State Attorney General Andrew M. Cuomo on Tuesday threatened to sue Excellus BlueCross and BlueShield and Univera Healthcare for fraud, accusing them of fraudulently using 9-year-old rate information from a faulty database to reimburse out-of-network doctors and hospitals.
Cuomo said at a press conference in Rochester that he had issued a "five-day notice" to the health insurer of his intent to sue, citing what he called the company's "egregious" past behavior and its refusal to cooperate with his ongoing efforts to reform the industry.
In the notice, he alleged that the company was "engaging in repeated and persistent fraudulent, deceptive and illegal business practices." He accused Excellus of knowingly using "usual and customary" rate information that was old.
And he said the company "made zero effort" to fix the problem, update the data or reimburse consumers after the issue was brought to its attention by the state Insurance Department in 2001 and by an employer client, the Syracuse Post-Standard newspaper, whose employees were being under-reimbursed.
"Despite the clear message from the attorney general, Excellus has refused to change its ways, and we have uncovered truly troubling conduct," said Linda Lacewell, head of Cuomo's Healthcare Industry Task Force.
Cuomo also presented "a trove" of internal e-mails showing company executives discussing the problem and how to correct the rates for the newspaper's employees to avoid bad publicity, after the Post-Standard human resources staff complained in 2006 and Excellus staff began fearing a "tell-all" newspaper story if the claims weren't resolved. The newspaper did publish stories and an editorial on the issue, matching consumer complaints Cuomo's office has also received about Excellus.
Cuomo is seeking an injunction to stop Excellus' use of outdated data, restitution for consumers, punitive damages and fines. He wouldn't specify a dollar amount, but "it's going to be a significant amount of money," likely in the millions of dollars.
Rochester-based Excellus is the largest health insurer based in Upstate New York, serving 2 million members in 31 counties, with a dominant presence in Rochester and Syracuse. It serves 165,000 in the Buffalo area through Univera. In all, about 350,000 of its members are estimated to use out-of-network coverage.
The accusations against Excellus stem from Cuomo's year-old investigation into how health insurers pay doctors and hospitals for medical care to members that is not provided from within the insurance networks. Since prices are not negotiated in advance, such care routinely costs more than in-network care, and insurers typically reimburse only 50 percent to 80 percent of the "usual and customary rates" for a given service in a particular market.
Excellus and Univera responded in a statement that they are "deeply concerned" with Cuomo's industrywide findings and said they have "worked cooperatively" with his office for the past year. They acknowledged the questions that arose, but said they "made sure" they had updated fee data in their system as issues came up.
"If mistakes occurred in the payment of out-of-network claims, we will address them," Excellus said. "Doing the right thing for our members is of critical importance to us. We will take appropriate corrective actions to address any payment errors."
Separately, the attorney general's office said Cigna Corp. will stop using a faulty database to calculate out-of-network reimbursement rates, and will contribute $10 million to a new, independent payment database.
Excellus and Univera said Tuesday they are willing to participate in the new independent database, too.
Several other major insurers have reached agreements with Cuomo on the same issue, including Independent Health Association; UnitedHealth; and HealthNow New York, the parent of BlueCross BlueShield of Western New York.