By: Kelly E. Dempsey, Esq.
A legal earthquake hit the self-funded industry last week and seemed to result in multiple tremors of legal actions throughout the week. In addition to all the cases about contraceptives, the Eighth Circuit Court of Appeals issued a large blow to the self-funded industry by siding against UnitedHealth in a lawsuit brought by out-of-network providers due to UnitedHealth’s process of cross-plan offsetting (see Peterson vs. UnitedHealth Group, Inc.). Cross-plan offsetting means the claims administrator is recouping funds for one plan that were overpaid by reducing payments from a second plan to the same provider. The process was created due to the struggle to recoup overpayments from out-of-network providers. With no contract in place, providers are reluctant to refund a plan if the payment is equal to or less than billed charges.
In defending against the lawsuit, the core problem for UnitedHealth is that the plan documents did not support the practice. UnitedHealth had to get a bit creative with their arguments by arguing that they had discretionary authority to interpret the terms of the plan. The court did not accept this argument, but while the court implied that cross-plan offsetting violates ERISA’s fiduciary duties, it stopped short of saying the process does violate ERISA.
What does this mean for TPAs and employers? As offset amounts are generally not large, the likelihood of litigation is relatively low; however, there is still the potential for the DOL and other courts to weigh in on whether or not this practice violates ERISA fiduciary duties. If a plan (or TPA) wishes to proceed with this process, this case is another reminder to make sure the plan document supports the process by which claims are being administered.