Attorney General Cuomo Secures Agreements With Excellus And CDPHP To Join Historic Health Insurance Reform Efforts And Reimburse Thousands Of New York Consumers For Underpaid Claims

ALBANY, NY (March 5, 2009) – Further expanding his historic reform of the health insurance industry, Attorney General Andrew M. Cuomo today announced agreements with Excellus Health Plan (“Excellus”) and Capital District’s Physician Health Plan (“CDPHP”), two of Upstate New York’s largest health insurers. The agreements are part of his ongoing drive to end industry-wide conflicts of interest in the system for determining out-of-network reimbursement rates and establish a new process to generate fair rates for working families nationwide. Under the terms of today’s agreement, not only will both companies cease use of the defective Ingenix database, but they will re-process claims made under the flawed system and reimburse consumers across New York State what they are owed. The two companies will also contribute money to a qualified nonprofit organization that will establish a new, independent database, which the companies will use, to help determine fair out-of-network reimbursement rates for consumers. 

Last month, Cuomo announced his intent to sue both companies for defrauding consumers by using a defective system for determining reimbursement rates for members who pay higher premiums for the right to go out of network. Rochester-based Excellus is the largest not-for-profit insurer in New York State, and is the largest insurer in the Rochester and Syracuse areas. Excellus and its affiliates serve nearly two million people in 31 counties, with approximately 872,000 members in Rochester, 549,000 in Syracuse and Central New York, 289,000 in Utica, and 165,000 in Buffalo, where it operates as Univera Healthcare (“Univera”), one of the Buffalo area’s three largest insurers.  CDPHP is a major non-profit insurer based in the Capital Region that insures 400,000 patients throughout 29 counties in New York State.

“Today’s agreements mean that Excellus and CDPHP will fulfill the promises made to their members to deliver fair rates and give consumers what they paid for,” said Attorney General Cuomo. “We have expanded the breadth and depth of our reform efforts, and we have secured compensation for consumers across New York who were under-reimbursed in the past. Not only are we a step closer to the complete overhaul of a defective system, but this will deliver much-needed financial relief for members across Upstate New York.”

In January, Attorney General Cuomo announced sweeping reforms to end the manipulation of reimbursement rates at the expense of patients across the country. After a year-long investigation revealed that the health insurance industry relied on a defective database to set rates, Cuomo reached groundbreaking agreements with UnitedHealth Group Inc. (“UnitedHealth”) (NYSE: UNH), the owner of the Ingenix database and the second-largest insurer in the country, along with Aetna (NYSE: AET), the nation’s third-largest health insurer, CIGNA (NYSE:CI) and, most recently, WellPoint/Empire BlueCross Blue Shield (NYSE: WLP), the largest insurer in the country and in New York State, as well as Guardian Life Insurance Company of America (“Guardian”). Cuomo also brought his reform efforts to Upstate New York, securing agreements with the Schenectady-based MVP Health Care/Preferred Care as well as Independent Health and HealthNow, both Buffalo-based insurers.

Attorney General Cuomo’s investigation concerned allegations that as a subsidiary of UnitedHealth, Ingenix had a vested interest in helping set rates low, so companies could underpay patients for out-of-network services. The investigation revealed that the database intentionally skewed “usual and customary” rates downward through faulty data collection, poor pooling procedures, and the lack of audits, meaning consumers were forced to pay more than they should have.  The investigation found the rate of underpayment by insurers ranged from ten to twenty-eight percent for various medical services across the state.  The Attorney General found that having a health insurer determine the “usual and customary” rate – a large portion of which the insurer then reimburses – creates an incentive for the insurer to manipulate the rate downward.  The establishment of a new database, independently owned and operated by a nonprofit organization, is designed to remove this conflict of interest.

Under the agreement secured with UnitedHealth, the database of billing information operated by Ingenix will close.  UnitedHealth also agreed to pay $50 million to a qualified nonprofit organization that will establish a new, independent database to help determine fair out-of-network reimbursement rates for consumers throughout the United States.  Cuomo’s agreement with Aetna secured another $20 million, and WellPoint and CIGNA each agreed to contribute $10 million to the new database

As part of his ongoing investigation, earlier this month, Cuomo announced his intent to sue both Excellus and CDPHP for defrauding consumers across the state by relying on a conflict-of-interest ridden system to reimburse consumers for out-of-network claims. In the case of Excellus, the Attorney General uncovered a trove of e-mails pointing to an egregious scheme where, for at least the past fifteen years, Excellus had used years-old fee schedules to reimburse consumers for out-of-network claims, saving itself countless dollars which should have been paid to consumers.  Because medical costs rise substantially every year, the use of old fee schedules hurts consumers by paying them substantially less than they are owed.  The investigation found that Excellus relied on pricing information that was as much as nine years old. Furthermore, emails and other internal communications secured by the Attorney General’s Office during the investigation show that Excellus employees were aware of their outdated rates and did nothing to correct the problem or pay members what they were owed. Cuomo's case against Excellus also included information provided by the Syracuse Post-Standard newspaper showing that the company was under-reimbursing the Post-Standard's employees, who were members of Excellus.

