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Post date: October 27 2009

Attorney General Cuomo Announces Historic Nationwide Reform Of Consumer Reimbursement System For Out-Of-Network Health Care Charges

New Not-For-Profit Company and Upstate Research Network Headquartered at Syracuse University to Develop New Reimbursement Database and Website with Health Care Pricing Information

Almost $100 Million in Settlement Money Will Fund the New Reimbursement System, Creating New Jobs and Helping Develop Upstate Economy


SYRACUSE, N.Y. (October 27, 2009) - Attorney General Cuomo today 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.

“FAIR Health and the upstate research network headquartered at Syracuse University will bring much-needed transparency, accountability and fairness to a broken consumer reimbursement system we have called Code Blue,” said Attorney General Cuomo. “By transforming this system for consumers nationwide, New York proves its reputation as a reform leader for the nation. By spending almost $100 million in settlement proceeds from health insurers, this initiative will also create new jobs and contribute to the development of the upstate economy which is vital to New York. Today is truly a triple win for consumers, New York and the nation.”

Nancy Ann DeParle, Director of the White House Office of Health Reform, said, “This is an important step forward for consumers, who too often are unable to penetrate the secrecy and bureaucracy of insurance companies. Transparency is one of the central goals of health insurance. For consumers struggling to navigate today's health insurance system, knowledge is power. President Obama is working with Congress to enact health insurance reform that will protect Americans against unfair insurance industry practices. We applaud the steps taken by Attorney General Cuomo and the state of New York to give consumers the ability to make informed decisions when purchasing health insurance.”

Senator John D. (Jay) Rockefeller IV, Chairman of the U.S. Senate Committee on Commerce, Science and Transportation, said: “This is an important victory for everybody who believes there needs to be more transparency and accountability in the health insurance industry. I congratulate Attorney General Cuomo and his tenacious attorneys for forcing the insurance industry to finally end a practice that has shortchanged American consumers by billions of dollars. These Ingenix databases are riddled with errors and conflicts of interest. They produce numbers only an insurance company could love. Building on the great work of Attorney General Cuomo's office to set up this new database, I believe we can pursue reforms at the national level to make sure consumers in every state get the full value health benefits they were promised by their health insurers.”

Today’s announcement arises from a wide-ranging investigation by Cuomo’s office into how the health insurance industry reimburses consumers for out-of-network health care charges. The investigation uncovered a fraudulent and conflict-of-interest ridden reimbursement system affecting millions of patients and their families and costing Americans hundreds of millions of dollars in unexpected and unjust medical costs.

The research for the new database will be centered at Syracuse University’s Maxwell School, a public affairs school which includes health policy, and the School of Information Studies (known as the “iSchool”), both of which were ranked the best in their fields by U.S. News & World Report in 2008 and 2009.

The research project will be led by Dr. Deborah A. Freund, Distinguished Professor of Public Administration at Syracuse University. The other upstate research universities, SUNY at Buffalo, Cornell University, University of Rochester, and SUNY Upstate Medical University, will bring a diverse and critical range of talents and expertise as members of the upstate research network.

In addition to creating and managing the new database, FAIR Health and the upstate research network will design a new consumer web site where, for the first time, patients around the country can find out in advance how much they are likely to be reimbursed for out-of-network health care services in their area. Information in the new database will be made available for academic research, and the database itself, in non-industry hands for the first time, is expected to make FAIR Health a significant driver in health care reform efforts.


The creation of FAIR Health and the upstate research network is the culmination of Attorney General Cuomo’s longstanding, nationwide healthcare reform investigation into the defective and conflict-ridden Ingenix database. Ingenix, a subsidiary of UnitedHealth, was used by insurers nationwide to set reimbursement rates when patients went out of network for health services. The Attorney General’s investigation found that as a subsidiary of the second-largest insurer in the nation, 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 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.

Approximately 70 percent of insured working families have out-of-network plans that let them choose their own doctors and the system impacts one in three individuals, or over 110 million people nationwide.


