Health insurance conglomerates like UnitedHealth Group, Aetna, and Anthem administer benefits and process medical claims for thousands of employee health insurance plans that are governed by the Employee Retirement Income Security Act (“ERISA”). Similarly, most health care providers furnish services to beneficiaries of numerous health insurance plans, meaning that the providers’ claims for payment are frequently processed and paid by companies like UnitedHealth, Aetna, or Anthem, acting as administrators for these plans. Beginning in 2007, UnitedHealth began a practice known as “cross-plan offsetting” in order to more easily recoup overpayments it had made to providers that were not in the health plans’ networks. Under cross-plan offsetting, an administrator for multiple health plans offsets overpayments made to an out-of-network provider under one health plan against the payments owed to that same provider under other health plans of that administrator. Cross-plan offsetting arises more often in the case of overpayments to out-of-network providers because health plans’ contracts with in-network providers usually permit recoupment of overpayments by withholding payment for subsequent services furnished by the in-network provider, and the in-network provider will generally furnish services to a plan’s beneficiaries much more often than an out-of-network provider will.
Some out-of-network providers have brought class actions on behalf of health plan beneficiaries challenging the legality of cross-plan offsetting. In a decision issued on January 15, 2019, the U.S. Court of Appeals for the Eighth Circuit ruled against UnitedHealth’s practice of cross-plan offsetting, finding that cross-plan offsetting was not authorized by the documents of the health plans in question. Peterson v. UnitedHealth Group, Inc., 2019 U.S. App. LEXIS 1270 (8th Cir.2019). Before addressing the merits of the challenge to cross-plan offsetting, however, the Eighth Circuit first addressed whether Dr. Peterson, the out-of-network provider bringing the class action on behalf of his patients, had standing as the representative of his patients to bring an action under ERISA. Health care providers generally do not have standing to bring an action under ERISA on their own behalf to recover benefits due under a health plan; instead, they must bring such an action under an assignment from the plan’s beneficiaries or as their representative. UnitedHealth contended that Dr. Peterson could not act as his patients’ representative because he had not adequately disclosed a conflict of interest relating to balance billing for out-of-network services. In rejecting this argument, the court found that having UnitedHealth pay for Dr. Peterson’s services “with money rather than with an offset” would be in both Dr. Peterson’s interest and the patients’ interest if the offset was not a valid payment of their obligation for the services. 2019 U.S. App. LEXIS 1270, *10-11. The court also found that the engagement letter signed by the patients adequately explained the potential conflict of interest.
The Eighth Circuit also rejected UnitedHealth’s interpretation of the plan documents as authorizing cross-plan offsetting. While recognizing that the documents of the various plans granted UnitedHealth broad authority to interpret and administer the plans, the court concluded that the text of the plan documents provided no basis for authorizing cross-plan offsetting. The court further observed tension between the practice of cross-plan offsetting and the requirements of ERISA:
While administrators like United may happen to be fiduciaries of multiple plans, nevertheless “each plan is a separate entity” and a fiduciary’s duties run separately to each plan. Standard Ins. Co. v. Saklad, 127 F.3d 1179, 1181 (9th Cir. 1997). Cross-plan offsetting is in tension with this fiduciary duty because it arguably amounts to failing to pay a benefit owed to a beneficiary under one plan in order to recover money for the benefit of another plan. While this benefits the later plan, it may not benefit the former. It also may constitute a transfer of money from one plan to another in violation of ERISA’s “exclusive purpose” requirement. 29 U.S.C. § 1104(a)(1).
2018 U.S. App. LEXIS 1270, *14-15. Although the Eighth Circuit did not specifically rule that cross-plan offsetting violated ERISA, it expressed skepticism regarding interpretations of plan documents “that authorize practices that push the boundaries of what ERISA permits.” 2018 U.S. App. LEXIS 1270, *15. This skepticism led the court to conclude that UnitedHealth’s interpretation of the plan documents was not reasonable and to uphold the district court’s grant of partial summary judgment in favor of the class action plaintiffs.