UnitedHealth's cross-plan offset strategy runs afoul of ERISA
The ruling could limit a plan's ability to link payments for in-network care and out-of-network care.
A three-judge panel at the 8th U.S. Circuit Court of Appeals says UnitedHealth Group Inc.‘s insurance carrier units must put clear warnings in the health plan documents if they want to combine different health plans when trying to recover overpayments from the providers.
The Employee Retirement Income Security Act of 1974 (ERISA) gives a health plan discretion to interpret plan provisions, the panel acknowledged in its ruling.
But the 8th Circuit panel held that a “cross-plan offsetting” effort is too far away from the language in the UnitedHealth health plan documents reviewed to be allowed through use of UnitedHealth’s discretionary clauses.
Related: 10 most expensive ERISA settlements of 2018
“To adopt United’s argument that the plan language granting it broad authority to administer the plan is sufficient to authorize cross-plan offsetting would be akin to adopting a rule that anything not forbidden by the plan is permissible,” Circuit Judge L. Steven Grasz wrote in an opinion discussing the ruling. “Such an approach would undermine plan participants’ and beneficiaries’ ability to rely on plan documents to know what authority administrators do and do not have.”
The court issued the ruling in connection with Peterson v. UnitedHealth Group Inc. and Riverview Health Institute v. UnitedHealth Group Inc.
In both cases, providers sued UnitedHealth over the carrier’s cross-plan offsetting effort.
Cross-plan offsetting
Like many other health carriers, UnitedHealth is a holding company that owns many different health insurance companies and health maintenance organizations. The company also administers employers’ self-insured health plans.
Physicians, hospitals and other providers may participate in the provider networks for some UnitedHealth plans and not for others.
A health plan often believes it has paid a physician, hospital or other provider too much for care. A health plan may handle overpayments with “offsets,” or moves to deduct overpayments for past care from payments for new care.
The providers in the Peterson and Riverview cases said UnitedHealth took offset arrangements a step further. In some cases, they said, a doctor or chiropractor might care for some patients with UnitedHealth coverage out-of-network, and for other patients with UnitedHealth coverage on an in-network basis.
In that situation, the providers said, UnitedHealth might cut payments for the out-of-network care to offset overpayments for the in-network care.
The 8th Circuit panel suggested that cross-plan offsetting “is in some tension with the requirements of ERISA.”
“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,” Grasz wrote. “If such a practice was authorized by the plan documents, we would expect much clearer language to that effect.”
Reactions
D. Brian Hufford of Zuckerman Spaeder, the lead counsel for the plaintiffs, welcomed the ruling.
“Cross-plan offsetting is an all-too-common strategy that insurers use to hold onto money that is rightfully owed to doctors and other providers for services they have performed on behalf of insured patients,” Hufford said in a statement.
UnitedHealth said in a statement that overpayment recovery is an important tool in the company’s efforts to improve coverage affordability.
“We will continue to enhance this process for our customers, who support our efforts to recover these funds on their behalf,” the company said.
ERISA and discretionary clauses
ERISA is a major federal health system change law.
Congress adopted it in an effort to keep individual states’ benefits mandates from driving up costs, and to keep other forms of red tape from driving up costs. One provision in ERISA preempts state contract law claims.
Benefit plan designers, meanwhile, often include “discretionary clauses,” or clauses that give the plan administrator the freedom to interpret the terms of the plan. Under ERISA rules, federal courts may be able to review a plan administrator’s claim determinations only to decide whether the administrator made reasonable use of discretion, not to see whether the underlying determination was correct.
Plan members, plan members’ health care providers and state officials have clashed with employers, insurers and independent plan administrators over the years over the limits of discretionary clauses and over the correct standard of review for suits involving concerns about use of discretionary clauses.
A list of some earlier articles about past discretionary clause litigation is available here.