July 14, 2020

A proposed class action filed Tuesday in Minnesota federal court challenges UnitedHealth Group's practice of taking money from certain health insurance plans to recoup financial losses from others, accusing the insurer of reaping huge profits from a strategy that violates federal benefits law.

Though the U.S. Department of Labor has said "cross-plan offsetting" flouts the Employee Retirement Income Security Act and doctors have successfully sued over instances of it, the practice is still technically legal, according to the complaint.

Tuesday's lawsuit — the first to challenge this strategy on behalf of American workers rather than doctors, lawyers say — seeks to prove that insurers break the law when they move plans' money around to protect profits.

"By engaging in cross-plan offsetting, United treats the thousands of plans it administers as one extremely large piggybank, moving more than $1.2 billion among its plans each year to suit its own interests," the workers' complaint says. "Each cross-plan offset violates ERISA, and in most cases, the money ends up in United's own pocket."

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The suit claims cross-plan offsetting violates ERISA because United is improperly using workers' plan contributions, intended "exclusively to pay plan benefits and reasonable plan administrative expenses," to recoup its own losses.

Cohen Milstein Sellers & Toll PLLC partner Karen Handorf, the workers' lead attorney, said the practice is part of a larger problem: the lack of transparency around how insurers are using workers' money.

A lot of American companies are "probably spending more money than they need to on health care," she said, but they wouldn't know it, because insurers aren't upfront about what they're doing with health plan assets. Plan audits are infrequent, and so are reports about where money is going, Handorf said.

"The reason that United and other insurers have been able to act like this for so long is because nobody has been able to tell what's going on," said Julie Selesnick, another Cohen Milstein attorney representing the workers.

The workers are represented by Carolyn G. Anderson, June P. Hoidal and Ian F. McFarland of Zimmerman Reed LLP, Karen L. Handorf, Julie S. Selesnick and Sarah D. Holz of Cohen Milstein Sellers & Toll PLLC, and solo practitioner William Meyer.

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