Senator calls for investigation into use of algorithms in healthcare pricing

Sen. Amy Klobuchar, D-Minn.

Photo: Official portrait of US Senator Amy Klobuchar

Senator Amy Klobuchar has sent a letter to the attorney general’s office and the Federal Trade Commission asking for an investigation into health insurers’ use of pricing algorithms.

“Recent reports suggest that companies may be using algorithmic tools to undermine competition and impose additional costs on patients who receive health care through their insurance networks,” Klobuchar wrote, citing the findings New York Times Reporting.

In the letter, Klobuchar specifically cited MultiPlan, a Massachusetts-based company that specializes in claims cost management.

The company sells data to help insurance companies determine how much they should pay providers for out-of-network medical care and how much of those costs are passed on to patients, Klobuchar said in the letter, again citing the New York Times Report.

“While it is common for patients to pay different rates for out-of-network care, I am concerned about this.” – rather than competing with employers for business by reducing these costs for employees – “Algorithmic tools process data collected from numerous competitors to undermine competition among insurance companies,” Klobuchar wrote to the AG and FTC. “The result is this.” – instead of competing with each other – Insurance companies pass on additional hidden costs to employees and patients.”

Klobuchar said MultiPlan is a central hub that collects out-of-network payment data across the industry and uses algorithmic tools to process that data to recommend artificially low payments to doctors, potentially at the expense of employees or patients.

“MultiPlan reportedly charges fees based on how little its insurance customers pay doctors. In other words, the more money MultiPlan forces its patients to pay for out-of-network care, the more money it makes,” she said.

MultiPlan did not immediately respond to a request for comment.

Insurers said MultiPlan’s tools help combat outrageous billing from some providers, including consolidated hospital systems and private equity-backed staffing firms New York Times.

The Justice Department and the FTC have argued that the use of algorithmic price-fixing firms in the rental and hotel markets violates antitrust laws, and algorithms are being used in the same way in this matter, Klobuchar said.

“I encourage you to investigate the use of algorithms that collect and process data in the out-of-network insurance payment industry to determine physician payments and patient out-of-pocket expenses to determine whether any of these behaviors violate the law. ” Klobuchar said.

WHY THIS IS IMPORTANT

In April, Allegiance Health Management, which provides services in predominantly rural areas of Louisiana, Mississippi and Texas, filed a class action lawsuit against MultiPlan, Aetna, Elevance Health, Centene, Cigna, Health Care Service Corporation, UnitedHealth Group, Humana and Kaiser Permanente.

“The nation’s leading commercial health insurance providers, through MultiPlan, conspired to fix, suppress, and stabilize the reimbursement rates they pay to health care providers for out-of-network health care services in the United States, in violation of Section 1 of the Sherman Antitrust Act. Defendant MultiPlan, Inc.’s knowing and deliberate use of common “repricing” tools sold and promoted by defendant MultiPlan, Inc. enabled and facilitated this anti-competitive scheme, resulting in plaintiffs artificially receiving reimbursements for health care services they received received outside the network the complaint states:

THE BIGGER TREND

Klobuchar has introduced legislation called the Preventing Algorithmic Collusion Act of 2024 to stop anti-competitive behavior through pricing algorithms.