A U.S. Circuit Court ruled in early January, 2019 that United Healthcare may not engage in cross-plan offsetting. According to the ruling, this is defined as: “the practice of not paying a benefit due under one plan in order to recover an amount believed to be owed to another plan because of that other plan’s overpayment.”
United, in early February, appealed this ruling to the full Eighth Circuit.
According to the January ruling, “First, nothing in the plan documents even comes close to authorizing cross-plan offsetting… We agree with the district court’s summation that ‘not one of the plans explicitly authorizes cross-plan offsetting.’”
“To adopt United’s argument that the plan language granting it broad authority to administer the plan is sufficient to authorize cross-plan offsetting would be akin to adopting a rule that anything not forbidden by the plan is permissible,” U.S. Circuit Judge L. Steven Grasz wrote in the panel’s opinion.
“Regardless of whether cross-plan offsetting necessarily violates ERISA, it is questionable at the very least,” Judge Grasz wrote. “Considering this, alongside the fact that there is no plan language — only broad, generic grants of administrative authority — that would authorize the practice, leads us to conclude that United’s interpretation is not reasonable.”
The ruling begins by explaining that United administers thousands of health insurance plans and occasionally makes erroneous payments. With “in-network” providers, United is able to easily recover these overpayments due to an agreement that allows it to “offset” the overpayment by withholding it from a subsequent payments to that provider. However, in 2017 United began utilizing this same practice with out of network providers.
According to the ruling: “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 latter 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).”
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