Senator asks for investigation on use of algorithms in healthcare pricing

Senator Amy Klobuchar, D-Minn.

Photo: Official portrait of U.S. Senator Amy Klobuchar

Senator Amy Klobuchar has sent a letter to the Attorney General's office and to the Federal Trade Commission asking for an investigation into the use of algorithm pricing tools by health insurers.

"Recent reporting has indicated that firms may be using algorithmic tools to undermine competition and push additional costs onto patients that receive healthcare out of their insurance network," Klobuchar wrote, citing New York Times reporting.

In the letter, Klobuchar specifically cited MultiPlan, a Massachusetts-based company specializing in claim-cost management.

The firm sells data to help insurance companies determine how much they should pay providers for out-of-network medical care, and how much of that cost is 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 that – rather than competing for business from employers by reducing these costs to employees – algorithmic tools are processing data gathered across numerous competitors to subvert competition among insurance companies," Klobuchar wrote to the AG and FTC. "The result is that – instead of competing with each other – insurance companies are pushing additional hidden costs on to employees and patients."

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

"MultiPlan reportedly collects fees commensurate with how little its insurance-company clients pay to doctors. In other words, the more money MultiPlan forces patients to pay for out-of-network care, the more money it makes," she said.

MultiPlan did not immediately return a request for comment.

Insurers have said that MultiPlan's tools help combat outrageous billing by some providers, including consolidated hospital systems and private equity-backed staffing firms, according to the New York Times.

The Department of Justice and FTC have argued that the use of algorithmic price-setting firms in the rental and hotel markets violates antitrust laws, and, in this matter, algorithms are being used in the same way, 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 payments for physicians and out-of-pocket costs for patients to determine whether any of this conduct violates the law," Klobuchar said.

WHY THIS MATTERS

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

"The nation's leading commercial healthcare insurance providers, through MultiPlan, have conspired to fix, suppress, and stabilize the reimbursement rates that they pay to healthcare providers for out-of-network healthcare services in the United States in violation of Section 1 of the Sherman Antitrust Act. Defendants' knowing and purposeful use of shared 'repricing' tools sold and promoted by Defendant MultiPlan, Inc., has enabled and facilitated this anticompetitive scheme, causing Plaintiffs to receive artificially suppressed reimbursements for out-of-network healthcare services they have provided from no later than July 1, 2017, to the present," the complaint said.

THE LARGER TREND

Klobuchar has introduced legislation called the Preventing Algorithmic Collusion Act of 2024 to stop anticompetitive conduct via pricing algorithms.

Email the writer: SMorse@himss.org