The lawsuit questions a practice known as cross-plan offsetting or bulk payment recovery that affects employer plans.
A class-action lawsuit against UnitedHealthcare is revisiting how overpayment recovery and cross-plan offsetting affect member costs in employer plans.
The lawsuit—Scott v. UnitedHealth Group—centers around UnitedHealthcare’s overpayment recovery method known as cross-plan offsetting or bulk payment recovery.
Cross-plan offsetting happens when a payer incorrectly pays a provider, an article from Mercer explained. The payer will rectify the payment by withholding claims reimbursement for the same provider under another plan.
The class-action lawsuit alleged that UnitedHealthcare moves over $1.2 billion between its health plans on a yearly basis using this practice in a manner that goes against the Employee Retirement Income Security Act of 1974 (ERISA).
ERISA governs employer-sponsored health plans. It requires that plan fiduciaries—in this case, UnitedHealthcare—function strictly for the benefit of that plan’s participants and beneficiaries. The Act also prohibits certain practices that would be in the interests of the payer.
UnitedHealthcare, however, used funds from employees in AT&T and CenturyLink in a way that did not function for the benefit of the employees’ interests, going so far as to use funds from self-insured plans to go toward fully insured plans’ interests, the lawsuit stated.
“United treats the thousands of plans it administers as one extremely large piggybank,” the lawsuit stated. “Each cross-plan offset violates ERISA, and in most cases, the money ends up in United’s own pocket.”
The lawsuit argued that not only did UnitedHealthcare’s cross-plan offsetting practices violate ERISA, but also they negatively impacted:
- Plans themselves by taking funds and using them for ends not related to the plans
- Employers, unions, and the plan participants whose funds are used for ends not related to their plan
- Plan participants who are balance billed as a result of United seizing certain benefits
- Providers who may not receive payment for their work
“Moreover, United does not inform Plan participants when Plan assets have been diverted from payment to a participant’s health provider for United’s own purposes. United tells only providers that the claim is not being paid because it is subject to an offset, and falsely tells both the Plan and the participant that the claim was ‘paid,’” the lawsuit stated.
If Scott v. UnitedHealth Group were to succeed, it could have major implications for ERISA-governed plans and overpayment recovery practices moving forward.
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A document about the payer’s “Bulk Recovery Process” published in June 2020 explained the process from the payer’s perspective to self-insured plans that can choose to participate in the Bulk Recovery Process.
“Once overpayments are identified, UHC typically offers overpaid medical providers the opportunity to dispute and/or voluntarily refund the overpayment,” the document stated.
“If the providers choose not to do so, UHC can use the Bulk Recovery Process to collect the receivables due against current or future payments to the overpaid providers under any plan that UHC administers, and then to credit the recovered amount to the plan that overpaid.”
The document recognized the risk of balance billing and promises plans legal support if needed in the case of a lawsuit. It also acknowledged that UHC benefits from the bulk recovery process, citing the fact that the process saves time on overpayment recovery processes.
The payer mentioned that it recovered $755 million on behalf of self-insured plans and $599 million for fully insured plans in 2019 in both refunds and bulk recovery.
“Without the Bulk Recovery Process, UHC would be able to recover a self-insured plan’s provider overpayments only from payments due from that same plan to the same provider. As such, it is expected that individual self-insured plan recoveries would be significantly reduced if the ability to Bulk Recover for that particular plan is removed,” the document stated.
The payer added that opting out increases administrative costs for all parties and stunt overpayment recovery for both in-network and out-of-network providers.
Cross-plan offsetting situations can also happen when payers and providers disagree about how much a payer owes the provider.
At the beginning of 2020, for example, UnitedHealthcare found itself unable to come to an agreement with Houston Methodist over their contract. The core issue was reimbursement rates. The payer pointed to escalating healthcare spending in the Houston area and found Houston Methodist partially responsible.
As a result, 100,000 members would be out-of-network at Houston Methodist hospitals if they chose to receive care at those sites.
UnitedHealthcare also had troubles negotiating its contract with Boca Raton Regional Hospital in 2019 leading to the potential of surprise billing for members.
Anthem is another major payer under the scrutiny of a lawsuit. The Department of Justice is investigating Anthem for risk adjustment fraud.
The complete article can be viewed here.