Reform of the Out-Of-Network Reimbursement System


On October 27, 2009, the Attorney General announced historic nationwide reform of the consumer reimbursement system for out-of-network health care charges.  A new not-for-profit company, FAIR Health, Inc., and an upstate research network headquartered at Syracuse University will develop a new independent database for consumer reimbursement and a new website where for the first time consumers can compare prices before they choose their doctors.

In addition to Syracuse University, the upstate research network consists of the State University of New York (“SUNY”) at Buffalo, Cornell University, University of Rochester, and SUNY Upstate Medical University. Almost $100 million in settlement money will fund the new reimbursement system, creating jobs and helping develop New York’s upstate economy. The new database will make FAIR Health a center for health care research and an engine of health care reform.

This reform arose out of an industry-wide investigation, launched in February 2008, into allegations that health insurers do not keep their promise to reimburse consumers based on the “usual and customary rate” of out-of-network care. Most health insurers use a database operated by Ingenix, Inc., a subsidiary of UnitedHealth Group. Ingenix gathers billing data from the industry and creates schedules used to determine the “usual and customary” rates. UnitedHealth Group, one of the nation’s largest insurers, uses the same schedules as a basis for reimbursing consumers. The Attorney General found that this gives Ingenix an incentive to manipulate the data so as to reduce reimbursement rates. Other health insurers that use Ingenix have the same conflict of interest.

With the creation of a new, independent database, consumers can now look forward to having more information, greater clarity and fundamental fairness in the out-of-network reimbursement system.