The 8th Circuit recently affirmed a district court decision, which held that United Health Group and its affiliates were not permitted to engage in the practice of “cross-plan offsetting” in order to recoup health plan benefit overpayments.

Background of the Case

In 2007, UnitedHealth Group Inc. and various affiliates (“United”), in its role as claims administrator for thousands of employer-sponsored group health plans, implemented a new practice to recover overpayments made to out-of-network health care providers. This practice, which is commonly referred to as “cross-plan offsetting,” allows United to reduce the amount paid for a claim under one employer’s health plan in order to recoup an amount that United overpaid under a different employer’s health plan.

The plaintiffs in the case were out-of-network providers who received underpayments for services rendered to participants and beneficiaries under employer-sponsored health plans administered by United as a result of United’s cross-plan offsetting practice. The plaintiffs sued on behalf of their patients (the participants and beneficiaries), alleging that the practice of cross-plan offsetting violates the terms of the employer-sponsored group health plans, as well as the requirements of ERISA.

The district court held that the language of the various health plan documents did not authorize United to engage in cross-plan offsetting. In its order, the district court also certified the decision for immediate appeal to the 8th Circuit, as permitted under 28 U.S.C. § 1292(b) where there is “a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation.”

Court’s Analysis and Conclusions

United argued that because the various health plan documents granted United broad authority to interpret and implement the plan, this was a sufficient basis to permit United to use the practice of cross-plan offsetting in order to recover overpayments to out-of-network providers. The 8th Circuit found this argument unavailing, stating that “[t]o 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.”

In its discussion, the court also noted that “the practice of cross-plan offsetting is in some tension with the requirements of ERISA,” in particular the concept that each employer’s health plan is a separate plan under ERISA and the requirement that the assets of a single plan are to be held in trust for the exclusive purpose of providing benefits to participants and beneficiaries covered by the plan.

Ultimately, the 8th Circuit affirmed the district court’s decision based solely on the lack of plan language specifically authorizing United to engage in cross-plan offsetting and did not rule on the question of whether the practice of cross-plan offsetting per se violates ERISA.

Plan Sponsor Takeaways

In light of the 8th Circuit’s decision, plan sponsors may want to review the terms of their service agreements with claims administrators for cross-plan offsetting provisions. If a service agreement permits the claims administrator to engage in cross-plan offsetting, a plan sponsor should evaluate whether it wants to renegotiate this aspect of the service agreement. If cross-plan offsetting is permitted under the service agreement (or if a plan sponsor knows that its claims administrator uses cross-plan offsetting to recoup overpayments) and the plan sponsor wants to continue this practice, then based on the Peterson decision it would be advisable to review the plan documents to confirm that the practice is specifically authorized by the terms of the plan.