Aetna and Cigna are under fire over new payment policies.
Modern Healthcare
October 08, 2025 05:00 AM
Physicians and hospitals are up in arms about new tactics some health insurance companies are using to reduce payments.
Under a policy Cigna is rolling out this month, six Current Procedural Terminology Evaluation and Management billing codes are being “downcoded” through an automated process that results in lower reimbursements for services such as office visits and outpatient consultations.
Separately, CVS Health subsidiary Aetna is instituting a policy under which some hospital admissions will be automatically approved but reimbursed at lower observation rates.
Related: AI, remote monitoring highlighted in AMA’s billing code changes
Here’s what you need to know about these new approaches to provider reimbursement.
What is Cigna’s rationale?
Health insurance companies, the Centers for Medicare and Medicaid Services and the Health and Human Services Department Office of Inspector General have identified providers “upcoding” claims to generate higher payments as a problem to address.
Cigna aims to curtail upcoding by a small group of outliers that affix codes for complex services to claims for basic care, such as treatments for ear infections and sore throats, a Cigna spokesperson said.
The evaluation and management, or E/M, policy applies to just 1% of in-network providers and providers may appeal for higher payments or apply for exemptions, the Cigna spokesperson said.
Cigna Healthcare, the company’s insurance subsidiary, implemented this methodology last Wednesday everywhere except California, where it’s under regulatory review. The company expects the state to allow it to move forward, the spokesperson said.
Why do providers object to the Cigna E/M policy?
Provider groups such as the American Medical Association, the American Academy of Family Physicians, the Texas Medical Association and the California Medical Association have expressed concerns that their members will be underpaid, and complained that Cigna is using an opaque process to determine reimbursements and pressuring them to avoid high-level billing codes.
Moreover, automatically downcoding claims and instructing providers to appeal adds more red tape and administrative expense to the system, California Medical Association Chief of Staff Janice Rocco wrote in a letter to Peter Welch, president of Cigna Healthcare’s Northern California and the Pacific Northwest operations Aug. 20.
“CMA opposes automatic or unwarranted downcoding of claims, and we strongly disagree that simply reducing the E/M [Current Procedural Terminology] code by a single level would result in improved claims accuracy,” Rocco wrote. The practice also conflicts with federal and state policy, she wrote.
Sen. Richard Blumenthal (D-Conn.) criticized the policy in a letter sent to Cigna Healthcare Chief Medical Officer Dr. Amy Flaster on Sept. 11. “This new policy will significantly increase administrative burdens and costs for physicians while jeopardizing patient care. I urge you to reverse this decision,” he wrote.
The Cigna policy also stoked worry among providers about the growing use of software to automate claims and reimbursements. Cigna doesn’t use artificial intelligence to make final determinations and doesn’t deploy AI for the evaluation and management policy, a spokesperson said.
CMS is aware of provider complaints regarding coding practices and AI, and instructs insurers to comply with the Affordable Care Act of 2010, the No Surprises Act, and other federal and state regulations, a spokesperson said.
Are other insurers ‘downcoding’ E/M claims?
Aetna, Humana and some Blue Cross and Blue Shield companies have taken similar approaches to E/M claims, provoking ire from providers. Rather than standard denials of payment on a case-by-case basis, insurers increasingly are systematically downcoding them, providers have said.
Aetna’s program is “highly targeted” and only applies to the 3% of its in-network providers that submit higher-intensity codes than CMS or the AMA recommends, a spokesperson said.
The Association for Clinical Oncology asked CMS to scrutinize how UnitedHealth Group subsidiary UnitedHealthcare, Elevance Health, Centene and Molina Healthcare handle E/M claims in a letter sent Sept. 22.
These companies did not respond to requests for comment.
What is Aetna’s ‘two-midnight’ policy?
Aetna will implement a “level of severity inpatient payment policy” for hospital services under its Medicare Advantage plans on Nov. 15.
Under this twist on the “two-midnight rule,” Aetna will approve admissions for more than one midnight for members who “urgently or emergently” present to hospitals. Although not subject to medical necessity reviews, those services will be reimbursed at the observation rate if Aetna deems they aren’t in accordance with Milliman Care Guidelines for inpatient care.
Aetna did not respond to a request for comment.
Why do providers object to the Aetna Medicare Advantage inpatient policy?
The American Hospital Association, the Federation of American Hospitals and other industry organizations characterized Aetna’s policy as an evasion of the two-midnight standard intended to ensure that hospitals are appropriately paid for inpatient care. Under the two-midnight rule, Medicare Advantage plans and fee-for-service Medicare must pay inpatient rates if patients remain in the hospital for at least two midnights.
“This policy could erode the transparency consumers rely on to make informed decisions about their care, undermine important regulatory protections that safeguard patients’ coverage and jeopardize the ability of hospitals to provide high-quality, accessible care to all who need it,” AHA President and CEO Rick Pollack wrote to Aetna President Steve Nelson on Sept. 15.
This reimbursement policy violates Aetna’s contracts with providers and will depress reimbursements, the Healthcare Association of New York State, which represents hospitals, wrote in a letter to CMS Administrator Dr. Mehmet Oz on Aug. 20.
The AHA and the Federation also contend that this policy will distort the Medicare Advantage quality scores Aetna receives.
“By automatically approving inpatient stays but then depriving full coverage for inpatient stays through severity coverage and partial payments, it appears that Aetna intends to inflate its approval numbers and obfuscate its ultimate inpatient coverage denials, misleading regulators and the public,” Federation of American Hospitals President and CEO Chip Kahn wrote Oz on Sept. 24. “Likewise, by failing to provide notice of adverse organization determinations, Aetna will suppress appeals in ways that directly impact Aetna’s performance on key measures in the Medicare Advantage Star Ratings program.”