By TRACEY DRURY
Business First

In an agreement announced Tuesday with the state attorney general's office, two of the region's largest health insurers have formally agreed to stop using a flawed database to determine reimbursement rates.

Independent Health and HealthNow New York Inc., the parent company of BlueCross BlueShield of Western New York, agreed to end their relationship with Ingenix Inc., a subsidiary of UnitedHealth Group Inc., which maintained a national database to determine out-of-network reimbursement rates. New York Attorney General Andrew Cuomo, who visited Buffalo Tuesday for a news conference, concluded a yearlong investigation into the system in January by announcing that UnitedHealth had agreed to shut down Ingenix and contribute $50 million toward the creation of a new, independent database.

Other insurers followed suit, settling with the AG's office through cash settlements and agreements to stop using the Ingenix database. Among those insurers was Aetna, the nation's third-largest health insurer, which will contribute $20 million to the new database. Independent Health will contribute $475,000 over a five-year period to help fund the database, while HealthNow will contribute $212,500. HealthNow's payment is lower because it has agreed to also contribute its data to the new database.

Cuomo's investigation determined that the process for determining the "usual and customary" rates was a closed system, with insurers contributing their data as well as setting the rates. Cuomo Tuesday called the system a virtual monopoly.

"It was a classic rate-setting scenario," he said, adding that the system created a "black box" structure where consumers had no idea what they'd be reimbursed for until after they agreed to pay their bill. "It forced consumers to write a blank check."

Cuomo said the new database, which will be funded with $100 million in settlements from insurers, will include an interactive Web site that will allow consumers to search for reimbursement rates, enabling them to shop doctors for a rate that works for their wallet.

Ultimately, it will help consumers to fight health insurers, who he said often like to "play God" and exploit their members by flaunting their size, power and teams of attorneys.

"The AG is your lawyer," he said. "I believe in this case, the AG can be your greatest equalizer."

Because the new database system will not be available for about six months, insurers will continue to use the Ingenix database. Most insurers nationwide have used the database since it was created 10 years ago.

Jay Pomerantz, chief medical officer at HealthNow, said less than 1 percent of the company's overall claims were affected by the investigation. But the company hopes to help create a better database through its contribution of data.

"The more data that's in a database adds to its validity," he said.

The agreement calls for both insurers to cease using the Ingenix database and amend their member disclosures to provide clearer information to members about their methods of determining reimbursement rates. Both also agree to use the new database once it is available.

Separately, HealthNow signed another agreement with the AG's office to adopt the AG's doctor-ranking model code, which ensures that rankings for doctors are not based solely on cost, using established national standards to measure quality and cost-efficiency. Independent Health signed the agreement in late 2007. The code was developed with help from the American Medical Association.