New ammo in fight to stop health insurance merger

By Marshall Allen

Thursday, Feb. 14, 2008 | 2 a.m.

UnitedHealth Group, which is poised to virtually monopolize health insurance in Las Vegas, was accused Wednesday by the New York attorney general of fraudulently distorting data to keep insurance reimbursements low and force patients to pay higher costs.

Officials said patients were cheated out of hundreds of millions of dollars.

Opponents of United’s proposed merger with Sierra Health Services, Nevada’s largest health insurer, said the New York announcement combined with recent fines on United elsewhere give the Nevada attorney general’s office and other lawmakers reasons to intervene and block the deal.

Opponents continue to consider litigation to stop the merger, fighting alone or in conjunction with the Nevada attorney general or the U.S. Justice Department. Justice Department approval is the final regulatory hurdle before the merger is complete.

New York Attorney General Andrew Cuomo announced his intent to sue United and its subsidiary Ingenix, a database company that provides information about reimbursement rates to dozens of insurance companies including Aetna, CIGNA, Health Net, Humana and Oxford.

New York investigators say Ingenix operates a defective and manipulated database that insurance companies use to determine how much they should pay consumers for visits to out-of-network doctors. Ingenix is a “conduit of rigged information,” officials said.

For example, New York authorities alleged that if the fair market rate for a 15-minute doctor visit is $200, Ingenix sets the rate at $77. The insurance company, which is under contract to pay 80 percent of the doctor’s bill, would then pay only $62, leaving the consumer to pay the other $138.

At a fair market rate of $200, the insurer should pay $160 and the consumer $40.

Cuomo estimated that the fraud has gone on for a decade, with the cumulative damages in the hundreds of millions of dollars.

When consumers complained about their reimbursement rates, United allegedly told them the rates were determined by independent research, New York officials said.

Cuomo says United’s ownership of Ingenix is a clear conflict of interest and the database company had an incentive to set rates that benefited United.

Don Nathan, spokesman for United, denied any wrongdoing by Ingenix. The database goes through a rigorous validation process and is neutral and transparent, he said.

The New York announcement is the latest in a series of violations and allegations involving United. The company provides coverage for about 70 million Americans, making it the country’s largest health insurer.

In late January, California regulators fined United up to $1.33 billion for more than 130,000 alleged claims-handling violations. In September, regulators from 36 states, including Nevada, forged an unprecedented alliance to fine United $20 million for failing to process claims and respond to consumer complaints.

If the merger goes through with Sierra, which insures about 630,000 Nevadans, United will be the dominant player in the Las Vegas health insurance market.

United had promised the deal would close by the end of 2007, but it has been delayed and opposition in Nevada has grown.

Nathan, the United spokesman, said Nevada consumers have nothing to fear. “The combination of Sierra and UnitedHealth represents a big plus to the people of the state, for service, for quality and for affordability,” he said.

A Sierra spokesman said his company does not use Ingenix.

The coalition of merger opponents includes the Service Employees International Union-Nevada, the Nevada State Medical Association and Clark County.

Jane McAlevey, executive director of the SEIU, said the quality of health care in Southern Nevada already ranks at the bottom nationally. State lawmakers should not allow United to make things worse, she said.

McAlevey said Nevada Attorney General Catherine Cortez Masto and other officials should “make a decision as a state to stop this merger.”

In private meetings with merger opponents, officials from Cortez Masto’s office have shown a willingness to intervene. But the office would not comment to the Sun about possible action.

Opponents have retained an economist as an expert and the American Medical Association is conducting a survey of physicians to document the potential effect of the merger on the marketplace.

Larry Matheis, executive director of the Nevada State Medical Association, said the survey will provide information in case of litigation. When asked whether the coalition is going to sue, Matheis said: “We’ll look at our options after the attorney general and Department of Justice have made their decisions known.”

The coalition is hoping the Justice decision drags on past Feb. 29, the date the Nevada insurance commissioner’s approval of the merger expires.

If the deadline is missed, the commissioner might reopen hearings, allowing consideration of the problems related to United’s performance in other states.