In Peterson v. UnitedHealth Group Inc., plaintiffs filed a class action lawsuit against United Healthcare claiming that its cross-plan offsetting practice violated ERISA. This practice allows an insurer or third party administrator (TPA) to recover overpayments to a provider by offsetting future payments for claims related to different employers’ plans and participants. The claims can be from both fully-insured and self-insured plans.
This practice primarily affects out-of-network claims where there are no network contracts that negotiate prices or overpayment recovery procedures, and participants can be balance billed for the outstanding amount. This is a common practice that has existed for some time, but it only recently came to light when providers began to sue.
Insurance carriers and plan sponsors must put clear warnings in the plan documents and SPDs if they want to combine different health plans when trying to recover overpayments from the providers. However, the provisions of the plan documents in Peterson only allowed offsetting for payments made from the same plan.
The judge weighed in on two very important questions: first, whether UHC acted reasonably in interpreting its client’s plans to permit cross-plan offsetting, and whether the practice complies with the fiduciary duties imposed by ERISA. 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 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 and that an overpayment to a provider relating to a patient’s care under his employer’s health plan may not be used to offset amounts owed to that provider under the health plan of a different patient covered under another employer.
A plan sponsor (generally, the employer) has a fiduciary duty to make sure that service providers administer their plans in accordance with its terms and ERISA requirements. Plan sponsors should:
- Find out whether their TPA engages in the practice of cross-plan offsetting.
- Permit their TPA to seek overpayment recoveries on behalf of the plan without authorizing it to engage in cross-plan offsets.
- Review their administrative services agreements to see if overpayment recoveries are addressed, and disclose them in plan documents and summary plan descriptions.
- Seek to add indemnification language to its agreement with the TPA to protect the plan from liability due to the practice of cross-plan offsetting.
This case will undoubtedly have tremendous ramifications on all plans, third-party administrators, medical providers and patients. Medical providers must be proactive and adopt compliant practices and policies. Health plans must also be proactive in validating that plan assets get returned to their plan, and not applied to cover shortfalls in another plan.