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Post date: January 15 2009

Attorney General Cuomo Announces Expansion Of Historic Health Insurance Reform: Aetna Will End Relationship With Company That Manipulated Rates To Overcharge Patients By Hundreds Of Millions Of Dollars

NEW YORK, NY (January 15, 2009) – Attorney General Andrew M. Cuomo today announced an expansion of his historic reform of the nationwide health care reimbursement system.  Cuomo has reached an agreement with Aetna (NYSE: AET), the nation’s third largest health insurer, in his ongoing drive to end industry-wide conflicts of interest and generate fair reimbursement rates for working families nationwide.  Aetna will pay $20 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. 

“With this agreement, the tide is turning against the corrupted reimbursement system that took hundreds of millions of dollars from the pockets of patients nationwide,” said Attorney General Cuomo.  “Health insurers will no longer be able to distort their data, leaving patients with unfair bills.  Insurers nationwide should be on notice – Our investigation continues and we are aggressively pursuing the other health insurance companies that have been involved with Ingenix.”

Earlier this week, Attorney General Cuomo announced a sweeping reform of the health care reimbursement system after conducting an industry-wide investigation into a scheme to defraud consumers by manipulating reimbursement rates.  At the center of the scheme is Ingenix, Inc. (“Ingenix”), which is the nation’s largest provider of health care billing information.  Two days ago, Cuomo reached a groundbreaking agreement with UnitedHealth Group Inc. (NYSE: UNH) (“United”), the nation’s second largest health insurer, which owns Ingenix. 

Under the settlement with United, the database of billing information operated by Ingenix will close.  United 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.  United and Aetna contributed seventy percent of the billing information that made up the Ingenix database; that information will now be contributed to the new, independent database instead.

Cuomo continued, “This new agreement represents continued momentum in the creation of the independent database.  With the Aetna and United agreements, we have now captured seventy percent of the information the new database will need.  We are one step closer to freeing patients from the conflict-ridden Ingenix system.”

In February 2008, the Attorney General announced an industry-wide investigation into allegations that health insurers unfairly saddle consumers with too much of the cost of out-of-network health care.  Seventy percent of insured working Americans pay higher premiums for insurance plans that allow them to use out-of-network doctors.  In exchange, insurers often promise to cover up to eighty percent of the “usual and customary” rate of the out-of-network expenses, and consumers are responsible for paying the balance of the bill. 

Aetna and the largest health insurers in the country rely on the United-owned Ingenix database to determine their “usual and customary” rates.  The Ingenix database uses the insurers’ billing information to calculate “usual and customary” rates for individual claims by assessing how much the same, or similar, medical services would typically cost, generally taking into account the type of service and geographical location.  Under this system, insurers control reimbursement rates that are supposed to fairly reflect the market.  

Attorney General Cuomo’s investigation concerned allegations that the Ingenix database intentionally skewed “usual and customary” rates downward through faulty data collection, poor pooling procedures, and the lack of audits.  That means many 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 maintained by a nonprofit organization, is designed to remove this conflict of interest.

Under Attorney General Cuomo’s agreement with Aetna:

  • Aetna will pay $20 million toward a new, independent database run by a qualified nonprofit organization;
  • The nonprofit 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.

In February 2008, Cuomo also announced that he had issued subpoenas to the nation’s largest health insurance companies that use the Ingenix database, including Aetna, CIGNA (NYSE: CI) and WellPoint/Empire BlueCross BlueShield (NYSE: WLP).  The Attorney General’s industry-wide investigation is ongoing.

Cuomo was joined by representatives from Aetna and from leading medical and consumer organizations in making today’s announcement.

Cuomo said, “I would like to thank the American Medical Association and the Medical Society of the State of New York for their invaluable assistance over the course of this investigation.  The expertise and experience of the national and state medical societies, as well as national consumer groups such as Consumers Union, are critical to achieving a solution that is in the best interests of patients and doctors alike.” 

Aetna Senior Regional Medical Director Donald Liss, M.D., said, “Aetna shares and welcomes Attorney General Cuomo’s interest in transparency, and we commend the Attorney General and his staff for establishing an independent process that is transparent and helps consumers make more informed health care purchasing decisions.  We also recognize the Attorney General’s concern about the conflicts of interest inherent in the Ingenix databases.  We welcome a new database to be developed and maintained by a trusted and independent entity.”

President of the American Medical Association (AMA), Nancy Nielsen, M.D., said, “The Ingenix database has corrupted the system for paying out-of-network medical bills, resulting in patients and physicians being cheated by health insurers.  The AMA calls on all insurers to immediately reject the rigged Ingenix database and agree to the solution proposed by Attorney General Cuomo.  An industry-wide commitment is needed to bring transparency, accuracy and integrity to an invalid payment system that has allowed insurers to place profits ahead of their promises to patients.”

Immediate Past President of the Medical Society of the State of New York (MSSNY) Robert B. Goldberg, D.O., said, “We thank Attorney General Andrew Cuomo for negotiating an agreement with Aetna, Inc. to abandon the Ingenix database for determining out-of-network payments – just two days after negotiating the momentous and even larger agreement with UnitedHealth Group.  The speed with which Aetna signed this agreement underscores its importance and the need for other insurers to follow.  Finally, patients who pay a premium to be able to select a doctor of their choice will get what they paid for, and their doctors will be fairly paid.  Patients can now concentrate on getting well, and doctors can concentrate on providing them with the best care.” 

Consumers Union Programs Director Chuck Bell said, “This is an extremely sensible, fair solution, which will be of great benefit for consumers nationwide.  We urge all other health insurance companies who have been using the Ingenix database to support Attorney General Cuomo’s comprehensive plan to improve transparency for out-of-network charges.”

Aetna covers 16 million members nationwide; United covers 33 million members nationwide.

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.  

Earlier this week, 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

  • View the Attorney General's agreement with AETNA