On January 15th, the Eighth Circuit Court of Appeals released its opinion finding that UnitedHealth Group’s practice of cross-plan offsetting – a practice where it would recover overpayments made to out-of-network providers by taking an offset from a different plan – was unreasonable (Peterson v. UnitedHealth Group, Inc., 2019 U.S. App. LEXIS 1270 (8th Cir. Jan. 15, 2019)). UnitedHealth maintains agreements with its in-network providers whereby it is able to offset overpayments by withholding any overpaid amounts from subsequent payments from that same in-network provider. In an effort to create a similar practice for claims paid to out-of-network providers, UnitedHealth has engaged in similar offsetting payment practices, but lacking the authority provided by the
in-network agreements. In the lawsuit, UnitedHealth attempted to rely on its broad discretion, as the plan’s claims administrator, to interpret plan provisions under the individual health care plans to justify this cross-plan offsetting practice. The court held that this was not reasonable and suggested that the practice could violate the Employee Retirement Income Security Act of 1974 (ERISA).
Employers should carefully consider how the UnitedHealth case may affect their own health care plans. In the lower court’s decision, the court carefully distinguished a service provider agreement from plan documents, finding that language in a service provider agreement allowing cross-plan offsetting did not permit the practice, since it was not allowed for under the plan document. Thus, it is possible that while a plan document does not allow for this practice, an insurer (or claims
administrator) is still engaging in cross-plan offsetting under the terms of its service provider agreement with the plan’s sponsor. Accordingly, employers may consider reviewing any service provider agreements against their plan document terms and consider if changes are necessary.
The Department of Labor’s (DOL) attention to the UnitedHealth case is also worth noting. The DOL filed an amicus brief establishing its position that the practice of cross-plan offsetting violates ERISA’s prohibited transaction rules. The court, however, carefully limited its decision on the grounds that the health care plan documents involved did not explicitly authorize UnitedHealth to engage in cross-plan offsetting practices and stated that it need not decide whether cross-plan offsetting necessarily violates ERISA. Nonetheless, the court suggested that, if pressed, it would likely hold that
cross-plan offsetting violates ERISA. The court noted that UnitedHealth owes a fiduciary duty to each plan separately and that the practice of cross-plan offsetting is in tension with such fiduciary duty, because "it arguably amounts to failing to pay a benefit owed to a beneficiary under one plan in order to recover money for the benefit of another plan," which benefits one plan but may not benefit the other.
Employers who have questions or would like to have their plans and service agreements reviewed in light of the UnitedHealth case and the DOL’s stance on cross-plan offsetting may contact one of the authors listed below.