July 29, 2020

From a U.S. Supreme Court case over an Arkansas law regulating pharmacy benefit managers' drug reimbursement rates to a new suit challenging UnitedHealth Group's "cross-plan offsetting" method of recouping overpayments, the second half of 2020 is gearing up to be interesting.

Here, Law360 looks at five ERISA cases lawyers should keep an eye on.

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Plan Participants Challenge Cross-Plan Offsetting

ERISA attorneys are also closely watching suits involving the practice of cross-plan offsetting, which refers to when an insurer or third-party administrator withholds payments to a provider for services rendered under one plan to recover what it believes was an overpayment to that provider from another plan.

While UnitedHealth Group Inc. is no stranger to litigation over the practice, a July proposed class action from Rick Scott and Royce D. Klein is unique in being brought on behalf of plan participants rather than providers.

"We think that's the key," said Julie Selesnick, a Cohen Milstein Sellers & Toll PLLC attorney representing the participants in the case.

In 2019, the Eighth Circuit sided with Dr. Louis J. Peterson in his suit over UnitedHealth's cross-plan offsetting, finding that there wasn't anything in the relevant plan documents authorizing the practice.

Though the appeals court didn't rule on the legality of cross-plan offsetting under ERISA, the panel said that "at the very least it approaches the line of what is permissible." United appealed to the U.S. Supreme Court, but the case was dropped in October.

"There's lots of cases that have tried to bring the same type of case as Peterson, and what happens so much of the time is that they get caught up on the issue of assignment," Selesnick said. "The reason we think that the actual structural ERISA violations haven't been addressed yet is because there hasn't been a proper plaintiff."

And the issue of cross-plan offsetting also has implications for employers, according to Ogletree Deakins Nash Smoak & Stewart PC's Daniel T. Sulton.

"Employers need to be thinking about whether or not they want to continue that practice given the level of scrutiny that practice has come under," Sulton said. "I think most employers are leaning towards removing that practice from the self-funded plans."

The case is Scott et al. v. UnitedHealth Group Inc. et al., case number 0:20-cv-01570, in the U.S. District Court for the District of Minnesota.

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Workers Claim Confidential Info Is Plan Asset

ERISA privacy and cybersecurity suits are also worth watching, including a case from a proposed class of current and former Shell Oil Co. workers alleging Fidelity Investments Institutional Operations Co. Inc. was wrongly allowed to use their confidential data for marketing purposes.

At the center of the dispute is an argument over whether certain personal information for plan participants qualifies as a plan asset under ERISA. While the workers argue the information is a plan asset, Shell and Fidelity have disputed the claim, calling it an "unprecedented legal theory."

"That's a really fascinating area to us and our group," Selesnick said. "We take the position that all data that is provided to your plan that is confidential is a plan asset, and that any use of it needs to be with permission, with potential compensation, and definitely needs to be protected and safeguarded, and not doing so opens the fiduciaries to liability."

On the cybersecurity front, attorneys are also watching cases alleging that fiduciaries failed to safeguard plan participants' personal information from cyberattacks, allowing their accounts to be raided.

"As cybersecurity is more of an issue and more people are out there doing bad things, this is going to become more and more of an issue and a question for who's liable for it," Ng said.

The case is Harmon et al. v. Shell Oil Co. et al., case number 3:20-cv-00021, in the U.S. District Court for the Southern District of Texas.

The complete article can be viewed here.