Senate Panel Hears of Health Insurers' Wrongs
Ex-Insider Testifies to 'Fear Tactics'

By David S. Hilzenrath
Washington Post Staff Writer
Thursday, June 25, 2009

Health insurers have forced consumers to pay billions of dollars in
medical bills that the insurers themselves should have paid, according
to a report released yesterday by the staff of the Senate Commerce
Committee.

The report was part of a multi-pronged assault on the credibility of
private insurers by Commerce Committee Chairman John D. Rockefeller IV
(D-W.Va.). It came at a time when Rockefeller, President Obama and
others are seeking to offer a public alternative to private health plans
as part of broad health-care reform legislation. Health insurers are
doing everything they can to block the public option.

At a committee hearing yesterday, three health-care specialists
testified that insurers go to great lengths to avoid responsibility for
sick people, use deliberately incomprehensible documents to mislead
consumers about their benefits, and sell "junk" policies that do not
cover needed care. Rockefeller said he was exploring "why consumers get
such a raw deal from their insurance companies."

The star witness at the hearing was a former public relations executive
for major health insurers whose testimony boiled down to this: Don't
trust the insurers.

"The industry and its backers are using fear tactics, as they did in
1994, to tar a transparent and accountable -- publicly accountable --
health-care option," said Wendell Potter, who until early last year was
vice president for corporate communications at the big insurer Cigna.

Potter said he worries "that the industry's charm offensive, which is
the most visible part of duplicitous and well-financed PR and lobbying
campaigns, may well shape reform in a way that benefits Wall Street far
more than average Americans."

Insurers make paperwork confusing because "they realize that people will
just simply give up and not pursue it" if they think they have been
shortchanged, Potter said.

Sen. Mike Johanns (R-Neb.) questioned the government's ability to make
matters clearer, saying federal regulation of mortgage disclosures has
made the documents that borrowers encounter in real estate transactions
"hopelessly complicated."

Potter's successor as spokesman for Cigna said the company strongly
disagrees "with the suggestion that, motivated by profits, the insurance
industry has deliberately attempted to confuse or unfairly treat covered
individuals."

"At CIGNA we are committed to improving the current system," spokesman
Chris Curran said by e-mail.

The report released yesterday alleges that insurers have systematically
underpaid for out-of-network care. The issue had been brought to light
previously in litigation, committee hearings and other investigations,
including a probe by New York Attorney General Andrew M. Cuomo. But as
politicians and interests groups clash over the current effort to
overhaul the nation's health-care system, it took on new relevance.

Cuomo described it last year as "a scheme by health insurers to defraud
consumers by manipulating reimbursement rates."

Many Americans pay higher premiums for the freedom to go outside an
insurer's network of doctors and hospitals. When they do, insurers
typically pay a percentage of what they call the "usual and customary"
rates for the services. How insurers determine the usual rates had long
been opaque to consumers and difficult if not impossible for them to
challenge.

As it turns out, insurers typically used numbers from Ingenix, a wholly
owned subsidiary of the big insurer UnitedHealth Group. Ingenix had an
incentive to produce benchmarks that low-balled usual and customary
rates and shifted costs from insurers to their customers, the report said.

Ingenix got its data from the same insurers that bought its benchmark
information, the report said. Insurers that contributed information to
Ingenix often "scrubbed" their data to remove high charges, and Ingenix
further manipulated the numbers, removing valid high charges from its
calculations, the report said.

Cuomo found that insurers under-reimbursed New York consumers by up to
28 percent, the report said. A dozen insurers have reached settlements
agreeing to change their practices; UnitedHealth agreed to the largest
payment, $50 million, to help a nonprofit organization set up a new
database to replace Ingenix.

In March testimony to Rockefeller's committee, UnitedHealth chief
executive Stephen J. Hemsley said UnitedHealth stands by "the integrity
of the Ingenix data."

Ingenix performed an important function, Hemsley said, because paying
whatever doctors charge "is simply not economically tenable."