On Tuesday at UR Medical Center, New York State Attorney General Andrew Cuomo addressed a new, not-for-profit company, FAIR Health, that will set medical insurance reimbursement rates for out-of-network procedures. UR Medical Center will be one of the research universities that constitute FAIR Health.

The announcement marked the conclusion of a year-and-a-half long investigation into fraudulent reimbursement practices by medical insurance companies that underpaid consumers by hundreds of millions of dollars in the last 10 years.

‘First and foremost [FAIR Health] will build a new, independent database of rate information to be used for consumer reimbursement all across the country,” Cuomo said. ‘This group will determine the fair reimbursement rates for all those health insurance companies for all out of network costs.”

In 2007-08, the Office of the Attorney General (OAG) received many complaints that medical insurance companies underpaid clients with out-of-network plans for out-of-network procedures, and that the factors determining these rates were unknown. Attorney General Cuomo announced his investigation of the insurance companies in February 2008.

Investigators found that the largest medical insurance providers, including UnitedHealth, Aetna, CIGNA and Wellpoint, all used data from Ingenix, Inc., to set their usual and customary rates for reimbursement. Those same medical insurance companies provided the data that Ingenix used to determine what the rate would be.

Further investigation revealed that Ingenix was a wholly-owned subsidiary of UnitedHealth and that it had a monopoly on the system nationwide.
‘When you looked at the ownership, this was no longer a coincidence,” Cuomo said. ‘This was, in my opinion, the industry essentially setting the rates themselves.”

The findings of the investigation have an effect that reaches beyond New York State. Out-of-network plans, for which consumers pay a premium, cover one in three or 110 million Americans.
‘The whole question became, who’s determining this fair rate?” Cuomo said. ‘It’s the rate card for the entire medical system in the country.”

The OAG collected and analyzed millions of insurance bills from various insurance companies operating in the state and found that, on average, they underpaid consumers by 28 percent.

Across the state the levels of underpayment varied. In Manhattan, it ranged from 10 to 20 percent. Erie County, home to Buffalo, had the highest at 30 percent of residents living below the poverty line.

To reform this system, the Attorney General’s office reached a settlement with the insurance companies: The Attorney General would not pursue litigation if they agreed to use FAIR Health, instead of Ingenix, to set their rates, and pay $100 million to set up FAIR Health. Fair and Independent Research, FAIR Health, will be based in Syracuse and comprise five upstate medical research institutions: URMC, Syracuse University, Cornell University, University of Buffalo and SUNY Upstate Medical University. The consortium will organize data about the costs and frequency of various medical procedures in an independent, accountable way.

‘[FAIR Health] will create a center of health care research which we believe is going to be unique in the nation,” Cuomo said.
To create transparency, FAIR Health will publish all of its information on a Web site for consumers to consult so they know the reimbursement rate of a procedure before they see the doctor.

‘FAIR Health will have an important role in spearheading national reforms that should give patients and physicians a reimbursement system that is transparent and free from corporate manipulation,” American Medical Association Board Member William Dolan said.

Rochester Mayor Robert Duffy was excited about the opportunities that bringing this company to Rochester presented to the city, noting that the program will have influence nationwide.
‘On the national scene today there’s nothing that takes more prominence than health care,” Duffy said. ‘Through his actions he will save all of us in terms of our premiums, in terms of our costs, but also help create the research base that will keep us healthier for many, many years.”
Fleming is a member of the class of 2010.

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