Maryland Injury and Disability Law : Washington DC Metro Injury & Disability Lawyer & Attorney : Greenberg & Bederman : Accidents, Falls, Medical Malpractice : Maryland, DC, Virginia

The problem is that with health care, there is no such thing as a “Usual and Customary” rate. Big insurance companies are able to negotiate lower costs for services because of the volume of care seekers that they bring to hospitals, clinics and doctors’ offices. Once you go out of network, you no longer have the weight of your insurance company’s negotiating skill behind you. So the costs for your treatment vary wildly from place to place. A sprained ankle in Tacoma, Washington might cost much more than the same injury in Yuma, Arizona. It depends on who owns the hospital, whether the facility is independent or whether an HMO runs the facility, or what their billing policies are. Health care is quite literally wide open. There is no “invisible hand of Adam Smith” keeping the price of services up or down.

So for the sake of argument, let’s say you are on vacation in rural Vermont and you break your leg. The non-negotiated, out-of-network costs might be a lot higher than the costs of the same injury at the hospital you would go to in Bethesda, Maryland, Arlington, Virginia or Washington, D.C. So if you paid extra on your policy every month for out of network costs, you would probably assume that your insurance policy would pick up 80% of whatever the hospital in Vermont is charging you. But instead, your insurance policy is picking up 80% of what Ingenix decides is “Usual and Customary.”

And that’s exactly what the problem was. Attorney General Cuomo discovered that Ingenix was skewing its “Usual and Customary” rates so that everything was reported as much cheaper than it was in real life, which lowered the amount that insurance companies were obligated to cover. So if the guy with the broken leg in Vermont is presented with an out of network bill for $4000, the insurance company can say “According to our calculations, the Usual and Customary rate for your injury is $2500, of which we will pay $2000.” This leaves you on the hook for $2000, as well as all the extra money you had been paying each month for the out of network coverage, which was evidently completely useless due to Ingenix.

It wasn’t only the policyholders who were getting stuck with huge medical bills. Most people don’t have the amount of cash on hand that it takes to pay for enormous medical expenses (this is why they had insurance, after all,) so the providers end up selling their debt to bill collectors for nickels on the dollar just so they can recoup some of their losses. So both the policy holder and the healthcare provider lose out, but guess who doesn’t? The insurance companies that use Ingenix software for their out of market billing. Which is to say almost all of them.

All of this is bad enough, but what makes the whole scenario even worse is that Ingenix was actually a wholly owned subsidiary of United Health Care, one of the biggest health care insurance providers in the United States. This is like a professional football team being allowed to bring its own referees to the Super Bowl. Who do you think is going to win out?

We would like to say that this case of price fixing was an isolated incident, but we can’t for two reasons. The first reason is that this rigged software was used by practically the entire American health insurance industry. How “isolated” could something be if the entire system is using the same flawed data? The second reason is that this is not the first episode of big insurance using skewed data in their software to maximize profits at the expense of their policyholders. Auto insurance companies are still to this day using a program called “Colossus,” which uses skewed data to “average out” the costs of physical injuries. Just like Ingenix, Colossus also leaves policyholders on the hook for thousands of dollars worth of medical costs that should have been paid by the insurer in the first place.

While it’s a good thing that Ingenix was essentially forced out of business by Mr. Cuomo, and it is good that users of Colossus are facing similar investigations, these changes have come a little too late for the hundreds of thousands of patients and medical professionals who have been ripped off as a result of these skewed computer programs. We think that the country would be better served if the states or federal government were more proactive about examining healthcare billing software. It’s good that we have firemen, but we have more of a need for Smokey the Bear.

The data that these companies use to determine pricing should be open to review, not kept as a trade secret. Nor should any companies that develop similar software have any financial ties to insurance companies. The fact that Ingenix was owned by one of the biggest health care companies in America is a massive conflict of interest, and one that cost Americans millions of dollars.

Greenberg & Bederman is a personal injury law firm located one half block from the SIlver Spring metro station.  We have been handling personal injury law since 1985.  To learn more about our personal injury lawyers, please read about Andrew Bederman, Roger Greenberg, or Jason Fernandez, or watch some of our personal injury videos on Youtube.