Under today’s agreement with Excellus and CDPHP:

  • Excellus will pay $775,000 and CDPHP will pay $300,000 toward a new, independent database run by a qualified nonprofit organization;
  • Excellus will also pay $775,000 to the Office of the Attorney General in costs and fees;
  • Excellus will commit to using a claims monitor in connection with reprocessing out-of-network claims made during the past six years and in notifying members as part of that process.
  • CDPHP will notify members who made out-of-network claims over the past six years and pay claims up to amount of charge (minus member responsibility);
  • The qualified nonprofit organization selected will own and operate the new database, and will be the sole arbiter and decision-maker with respect to all data contribution protocols and all other methodologies used in connection with the database;
  • The nonprofit will develop a website where, for the first time, consumers around the country can find out in advance how much they may be reimbursed for common out-of-network medical services in their area;
  • The nonprofit will make rate information from the database available to health insurers;
  • The nonprofit will use the new database to conduct academic research to help improve the health care system;
  • The nonprofit will be selected and announced at a future date.

The Attorney General’s industry-wide investigation into rate manipulation began in February 2008, when Cuomo announced that he had issued subpoenas to the nation’s largest health insurance companies that use the Ingenix database, including Aetna, CIGNA and WellPoint/Empire BlueCross BlueShield. To date the investigation is ongoing.

Martin Lustick, M.D., Senior Vice President and Corporate Medical Director, Excellus BlueCross BlueShield, said: “We acknowledge the conflicts of interest in the Ingenix database and support the Attorney General's efforts to have a not-for-profit company build and operate a new, independent database. This will bring consumers across the country greater transparency in understanding how much they may be reimbursed for out-of-network medical services. Given the new information, we are pleased to reimburse any of our members who may potentially have been affected.”

Dr. John Bennett, President and CEO of CDPHP, said: “We are pleased to cooperate with the Attorney General in supporting a new, independent database for determining out-of-network reimbursement rates. We are confident that this new entity will provide full transparency and serve the best interest of our members. We acknowledge the conflicts of interest in the Ingenix database which the Attorney General's investigation brought to light.  Given this new information, we are pleased to contact members who may have been underpaid as a result of the application of the Ingenix database and will reimburse those who
have been adversely affected. As a health plan uniquely run by practicing physicians in communities across New York, CDPHP understands deeply the concerns of its members and will continue to work hard to protect them.”

Nancy H. Nielsen, M.D., President of the American Medical Association, said: “Removing the cloak of secrecy from the Ingenix database has triggered a domino effect among health insurers that promises to benefit patients and physicians by reforming the corrupt system for paying out-of-network medical bills. Now that the underlying scheme has been exposed, health insurers are doing the right thing by agreeing to the groundbreaking settlements offered by Attorney General Cuomo.”

Michael H. Rosenberg, MD, President of the Medical Society of the State of New York (MSSNY) said, “We thank Attorney General for negotiating not only agreements – but also settlements – with Excellus BlueCross BlueShield and CDPHP regarding their past use of the flawed Ingenix database. With more than a half dozen settlements and agreements in the last seven weeks, the Attorney General has ensured that future payments made to patients and their physicians for out-of-network care will be fair and reasonable.  MSSNY is proud to have played a role in the investigations that led to these settlements and hopes this is an indication that the insurance industry will continue to modify its ways of doing business and work with physicians to provide better and more affordable healthcare to patients.  Patients and physicians alike will be forever indebted to the Attorney General for the work he has done to improve the quality, availability and cost of healthcare in New York State.”

Chuck Bell, Programs Director for Consumers Union, said: “Today's announcement represents another major victory for consumers. Excellus BlueCross BlueShield and Capital District Physicians' Health Plan (CDPHP) will stop using the flawed Ingenix database and instead use a new nonprofit database on out-of-network charges.  They will also reprocess insurance claims for out-of-network services over the last six years, to ensure that consumers are paid fairly.  We commend Excellus and CDPHP for agreeing to this settlement, and contributing $775,000 and $300,000, respectively, to support the new nonprofit database on out-of-network charges. The new nonprofit created by Attorney General Cuomo's initiative will now have over $90 million in start-up funding to get to work on improving the health care payment system for consumers.”

The agreement announced today is the result of an investigation by Deputy Chief of the Health Care Bureau James E. Dering, Senior Trial Counsel Kathryn E. Diaz, and Assistant Attorneys General Brant Campbell and Sandra Rodriguez, under the direction of Linda A. Lacewell, the head of the Attorney General’s Healthcare Industry Taskforce.  

In January, Cuomo also issued a report on his investigation, “Health Care Report: The Consumer Reimbursement System is Code Blue.”  The report highlights the conflicts of interest and other defects in the current system and calls for the reforms announced today.  To access the report, get consumer tips for out-of-network care, or to file a complaint, please visit

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