Beginning in January, Attorney General Cuomo secured agreements with every national and regional health insurer operating in New York State to end their use of the Ingenix database and financially commit to the new, independent database:

  • January 13, 2009: UnitedHealth Group Inc. agrees to shut down the Ingenix database and contribute $50 million towards the new, independent database.
  • January 15, 2009: Aetna agrees to end its relationship with Ingenix and contribute $20 million towards the new, independent database.
  • February 2, 2009: Aetna also agrees to reimburse over 73,000 students at over 200 colleges nationwide for underpaying out-of-network claims.
  • ; February 4, 2009: MVP Health Care agrees to end its relationship with Ingenix and contribute $535,000 towards the new, independent database.
  • February 4, 2009: Cuomo announces intent to sue Capital District Physicians’ Health Plan for defrauding consumers across New York by manipulating rates.
  • February 10, 2009: Independent Health and Health Now, New York Inc. agree to end their relationships with Ingenix and contribute $475,000 and $212,500, respectively, to fund the new database.
  • February 17, 2009: CIGNA agrees to end its relationship with Ingenix and contribute $10 million towards the new, independent database.
  • February 17, 2009: Cuomo announces intent to sue Excellus Health Plan for defrauding consumers across New York by manipulating rates.
  • February 18, 2009: WellPoint, Inc. agrees to end its relationship with Ingenix and contribute $10 million towards the new database.
  • March 3, 2009: Guardian Life Insurance Company of America agrees to end its relationship with Ingenix and contribute $500,000 towards the new database.
  • March 5, 2009: Excellus Health Plan and Capital District Physician’s Plan agree to end their relationships with Ingenix and contribute $775,000 and $300,000, respectively, toward the new database. The companies also agree to re-process claims over the past six years and reimburse members who were underpaid.
  • March 10, 2009: GHI and HIP agree to end their relationships with Ingenix and contribute $1.5 million towards the new database
  • June 18, 2009: Health Net agrees to end its relationship with Ingenix and contribute $1.6 million towards the new database.

Attorney General Cuomo also worked with the New York State Department of Insurance to establish a new insurance regulation to codify his efforts and ensure they become industry standard. The new Insurance regulation will govern health and accident insurers as well as health maintenance organizations (“HMOs”) that promise to reimburse consumers who go out of network based on the usual and customary rate of the service provided. It requires them to use an independent source for establishing usual and customary rates, as well as disclose to their members how and by whom the rates were established.


Stephen A. Warnke, Interim Chairman of the FAIR Health Board, said “Everyone agrees that to fix our health care system, we need accurate data on what health care services actually cost and how they are priced. Working with Syracuse University and its upstate partners, FAIR Health fills this crucial void by promising data that will be transparent, objectively validated and broadly available both to consumers and to academic researchers. Its launch could not be better timed.”


Dr. Reed Tuckson, chief medical officer and executive vice president of UnitedHealth Group, said, “We have long believed that better information will enable consumers to make sounder, more informed decisions about their health care. We stand ready to work with FAIR Health and the research consortium led by Syracuse University, an academic institution with a rich tradition of excellence, on an expeditious transition of the database so that it will be able to develop its own methodology and launch the new database as soon as practicable for the benefit of health care consumers across the country.”

American Medical Association Board Member William A. Dolan, M.D., said, “The American Medical Association commends Attorney General Andrew Cuomo for the landmark achievements of forcing health insurers to end to a rigged system for setting payments and successfully negotiating a transition to a more transparent system. The cumulative impact of these achievements will bring national reforms that will benefit tens of million of Americans who receive care outside their insurer’s network of physicians.”

David T. Hannan, MD, MPH, President of the Medical Society of the State of New York, said, “Today is a significant day in the movement to achieve more affordable, accessible and quality healthcare for New Yorkers. On behalf of New York physicians, the Medical Society of the State of New York applauds and thanks Attorney General Andrew Cuomo, along with his outstanding staff, for completing his promise - and our goal - of ending the health insurance industry’s practice of paying unfairly low reimbursement payments to its member patients who used out-of-network healthcare services. We believe that the replacement of the Ingenix database will be a significant healthcare reform achievement toward that end.”

Chuck Bell, Programs Director for Consumers Union, publisher of Consumer Reports, said, “Today’s announcement represents a huge leap forward in fixing the out-of-network reimbursement system to make it work fairly for the public. FAIR Health will ensure the rules of the road are fair for both health providers and consumers. This comprehensive resolution of these issues has national impact and will benefit consumers throughout the entire country.”


Syracuse University Chancellor and President Nancy Cantor said, “This is a critical research collaboration and it is all as result of Attorney General Cuomo’s efforts to ensure consumers receive the health care reimbursements they are entitled to, and that the process is open and transparent The project will involve the best work from our Maxwell health economists to leading technologists in our iSchool, all of whom will be joining with their colleagues from our partner universities to do this critical work. The universities engaged in this project-all of them anchor institutions in their communities across Upstate-are doing what they do best: bringing their expertise to the table and partnering with the Attorney General and FAIR Health, all for the public good, and to help make Upstate New York the intellectual capital of the nation for development, use and understanding of health care data.”

