A class action lawsuit has been filed in the U.S. District Court in Minnesota against UnitedHealth Group over an overpayment recovery process known as cross-plan offsetting that the plaintiffs claim is a prohibited transaction under ERISA.
Cross-plan offsetting is a common practice that has been used for years by insurers and third-party administrators (TPAs) to recover overpayments made to health service providers. To make themselves whole, insurers and TPAs “recover” the overpayment by withholding another health plan’s payment to the same provider.
The new case — Scott et al. v. UnitedHealth Group Inc. — claims that UnitedHealth breached its fiduciary duties under ERISA when it used assets from the plaintiffs’ plans to recoup financial losses from other separate plans, effectively using plaintiffs’ plan assets for its own benefit.
According to the complaint, the plaintiffs assert that, “By engaging in cross-plan offsetting, United treats the thousands of Plans it administers as one extremely large piggybank, moving more than $1.2 billion among its Plans each year to suit its own interests. Each cross-plan offset violates ERISA, and in most cases, the money ends up in United’s own pocket.”
The two plaintiffs spearheading the Scott class action were also involved in a prior suit – Peterson v. UnitedHealth Group – where the federal Eighth Circuit Court of Appeals upheld a district court ruling that UnitedHealth was not authorized to engage in cross-plan offsetting.
The Eighth Circuit stopped short of holding that cross-plan offsetting was prohibited by ERISA, finding only that UnitedHealth’s actions were in “tension” with ERISA. However, in a brief supporting health care provider in Peterson, the Department of Labor stated its belief that cross-plan offsetting is a violation of ERISA’s fiduciary duties.
In addition, the practice of cross-plan offsetting may also be considered a violation of ERISA’s exclusive benefit rule where fiduciaries are required to act solely in the best interest of plan participants. For example, when Plan A assets are used to offset an overpayment by Plan B, then Plan A participants may suffer harm by being “balance billed” by the provider for non-payment.
Considering this recent litigation and DOL’s position that cross-plan offsetting is a violation of ERISA, plan sponsors should review their agreements with insurers and TPAs to determine if they engage in the practice of cross-plan offsetting. If they do, plan sponsors should, guided by ERISA counsel, work with their service providers to find an equitable solution to overpayments that does not involve cross-plan offsets.
Hall Benefits Law’s vision is to provide every client with the peace of mind that comes from the confidence that HBL has addressed all possible compliance vulnerabilities. To learn more, call our team of responsive, experienced ERISA and employment counsel at 678-439-6236.
Hall Benefits Law, LLC
