- Lawsuit seeks to end insurer practice used to recoup over-payments
- Labor Department said practice violates ERISA
A new lawsuit seeks to stop health insurers from a decade-old practice that some attorneys say treats patients’ health plans like their own personal piggy bank.
The practice, known as cross-plan offsetting, occurs when an insurance company that considers it overpaid a doctor for a patient’s care recoups that loss by refusing to pay the same doctor in full when they care for another patient in a different health plan serviced by the same insurance company. Attorneys in litigation against UnitedHealth Group argue the practice hurts patients, providers, and employers that sponsor health plans.
It leaves doctors footing big bills they can legally pass onto patients in 21 states without protections against balance billing, said Julie Selesnick, of counsel at Cohen Milstein Sellers & Toll PLLC and one of the attorneys in the case against UnitedHealth.
Cross-plan offsetting makes a mockery of the Employee Retirement Income Security Act, said Karen Handorf, chair of Cohen Milstein's Employee Benefits/ERISA practice group and an attorney for the two UnitedHealth Group plan participants who brought the litigation. The federal law, which governs employee benefit plans, bans certain transactions that benefit those responsible for managing a plan.
“The fundamental backbone of ERISA is the exclusive benefit rule, which says money that goes into employee benefit plans needs to be for the exclusive benefit of the plan beneficiaries,” Selesnick said. “Instead you get these hard-working people paying premiums out of their paycheck and UnitedHealth is putting that money into their own pocket.”
The lawsuit, filed July 14 in the U.S. District Court for the District of Minnesota, claims UnitedHealth breached its fiduciary and statutory duties by moving more than $1.2 billion each year among its plans, money that allegedly ends up in the company’s own pocket.
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The Department of Labor has already weighed in on the legality of cross-plan offsetting.
The practice violates ERISA because UnitedHealth “acts as the judge, jury, and executioner for its own claim to recoup alleged overpayments,” the agency said in a friend-of-the court brief to the U.S. Court of Appeals for the Eighth Circuit in a 2017 case involving the company.
In that case, health-care providers accused UnitedHealth of taking money owed to providers for claims from self-insured plans, which are funded by employers and employee contributions, to reimburse itself for claims it overpaid in fully insured plans, which UnitedHealth pays for with its own funds.
The latest lawsuit argues any cross-plan offsetting violates the law even if the insurer is taking money from one self-insured plan to reimburse another.
Anthem updated its policy last year after the Eighth Circuit said UnitedHealth’s practice of cross-plan offsetting “approaches the line of what is permissible,” even though the appeals court wasn’t asked in that case to decide whether cross-plan offsetting violates ERISA.
Anthem said it was ceasing the practice of offsetting and cross-plan offsetting for out-of-network provider claims, but will continue the practice for in-network provider claims, according to BRMS, a benefit administrator and health-care risk manager, which posted a copy of the letter Anthem sent to its clients.
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The Labor Department noted the distinction between claims that come from in-network health-care providers and those from out-of-network providers.
“In-network providers typically have contractual relationships with the plans and insurers, removing any plan or participant interest in disputes over their payment amounts, which are paid pursuant to those in-network contracts.” the department said in a footnote in its brief. “In these situations, the plan participants are not subject to financial risk because these contracts typically bar balance billing.”
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