Many health insurance companies don’t pay the “full” amount of what your doctor’s office charges. Instead, they pay what has become known as “reasonable and customary” payments. However, a Senate investigation may uncover foul play by the insurance industry.

Reasonable & Customary: Defined

Doctors’ offices generally use large coding sheets that identify the procedures that were administered and the corresponding costs. Depending on your insurance provider and plan, that information is either submitted directly to your insurer or you pay upfront and submit the paperwork yourself.

Anyone’s plan who provides for the latter knows too well that insurance companies rarely pay for what your doctor charged. Instead, they’ll pay what is “reasonable and customary” – which represents the range of usual fees for comparable services charged by the medical or dental professionals in a geographic area. So, what a doctor charges in New York will likely be very different than a similar one charges in Des Moines.

Bad faith insurance practices?

Insurance companies have been accused of taking it a bit further – and may have acted in bad faith in the process. Several of the larger health insurance carriers such as UnitedHealth, Aetna, Cigna and WellPoint have used a database called Ingenix (which is actually owned by UnitedHealth) for many years to determine what constitutes reasonable and customary. However, they’ve been accused of altering that database to pay less than they should have been paying. The result is that consumers and doctors may have been short-changed on payments for many, many years.

UHC settles lawsuit for $350M, but won’t admit fault

UnitedHealth recently settled a class action lawsuit for $350 million which alleged data laundering with its Ingenix database. However, the company did not admit fault in that settlement. Now, it’s being taken a step further and UnitedHealth and the other health care insurers who used the database are being investigated by the Senate Commerce Committee to shed light on how those companies calculated payments and whether or not they systematically acted in bad faith.