Minneapolis-based UnitedHealth Group has agreed to pay $50 million to settle allegations from N.Y. Attorney General Andrew Cuomo that the health plan and its wholly owned subsidiary, Ingenix, manipulated out-of-network insurance payment rates for physician fees, according to a news release from the attorney general's office.

United and other health plans use information gleaned from databases provided by Ingenix, the nation's largest private provider of healthcare billing information, to set their 'usual and customary rates' for paying doctors. In Feb. 2008, Mr. Cuomo launched an investigation into what he alleged was a scheme to manipulate the Ingenix databases and issued subpoenas to Ingenix and 16 health insurers, including United, Aetna, Cigna and several Blue Cross and Blue Shield plans.  

Mr. Cuomo found that "by distorting the 'reasonable and customary' rate, the United insurers were able to keep their reimbursements artificially low and force patients to absorb a higher share of the costs," the attorney general's office said in a news release. Mr. Cuomo alleged the practice was industry-wide.

"For the past 10 years, American patients have suffered from unfair reimbursements for critical medical services due to a conflict-ridden system that has been owned, operated and manipulated by the health insurance industry," Mr. Cuomo said. "This agreement marks the end of that flawed system."

Mr. Cuomo said Ingenix's 'reasonable and customary' rates were lower than actual cost of medical expenses, which compelled individual beneficiaries to pay more out of pocket than necessary for out of network visits. Ingenix and United, the nation's second largest health insurer, agreed to close Ingenix's Prevailing Health Charges System and Medical Data Research data bases. United also agreed to pay $50 million to fund a not-for-profit organization to create and own a new, independent healthcare billing database to replace the two insurer-owned databases. That not-for-profit organization will also develop a Web site to inform consumers around the country how much they will be reimbursed for common out of network services in their area and make rate information available to health plans.

"Today, patients and physicians prevailed over health insurance giant UnitedHealth Group when New York Attorney General Andrew Cuomo stopped the insurer from using a rigged Ingenix database that increased insurer profits at the expense of patients and physicians," said American Medical Association President Nancy Nielsen, MD, in a news release. "For far too long health insurers using the flawed Ingenix databases have been able to increase revenue by underpaying patients' medical bills."

United said the agreement will enhance the transparency of information related to physician fees for out of network services.

"We are committed to increasing the amount of useful information available in the health care marketplace so that people can make informed decisions, and this agreement is consistent with that approach and philosophy," said Thomas Strickland, UnitedHealth Group executive vice president and chief legal officer, in a statement.

Read the attorney general's news release about the UnitedHealth Group settlement.