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WellPoint Follows Cigna in Settling NY Probe into Client Payments

Posted on 18 Feb 2009

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According to a person familiar with the probe, WellPoint Inc. agreed to pay $10 million to settle an investigation by New York into how the insurer reimburses clients for out-of-network services.

WellPoint, the second-largest U.S. insurer, is the fourth major company known to settle with New York Attorney General Andrew Cuomo over how it determines “reasonable and customary charges” for out-of-network doctor visits. An agreement by Cigna Corp., the fifth-largest U.S. insurer, was announced yesterday.

UnitedHealth Group Inc., the biggest U.S. insurer, settled for $50 million in an agreement announced last month. UnitedHealth also agreed to shut down the database operated by its Ingenix subsidiary. Insurers use the Ingenix database to help set reimbursement rates. Aetna Inc., the third-largest, followed UnitedHealth’s settlement, paying $20 million, and Cigna settled for $10 million.

“This is like a bunch of dominos,” Dr. Nancy Nielsen, president of the American Medical Association, the largest doctors’ group, said in a telephone interview yesterday. “Once the underlying scheme was uncovered and the UnitedHealth settlement was reached, it was the thing to do.”

The WellPoint settlement may be announced today. Cuomo issued an advisory this morning about an 11 a.m. press conference on what he called the “latest development in nationwide sweep of the health insurance industry.”

Cuomo’s office declined to comment yesterday when asked about a WellPoint settlement.

WellPoint and Empire Blue Cross Blue Shield, a wholly owned subsidiary, “will continue to cooperate and work with the office of the Attorney General,” the Indianapolis-based company said in a statement yesterday when asked about settlement.

The statement was the same one WellPoint spokeswoman Cheryl Leamon sent when asked about the probe earlier this month.

Cuomo has been investigating how the health insurance industry handles out-of-network claims for about a year. He says insurers industrywide have used Ingenix’s “rigged” database to set artificially low reimbursement rates.

“It was clearly a scheme to keep what the insurers paid low,” Nielsen said. “There’s no question the books were cooked.” She said insurers both contributed data to the database and used it to determine how much to reimburse patients.

Replacement Database

Minnetonka, Minnesota-based UnitedHealth announced Jan. 13 that it would shut the Ingenix database. The $100 million total Cuomo expects from the industry’s settlements is slated to fund a not-for-profit entity that will build a database to replace Ingenix’s.

Cuomo has said the nonprofit entity, to be associated with a university in New York, should be running in about six months.