In the settlement that was reached when Gov. Andrew Cuomo was New York's attorney general, insurance companies, while admitting no wrongdoing, agreed to pay $95 million to set up a data base that would find the prevailing costs of healthcare services, The New York Times reported Tuesday.
But the settlement did not require that companies use the data base, which is called FAIR Health, when calculating reimbursement for out-of-network bills for medical care.
In the end, companies created the data base, got it up and running, then used a different formula for calculating reimbursements, which then turned out to be far less than they would have paid using FAIR Health as a starting point, the newspaper said.
The settlement required the insurance companies to use an objective data base for figuring out costs and payments. So companies switched to paying a percentage of Medicare rates.
The percentages used -- up to 240 percent -- fall far short of the traditional benchmark, which was 80 percent of usual, customary and reasonable rates, known as U.C.R., the Times said.
"They're not getting what they think they're paying for," Benjamin Lawsky, the superintendent of the Department of Financial Services, told the Times.
Changing to a new formula "certainly creates the appearance that insurers are trying to end-run the settlement and keep out-of-network payments low," he said.
In addition, "this shift is mirrored across the country, and the implications in terms of declines in reimbursement are similar," said Rob Parke, a benefits expert at Milliman, an international consulting firm.
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