Getting hosed by insurance, the “usual and customary” way

This story received very little attention, but it’s potentially a huge money-saver for patients as well as a gratifying “I told you so” for physicians. In an agreement reached by New York Attorney General Andrew Cuomo and insurer UnitedHealth Group, insurers will change the way they determine “usual and customary” charges for out-of-network services.

For many insured patients, doctor and hospital visits that are outside of the insured’s network are paid on a scheme where the insurance company reimburses a portion of the charges, typically 50-80%. The insurance company doesn’t reimburse based on what was charged—perish the thought—but rather on their determination of the “usual and customary” fee that they claim should have been charged. Those of you who’ve ever been caught in this charade know what happens: the insurance company comes up with a low-ball figure. Then they only pay a portion of that (and only then, after you’ve met a deductible.)

The insured patient has very little recourse. You can try to collect documentation of what other physicians charge in the area to convince the insurance company that their figure is wrong, but the insurance company will insist that their “usual and customary” figure is correct nonetheless. Few people are willing to spend the time and hassle proving that their insurance company’s figure is wrong. It’s just another sneaky way for insurance companies to avoid paying for health benefits.

As a physician, the insurance company’s tactics were particularly odious. It led to many people blaming their physicians for charging too much, when in fact what was happening was that the insurance company was deliberately understating what the reasonable charge should be. It made us look greedy and kept the profits of the insurance companies high at the expense of patients.

The state of New York filed a lawsuit to stop this practice in 2000. Their investigation found that the insurance company’s manipulation and misrepresentation of these charges led to underpayments of 10-28% in New York state.

In a settlement announced this year, UnitedHealth Group (without admitting any wrongdoing, natch) agreed to change the way these “usual and customary” figures are obtained. In the past, the insurance companies paid a for-profit corporation, Ingenix, to supply the figures. Since the insurance companies were Ingenix’s clients, there was clear conflict of interest: Ingenix liked to keep the figures low to please the insurance companies, and were shielded from any direct inquiries from the patients who were affected by their data. As part of the settlement, a new non-profit corporation will be formed to determine the usual and customary charges for medical services. The new company will publicly disclose their figures and their methods for obtaining these figures, and will allow patients and their families to verify that the figures are accurate.

UnitedHealth Group has also agreed to pay $350 million dollars, some of which will be used to fund the new non-profit company and reimburse underpaid physicians and insured individuals who paid physicians out of their own pockets. I have no idea how much of the $350 million will go to attorney’s fees.

Although this part of the settlement only applies to this one insurer, apparently the Attorney General’s office is pursuing other companies as well. It’s expected that nationwide, insurers will change their policies to rely on more realistic figures rather than the low-ball Ingenix numbers they’ve used in the past.

So: score one for patients, doctors, and honesty. Too bad it only took 9 years for this to wind its way through the courts.

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One Comment on “Getting hosed by insurance, the “usual and customary” way”

  1. Holly M Says:

    Very good news indeed. I hope the pharmaceutical companies are the next in line for investigation!

    Like


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