UnitedHealth Group under Investigation by N.Y. Attorney General

New York Attorney General Andrew Cuomo is conducting an industry-wide probe of health insurance firms operating in the State of New York. Although subpoenas requesting information on their practices and procedures have gone out to sixteen major insurers, a great deal of Cuomo’s investigation is into the practices of UnitedHealth Inc, one of the nation’s mega-health insurers.

In his statement, Cuomo cited that Ingenix, a company owned by UnitedHealth had purposefully delivered faulty and inaccurate reimbursement numbers to all health insurers using their company for rate data.

In his complaint, The Attorney general states that Ingenix purposefully set reimbursement rates to doctors and hospitals below industry norms, thus allowing UnitedHealth and possibly other insurers in the state to avoid paying claims according to actual costs. This in effect created excessive costs for the insured and increased profits for the insurers.

Cuomo also stated that UnitedHealth failed to tell their insurance policy holders that Ingenix is a company owned by UnitedHealth, an obvious conflict of interest. The obvious potential to manipulate reimbursements that would further create profit for UnitedHealth should be under investigation. Imagine an insurance company telling a client they only paid 70% of a claim because another portion of their same company told them that was the correct amount to remit. It is good for Cuomo to jump on this situation but it must be asked; who in both the state and federal legislatures allowed this incredible conflict of interest to be possible. Perhaps more importantly is the question as to how much these legislators were paid to act so irresponsibly.

The doctors and hospital organizations in the state have lauded Cuomo’s action, stating that for years either they or their patients have been absorbing costs brought on by the failure of the industry to use actual costs in their disbursements of medical treatment in the state. Instead, using Ingenix numbers, health insurers, including UnitedHealth can deny portions of claims stating the charges are in excess of “normal and customary" charges in an area even when they are not.

This isn’t the first black eye for UnitedHealth. In California another unit of the company is facing a $1.3 billion fine for alleged claims violations.

Showing that Wall Street is in bed with corporate America, a Wachovia Securities analyst stated that hitting UnitedHealth in their wallet with fines or requiring they pay actual costs for medical treatment might create the necessity for UH and all insurers to increase their rates to cover their costs.

A look at UnitedHealth’s income statement shows this to be a fallacious remark. The company currently makes over $4 billion net profit per year, up 60% from just three years ago. Their board of directors and chief financial officers also just took millions of dollars out of the company by exercising stock options. Options they could purchase at a mere $9.09 per share and then immediately sell for $50.00 per share.

There is no need for rate hikes by United Health. There is only the need for someone in some state to do more than fine these people. Only when these directors have the potential of civil charges being brought will Americans find themselves paying fair premiums for health coverage that actually covers the cost of their care.

At least one Wall Street analyst was fair minded stating UH can ill afford this additional negative press in the two huge markets of California and New York without a significant deterioration in their client base happening. One can only hope.