More than 100 million American consumers pay extra premiums for health insurance coverage that allows them to receive care outside their insurance company’s network of doctors and other health care providers. Consumers pay more for "out-of-network" coverage because they believe it gives them access to the medical care that will afford them or their family members the best chance for recovery from a serious accident or illness. Over the past several years, a succession of private lawsuits and government investigations has revealed that the largest health insurance companies in the United States have been under-reimbursing their customers for out-of-network health care services. While insurance carriers have been promising to provide their customers with a certain level of coverage, they have actually been paying out-of-network claims at a lower level. The result of this practice is that American consumers have paid billions of dollars for health care services that their insurance companies should have paid. The tools the health insurance industry used to systematically underestimate the cost of out-of-network services were two "data benchmarking" products sold by a Minnesota health care services company called Ingenix, Inc. Ingenix provided the insurance industry with data it claimed were the prevailing, "usual and customary" market rates for medical services in specific geographic regions. Ingenix’s "usual and customary" data tables were used to pay tens of millions of medical claims for out-of-network services.

Evidence collected during private litigation and the New York Attorney General’s investigation demonstrated how the less-than-arms-length relationship between Ingenix and the insurance industry led to reimbursement practices that cost American consumers billions of dollars. Insurers that contributed charge data to Ingenix often "scrubbed" their data to remove high charges. Ingenix then used its own statistical "scrubbing" methods to remove valid high charges from their calculations. The results of these questionable statistical methods were estimates of "usual and customary" charges that consistently skewed reimbursement rates downwards – in a direction that allowed insurers to reduce their claims payments. The New York Attorney General concluded that the "prevailing rates" Ingenix generated for doctor visits in New York were as much as 30% lower than the actual market rates for these services. In other words, insurance companies were paying only 70 cents on each dollar they owed their customers under the terms of their policies.

Doesn't this sound like criminal activity to you? It does to me, and yet I have not heard of any criminal investigations, let alone prosecutions.

Someone(s) discovered a way to make billions of dollars by deliberately cheating their customers, and yet they are not only walking freely, but were allowed to keep much of that money.

There are several things happening here. The first is that there is only one source for data on costs of medical procedures (doctors' rates, etc), and this source is a wholly owned subsidiary of a health insurance provider.

Second, the extra charges for out-of-network care was begun as a way to combat high rates charged by some health care providers. Insurers can negotiate for lower rates with providers within the network, but have little control on those providers outside of it. Insurers have created "usual and customary" rates (UCR) as a way of covering only those fees that would be typical of providers within the network.

And this seems reasonable - except when there is only one outfit determining what the UCR is for any particular procedure, and, as is made plain in the Committees report, they deliberately reduce the amount of certain UCR's.

And one further point - note that none of this helps to place a limit on what some health care providers will charge. This leads to exorbitant out-of-pocket costs for patients, and in many cases, personal bankruptcy.

And there's more - while the report doesn't show any evidence of collusion to commit fraud, it doesn't take a rocket science to understand that the methods employed might encourage it:

Insurers could receive large discounts on the Ingenix database products by participating in Ingenix’s "Data Contribution Program." Invoices reviewed by Committee staff show that insurers could receive "data credits" entitling them to discounts of more than 50% if they submitted medical claims data to Ingenix. According UnitedHealth Group CEO Stephen Hemsley, about one hundred different parties contributed data to Ingenix. As Exhibit B demonstrates, data submitters agreed to submit "non-manipulated, complete, useable data for all covered members for all submitted claims." They also agreed to the following data submission rules: Customer shall include all data fields that Customer currently collects that are required in the data contribution format, and Customer shall not manipulate or present the data so as to provide only a particular subset of its data. Customer will submit its full claims experience for the number of total contracted covered lives. --- When Chairman Rockefeller directly asked the CEO of Ingenix, Mr. Andy Slavitt, whether he was concerned that data contributors were submitting incomplete, "pre-scrubbed" data to Ingenix, Mr. Slavitt responded that, "we run a number of analyses to check and make sure" that the data is accurate and complete."26

Mr. Slavitt’s statement is not entirely consistent with testimony that Ingenix’s Manager of Research and Development for the PHCS and MDR products, Ms. Carla Gee, has provided in court proceedings over the past few years. In these proceedings, Ms. Gee testified that while Ingenix performed occasional audits of the data, her firm was ultimately "at the mercy" of the insurance providers to submit accurate and complete data. She also conceded that: Ingenix has never tested its results to determine if its statistical conclusions bear any relationship to the actual high, low, median or 80th percentile or actual marketplace CPT [Current Procedural Terminology] code service rates charged by health care providers in any given area. As will be discussed in Section IV below, Committee staff have reviewed new evidence demonstrating that another large data contributor to Ingenix did not submit accurate and complete claims data to Ingenix. The effect of this improper data manipulation – which Ingenix either allowed to occur or neglected to discover – was to skew reimbursement rates downwards and harm consumers.

Secrecy, behind the claim of proprietary ownership, is what has kept this scam afloat. An example from the report:

For a number of years, alert consumers and health care providers sensed that the "usual and customary" cost estimates insurers were using to pay out-of-network claims were lower than market rates. But because insurers refused to explain how they developed their estimates, health care consumers could do very little to challenge the insurance industry’s practices. During the Committee’s March 31 hearing, for example, Chairman Rockefeller discussed the case of a consumer in Seattle, Washington, named Jill Faddis. In 2001, Ms. Faddis’ husband was billed $140 for a periodontist visit, but their insurance carrier, Aetna, informed them that the "usual and customary" charge for this service was $65. Ms. Faddis thought Aetna’s figure seemed low, so she took out her Yellow Pages and called every periodontist in her area to find out how much they charged for the service her husband received. As the figure (Figure 1) attached to the end of this report illustrates, she found that periodontists in her area billed between $110 and $163 for the service. But because Ms. Faddis had no effective way to challenge Aetna’s obviously incorrect estimate, she and her husband paid the $75 difference.

Now how many of you would a) think the UCR was low for your area; b) would think to call around and find out what the average charge is for a procedure; and c) have the time to do so?

And some in Congress support a plan that would force every American to buy private health care insurance?