which are used by insurance companies around the country:

"In a settlement with one of the nation's biggest insurers, New York's attorney general, Andrew M. Cuomo, has ordered an overhaul of the databases the industry uses to determine how much of a medical bill is paid when a patient uses an out-of-network doctor.

"The move, to be announced Tuesday, is part of a settlement with the insurance giant UnitedHealth Group, which operates the industry databases. It results from a yearlong investigation by Mr. Cuomo's office that concluded the data had understated the true market rates of medical care by up to 28 percent.

"The settlement will have a nationwide impact because UnitedHealth, the biggest health insurer in New York, operates the databases used by the entire industry, through its Ingenix business unit. The deal calls for creation of a new independent database, to be run by a university that is still to be selected."

In addition, UnitedHealth will shut down its Ingenix medical billing information service and pay $350 million to settle class action lawsuits filed on behalf of the American Medical Association, health plan members, healthcare providers and state medical societies.

And these are just the bad practices that have come to light. How many more are still unknown to us? We need more transparency from the insurance industry so we can know how they do business. Allowing them to hide most of their practices behind the veil of 'trade secrets' is what allows such bad practices to continue and why it often takes years to bring any of them to light.

The only way to achieve such transparency is health care reform that guarantees people the choice between a public insurance plan and private plans, along with national regulations that require more openness from the private insurance plans. A government-run plan that makes all its decisions and methodology open and available for public comment, competing alongside the private health plans, is the best way to drive more accountability in the insurance industry.

Let's make sure insurance companies are not allowed to keep the status quo for the rest of 2009 and beyond.

01-15-09 By Monica Sanchez | Comment (0)