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The American Medical Association is among several medical societies that have filed a class action lawsuit against WellPoint, Inc., the largest health insurer in the United States.  The lawsuit, filed earlier this week in Los Angeles federal court, alleges that WellPoint colluded with others to underpay physicians for out-of-network medical services, resulting in patients paying an excessive portion of the medical bill. 

The AMA filed similar class action lawsuits last month against Aetna Health, Inc. and the CIGNA Corporation. United Healthcare owns the database (Ingenix) that is used by these payers. In January, the AMA was awarded $350 million in a lawsuit against UnitedHealthcare and Ingenix. 

These lawsuits will take years to be settled and will set historic precedents. In the interim, premiums will rocket to cover the costs of defense for these payers and to cover the eventual settlements.

Payers have been underpaying claims on the basis of unreasonable charges (a plan exclusion commonly referred to as UCR) for decades.  It is used to control costs when a provider is not under a cost control contract with a payer.

When a plan participant utilizes a non participating provider, either by choice or enforced due to lack of options, there are no means to control the costs so long is it is medically necessary, which is another subject in its entirety.

The Ingenix database replaced a predecessor database that was in existence before the early 1970's! There are no other databases that exist today, or beforehand, that accumulate billed charges nationally. Prior to Ingenix's purchase by United Healthcare, it was independently owned which in itself aided to the defense of the data used by payers. The data now used under the ownership of UHC can be seen as self serving. 

There are many flaws to the Ingenix system, most of which will not be detailed in this blog. However, a little history and the writer's opinion on arbitrary reductions is appropriate.

In my professional experience as an ex insurance company executive, I can report that Ingenix accumulates billed charges that are submitted by various insurance companies, mainly the same payers involved in the litigation. The Ingenix predecessor was owned and named HIAA - the Health Insurance Association of America. HIAA has since been replaced by AHIP - Americas Health Insurance Plans. AHIP or HIAA sold the database to Ingenix and Ingenix was then acquired by United Healthcare. The rest is history.

By definition, unreasonable charges are most commonly defined by the amount billed (regardless of payment), by the majority of providers in the same area. Payers have tightened their plan language over the years to decrease appeals and strengthen their denials but the concept has remained the same. 

The database is scored by percentile based by procedure codes. For example, a payer might choose to pay the 80th percentile (very common) and would pay what 80% of all providers BILLED within the same three or five digit zip code. OR they can choose the 50th percentile. The percentile choice is solely at the discretion of the payer. No industry standards exist.

Regardless of the percentile chosen, another flaw with the database is that if there is only one provider then that provider's charge is the sole determining factor and becomes all the percentiles! There can be no comparison of charges for the same procedure in the same area when there is only one or no providers who have billed for that procedure in its zip code.

UCR reductions by their very nature are arbitrary and often a matter of judgement rather than based upon facts. The judgement call could be a simple as an IT analyst determining which database it can program into its system to be compatible with electronic claims processing and the volume of claims. Or it could be as simple as a claims examiner deciding what to base a payment on if the system flags a claim for review. If the examiner's payment authorization is exceeded by the amount of the claim it may get a supervisors review, again an arbitrary decision will be made and the results will stand pending an appeal which would then be subject to state and federal regulations.

States and the federal government have established appeals procedures but they are always modified and hard to weed through without an attorney.The appeals process is time intensive and requires significant expertise and resources which smaller providers and consumers just don't have.Hence the current class action lawsuits.

It's hard enough to get a preauthorization before a service is rendered and all that means is that the procedure has been determined to be necessary for a patient. It has no bearing upon the eligibility of a claim, or the payment that will be made. Imagine the energy drain from obtaining preauthorizations and then fighting a denial of underpayment on the same claim!

Recently states have enacted balance billing problems that are intended to take consumers out of the middle of payment disputes when a provider simply gives up and bills that patient for the amounts that an insurance company has denied. However, the regulations only apply to HMO claims, not ERISA claims, indemnity, commercial, self funded health or PPO plans.

Providers are seeking justice for short pays and time and energy spent on appeals for underpaid claims.

In the defense of insurance companies however, if there is no limit on the amount an insurance company pays for claims the cost of healthcare would be even more prohibitive that it is today.

Providers often subsidize managed care payments by not participating in smaller health plans. The smaller the health plan the less negotiation strength of the plan and the more it will pay, subsidizing the BUCA giant (Blue Cross, United, Cigna, Aetna).

The crisis is decades old and has been perpetuated by managed care. Medical inflation was a lot less significant before managed care.

These are class action lawsuits and the class will take forever to be determined and the winners will be the attorneys. If the insurance companies settle or lose, premiums will become unfathomable. The arbitrary nature of underpayments based upon this criteria and the implied allegations of manipulation will cause insurance companies to settle this and just raise premiums to cover the settlement.

It needs to be settled or ended by the federal government before its too late. There is no way this is going to reduce the cost of healthcare in the future. All it will accomplish is PERHAPS repair some damage done at the cost of future premium increase.

Of course this is just my opinion and simply based upon my professional experience.

Pleae contact TeamGail if you need help with a denied claim. We are experts in this field and can help with underpaid or denied claims. We are patient advocates and have significant resources and staff to assist.