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Ingenix: a system to rip-off insureds and doctors on "reasonable and customary"?

New York's Attorney General and the AMA have filed separate lawsuits charging that a system used by insurers to calculate "reasonable and customary" charges is cheating customers and health care providers.

Many insurance schemes, such as Michigan's No Fault Automobile insurance system, and many individual insurance policies and contracts limit insurer payouts to "reasonable and customary" medical charges.  For example, most health insurance contracts limit payment to out-of-network providers to "reasonable and customary" expenses for similar services.

The Attorney General and the AMA claim that insurers are systematically cheating customers and health care providers by using a company named Ingenix to calculate these charges.  Ingenix is a wholly-owned subsidiary of United Health Group, one of the nation's largest health care insurers.  Using a company it owns to calculate fair payments is obviously a conflict of interest since the lower Ingenix's calculations, the less that United Health and others pay out.  Interestingly, even though these insurers use Ingenix's numbers to calculate "reasonable and customary" charges, Ingenix claims in licensing its data to insurers that the data is "for informational purposes only" and does not imply anything about "reasonable and customary" charges--despite the fact that Ingenix knows that is precisely what the insurers are purchasing the data for.

The Attorney General and the AMA claim that Ingenix systematically excludes higher charges and uses only moderate and low charges to calculate the "norm".  I wonder how the insurer would react if you systematically excluded the auto repair estimates that you considered too low and used only the higher charges to make a statistical average of what the insurer should pay?  What if you did that after a house fire, would the insurer consider it kosher?

The Attorney General also claims that Ingenix pools services provided by nurses and practitioners with those provided by doctors to bring the pooled charge down.  He claims that Ingenix systematically ignores factors including patient condition and facility type, in a manner which falsely manipulates costs.  Lastly, he claims that Ingenix uses seriously out-dated information, so that its calculation of "customary" always lags well behind medical inflation (which usually exceeds the normal increase in the general cost of living).  The AMA's complaint adds that Ingenix numbers often conflate low-cost areas with higher-cost regions to blur the actual expense and frequently include in-network bargained discounts that are based on quantity and other considerations.

When the Attorney General calculated what doctors actually chaqrge for an office visit for a "moderately severe" illness, he came up with a cost of $200.00 for a 15 minute visit.  Ingenix calculated the cost at $77.00, which would leave the "insured" owing $138.00.  If you have significant co-pays calculated in this manner, you may want to investigate where your insurer is obtaining its data on "reasonable and customary":  you may find that it isn't an objective or fair computation.

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