UnitedHealth Group Inc., the biggest US health insurer, said it would spend $400 million to settle allegations it has manipulated payments to doctors and patients for the last 15 years. This includes a payment of $350 million to resolve class action lawsuits over reimbursing patients for out-of-network medical services, and $50 million paid earlier towards an independent medical database.

The settlement comes two days after UnitedHealth struck an agreement with the New York state attorney general following a probe into the independence of the company database used to set reimbursement rates for patients' medical bills.

Attorney General Andrew Cuomo also reached an agreement last night with another health insurer, Aetna Inc, which will pay $20 million to help establish an independent database used for calculating rates. Aetna's payment adds to the $50 million UnitedHealth agreed to pay earlier this week to fund the database. UnitedHealth is also shutting its Ingenix medical billing information service, which has been at the centre of the probe.

Insurers often promise to cover up to 80 per cent of the so-called "usual and customary" rate of an out-of-network expense, with consumers responsible for paying the balance. The Ingenix database would skew these rates downward compared with the actual market rate, shortchanging consumers, Cuomo said.

A probe by Cuomo, announced last February, found that UnitedHealth's Ingenix unit operates a "defective and manipulative" database that most major health insurers use to set reimbursement rates for out-of-network medical expenses.

In one example, Cuomo's office said that when $200 was a fair-market rate for a 15-minute doctor's visit for a common illness, Ingenix said it was $77. UnitedHealth would pay $62 when it should have paid $160, leaving the consumer with a $138 bill. Cuomo said he would try to persuade the rest of the insurance industry to support and use the new databases under the independent operator as a way of helping patients in the future. ''We will not stop until the entire industry has been reformed in this regard,'' he said.

The UnitedHealth class-action settlement agreement ''contains no admission of wrongdoing,'' United Health said in today's statement. The company will pay the $350 million from cash on hand and book the charge for the 2008 fourth quarter.

UnitedHealth has been battling the largest physician group, the American Medical Association, over out-of-network costs since 2000. The settlement affects less than 10 per cent of health benefits because most policyholders use their health plan's network providers to minimise out-of-pocket expenses. Still, the AMA said it stopped rampant cheating.

''UnitedHealth Group has recognised the importance of restoring its relationship with patients and physicians by ending use of a rigged database,'' said AMA President Nancy Nielsen in an e-mail statement. ''We must hold insurers accountable to their obligations.''