UnitedHealth Group’s policy of withholding payments to out-of-network physicians and doctors in order to recover previous overpayments – a practice known as cross-plan offsetting – is not permissible and may even violate The Employee Retirement Income Security Act (ERISA).
That was the long-awaiting ruling from the Eighth Circuit Court of Appeals issued last week. The case, Peterson v. UnitedHealth Group Inc., could have implications down the road for the health insurance industry since cross-plan offsetting has become a common practice.
Cross-plan offsetting works like this: In the course of processing millions of claims, insurers sometimes overpay healthcare providers. If the overpayments are made to in-network providers, then the insurer can recover the money because it has agreements in place with those providers that permit it to off-set the overpayment by withholding money from future payments.
However, in 2007, United began to offset payments made not only to in-network providers, but also to out-of-network providers, even where the overpayment was made from one plan and the offset was taken from a different plan – a practice known as cross-plan offsetting.
United’s argument for implementing the practice was that if they erroneously overpaid an out-of-network provider, and that provider refuses to return the overpayment, they have no recourse to get the money back because the provider is not under contract with the insurer.
Two out-of-network providers filed lawsuits alleging that United Intentionally failed to fully pay for services to United plan beneficiaries as a way to offset overpayments to the same providers from other United administered plans. (United administers fully-insured health plans for which United collects insurance premiums from the employer’s plans and uses its own funds to pay claims.)
The providers, who treated patients insured by ERISA-covered health plans administered by United, alleged that United’s plan documents do not allow such a practice. They also argued that, in engaging in cross-plan offsetting, United violated ERISA by furthering its own interests at the expense of its insured. (The plaintiffs pursued the claims not on behalf of themselves, but as assignees of the ERISA plan participants.)
The U.S. Department of Labor outlined in its Amicus brief: “When United refused to pay legitimate claims on behalf of the participants of one plan (“Plan B”) in order to recoup overpayments on behalf of different participants in a separate plan (“Plan A”), United burdened the participants in Plan B with the obligation to pay for services that should be covered by their plan. United’s conduct harmed the Plan B participants to further the interests of unrelated participants in other plans. Moreover, these transactions were structured by United to allow United to profit by recouping its own alleged overpayments for its fully-insured plans that are funded through its own accounts with payments from self-insured plans that are funded by plan sponsors and their employees.”
The lawsuits were consolidated and in March 2017, a United States District Judge for the District of Minnesota agreed and entered a partial summary judgment on the issue of liability. In his ruling, the district court judge opined that “Cross-plan offsetting advantages United and disadvantages providers. When United and a provider dispute whether a claim was overpaid, cross-plan offsetting allows United to act as judge, jury and executioner.”
The Eighth Circuit, which affirmed the lower court ruling wrote: “Nothing in (United’s) plan documents even comes close to authorizing cross-plan offsetting …” The court went on to state that “While we need not decide here whether cross-plan offsetting necessarily violates ERISA, at the very least it approaches the line of what is permissible.”
Although the ruling is limited in its scope, there are other similar cases that have been filed that could have implications for the industry.
The Health Law Offices of Anthony C. Vitale represents providers involved in ERISA plan overpayments that have been the subject of cross-plan offsetting. Contact us for additional information at 305-358-4500 or send us an email to firstname.lastname@example.org and let’s discuss how we might be able to assist you.