For time immemorial, health insurers have capped their reimbursement to physicians at a usual, customary, and reasonable (UCR) limit that the insurer set using a database. When I began working in the health insurance field in the early 1980s, the health insurance trade association, HIAA, maintained a UCR database based on claims information contributed by members and broken down by three digit zip code. In the 1990’s as I recall HIAA sold the database to Ingenix, which is now a United Healthcare (UHC) subsidiary.

The UCR limit does not apply to doctors who belong to the insurer’s provider network. Thus the lower UCR reimbursement incents consumers to use network providers thereby controlling medical costs.

Today, Andrew Cuomo, New York State’s attorney general, sent a letter to United Healthcare advising the company that the State plans to sue UHC and certain subsidiaries because the UCR database is flawed and works a fraud on consumers. Cuomo in his press release explained that his “investigation found a clear example of the scheme: United insurers knew most simple doctor visits cost $200, but claimed to their members the typical rate was only $77. The insurers then applied the contractual reimbursement rate of 80%, covering only $62 for a $200 bill, and leaving the patient to cover the $138 balance.: As usual, Consumers Union and the American Medical Association loudly applauded the action.

UHC which now has five days to convince Cuomo to not file suit, issued the following press release:

We are in the midst of on-going discussions with the Attorney General’s office and we will continue to cooperate fully. UnitedHealth Group recognizes the excellent health care delivered to patients by the physicians of New York and is committed to fair and appropriate payment for physicians, the state’s other health care providers and consumers. The company also believes in delivering high quality and dependable database tools.

The reference data is rigorously developed, geographically specific, comprehensive and organized using a transparent methodology that is very common in the health care industry. We believe these reference tools add substantial value to the health care system by providing all participants – providers, payers and consumers – with a long-standing transparent, consistent, and neutral line of sight into the health care market, its costs and performance.

Health plans and other health care payers use these reference tools to independently negotiate their own reimbursement schedules, establish fees for out-of-network care, negotiate provider service contracts and review claims for their members and consumers.

Cuomo also announced that his office was serving subpoenas on sixteen major health insurers/managed care companies that use the Ingenix UCR database, including Aetna, CIGNA, and Empire Blue Cross. Shares of publicly traded managed care companies fell on the news.

Karen Ignani, the President of the managed care trade association AHIP offered the following observations:

“Today’s announcement presents an opportunity to shed light on one of the root causes of rising health care costs in America. “At a time when the costs of medical services soar above inflation every year, health insurance plans’ tools and techniques are mitigating the damage done to consumers and employers. Last year, health insurance premiums grew at the lowest rate in a decade due to health plans’ cost-containment and quality-improvement strategies. “It’s unfortunate that today’s media event ignored these facts and failed to address the appropriateness of charging out-of-network patients $200 for ‘simple doctor visits’ lasting ‘15 minutes’ — which equates to a billing rate of at least $800 an hour. As medical costs continue to soar, this is the discussion that public policy leaders need to have.”

This case will be worth watching.