University of Rochester President Joel Seligman said, “I applaud Attorney General Cuomo’s efforts to ensure that patients and families are treated fairly and given access to information they need when it comes to out-of-network reimbursement. We are excited to play a role in this initiative and look forward to having the University of Rochester’s School of Nursing and researcher Irena Pesis-Katz being integral members of the FAIR team.”

Cornell President David J. Skorton said, “We are proud to be part of this innovative and far-reaching reform, which will substantially improve the health care reimbursement system. Working families across the nation will be helped by having a fair and transparent health care database to guide the reimbursement of out-of-network services. We look forward to our collaboration with other New York universities and we applaud Attorney General Cuomo for leading the way in this progressive reform.”

Russell W. Bessette MD, Associate-Vice-President for Health Sciences and Director of Health Information Technology at University at Buffalo/SUNY, said, “The Academic Health Center at the University of Buffalo applauds Attorney General Andrew Cuomo’s announcement to create Fair Health as a transparent and patient-centered database focused on better healthcare for all New Yorkers. We are particularly thrilled that his vision included the University at Buffalo as one of the four research centers tasked to conduct research in creating the next generation of fair and impartial measures which can guide patients in selecting treatment options and healthcare providers.”

Upstate Medical University President David R. Smith, M.D., said, “We are pleased to participate in this collaborative research project. The accurate processing and analysis of health claims data is extremely important within the healthcare industry.”


Senator John L. Sampson, Majority Conference Leader said, “New Yorkers work too hard and pay too much for their healthcare to allow insurers to take even more of their hard-earned money. We commend Attorney General Cuomo for putting consumers first and holding big insurance companies accountable.”

Assembly Speaker Sheldon Silver said, “I commend Attorney General Cuomo for his efforts to ensure accuracy and transparency of the health insurance reimbursement system. Amid the current economic crisis, New York's families are struggling to make ends meet and it is imperative that there are safeguards in place to prevent them from falling victim to fraud. The creation of a truly independent database to establish estimated reimbursement rates will help to end the conflicts of interest that have long plagued the health care system and will allow consumers to make more informed choices when selecting health care providers.”

Senator Neil Breslin, Chair of the Senate Insurance Committee, said, “Consumers have a right to know what it will cost them to seek medical care if they need to go outside of their health insurer’s provider network to receive treatment. The establishment of this new and independent database will ensure that costs for those treatments are both fair and accurate, while at the same time making health insurance more affordable and available.”

Senator David Valesky said, “I applaud Attorney General Cuomo’s efforts to not only reform the health care industry across our nation, but also shining a light on the talent we have in our upstate communities. This initiative will help patients across the country recognize what the fair reimbursement rates are for out-of-network care and eliminate a major conflict of interest that has plagued the industry for too long.”

Assemblywoman Joan Christensen said, “Attorney General Cuomo continues to show a real commitment to the citizens of our entire state. This initiative will bring positive attention to our upstate communities and deliver groundbreaking results to help families who are struggling with health care costs. This is a win-win solution that captures the essence of New York’s reputation as a leading state in the U.S.”

Assemblyman Bill Magnarelli said, “I am thrilled that New York state will be the epicenter of smart, innovative and revolutionary change in the health insurance industry. The ‘brain-trust’ of upstate is more than capable to bring about the reform we need to make sure that prices for medical care are kept under control. Attorney General Cuomo and his staff are to be commended for uncovering the wrongdoing and turning it into a positive development for our state and our country.”

Assemblyman Al Stirpe said, “Today’s announcement is the culmination of months of tireless reform efforts on the part of Attorney General Cuomo and his office. After settling with every major health insurer operating in New York State and collecting over $100 million to fund this new database, the Attorney General today is taking the first step to actually rebuild this broken system and replace it with one that works and protects hundreds of millions of patients nationwide.”

Syracuse Mayor Matthew Driscoll said, “This landmark reform will draw from the powerful resources of an expansive upstate network to affect health care reform nationwide and stimulate the upstate economy. With Syracuse University serving as the hub of this extraordinary transformation of our health care system, upstate New York will become the national leader in providing vital health data. Further, the FAIR Health system will create real, secure, and crucial jobs and invest up to $100 million throughout Syracuse and upstate New York. Thanks to Attorney General Cuomo, our best and brightest will now ensure the success of the most significant health care reform in a generation”

Today’s announcement is the result of an investigation by Acting Chief of the Health Care Bureau James E. Dering, Senior Trial Counsel Kathryn E. Diaz, and Assistant Attorneys General Brant Campbell and Sandra Abeles, 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

“Watch the Attorney General’s Announcement.”