Health care providers throughout the country that have submitted claims to commercial insurers for out-of-network services may have a substantial financial stake in pending class action litigation alleging that commercial insurers have improperly manipulated “usual and customary” out-of-network reimbursement rates. This January saw a flurry of announcements regarding the issue. Insurance companies UnitedHealth Group, Inc. (UnitedHealth) and Aetna, Inc. agreed to pay a combined $70 million to resolve allegations brought by a New York State Attorney General (NYAG) investigation. On the heels of that announcement, a $350 million settlement was proposed in a class action lawsuit initiated by the American Medical Association (AMA).

Both the NYAG and the plaintiffs in the AMA class action alleged that the insurance carriers had improperly manipulated “usual and customary” out-of-network reimbursement rates to the detriment of patients, physicians and health care providers. If the settlements are indeed finalized, health care providers may be entitled to recover a portion of the settlement proceeds.

The settlements were triggered by allegations that Ingenix, Inc., the nation’s largest provider of health care billing information and a wholly-owed subsidiary of UnitedHealth, utilized “convoluted and dishonest systems for determining the rate of reimbursement” that “intentionally skewed ‘usual and customary’ rates downward” in violation of the law, according to the NYAG. The NYAG settlement requires UnitedHealth and Aetna to contribute $50 million and $20 million respectively to establish a transparent, independent database to compile nationwide reimbursement rates, which will be administered by a non-profit organization. Additionally, the settlement requires Ingenix to close its reimbursement rate database permanently.

The AMA class action, which was filed in 2000 in federal court in the Southern District of New York, challenged the validity of the Ingenix database used to determine the “usual and customary” reimbursement rate for out-of-network care. The AMA suit asserted that UnitedHealth and Ingenix’s reimbursement practices violated the Employee Retirement Income Security Act, the Racketeer Influenced and Corrupt Organizations Act, and federal antitrust laws for conduct dating back to 1994. Last month, UnitedHealth agreed to pay $350 million to resolve the legal claims asserted by the AMA. On January 20, 2009, the AMA class action plaintiffs and defendants filed joint motions moving the district court for conditional class certification and preliminary approval of the settlement.

The settlements in these suits may affect the rights of health care providers who billed for out-of-network services or supplies and received reimbursement based on out-of-network rates set by Ingenix. For instance, providers who have contracted to receive reimbursement based on Ingenix’s reimbursement data may need to make other arrangements, since the Ingenix billing database is set to close as a result of the NYAG investigation. Additionally, certain health care providers may be entitled to receive compensation under the proposed AMA settlement fund and/or may lose their right to pursue an action against Ingenix, UnitedHealth, or other health insurers for their allegedly improper reimbursement practices once the settlement is finalized by the district court.

The proposed settlement class for the AMA class action includes:

[A]ll Out-Of-Network Health Care Providers and Out-Of-Network Health Care Provider Groups who provided Covered Out-Of-Network Services or Supplies to Persons whose health care benefits were insured or administered by any Defendant at any time from March 15, 1994 through Preliminary Approval Date, and whose resulting claims were processed or reimbursed by such Defendant using the Ingenix Databases or any of Defendants’ Out-Of-Network Reimbursement Policies.

The fact that this case was initiated by the AMA does not necessarily limit the scope of the AMA class action and settlement to physicians.  Rather, the use of the term "providers" in the proposed settlement agreement means that hospitals, end stage renal disease facilities, skilled nursing facilities, and other health care providers may be affected as well.

Arent Fox is currently monitoring the AMA class action proceedings to protect the rights of several health care providers. If you are interested in learning more or have any questions, please contact the authors or the Arent Fox attorney with whom you regularly work.