In recent years, UnitedHealth Group has ramped up its practice of recovering supposed overpayments to medical providers on claims of plan participants in one healthcare plan by offsetting these “overpayments” against (and therefore often totally disallowing) payments on the claims of participants in an unrelated plan.
Keep in mind that the participants in the plans normally are still on the hook for any medical bills that United refuses to pay. I like to refer to this practice of cross-plan offsetting as robbing Peter to pay Paul’s plan. Or perhaps given the petition for certiorari filed last week by United in a case brought as a class action by Dr. Louis Peterson seeking to end this practice, I should say robbing Peterson (and his patients) to pay Paul.
In the Peterson case, the Eighth Circuit Court of Appeals issued a decision earlier this year agreeing with a trial court that this practice was not allowed under the terms of the governing plans, which expressly allowed such offsetting for provider claims based on patients within the same plan but said nothing about cross-plan offsets.
Without deciding whether the practice necessarily violates ERISA as the Department of Labor argued it does in a brief it filed as amicus curiae in the case, the Eighth Circuit noted that, at a minimum, the practice was “in some tension with the requirements of ERISA,” and “pushed the boundaries of what ERISA permits.” Accordingly, the court concluded that, despite the broad grant of interpretive authority granted to United in the plans, its interpretation of the plan as allowing cross-plan offsets was unreasonable.
United has asked the Supreme Court to review (and reverse) the decision. In its cert. petition, United asks the Court to resolve two issues:
(1) whether the Eighth Circuit incorrectly held that its interpretation was “necessarily unreasonable merely because the plan is silent on the matter.”
(2) whether a court is required by established ERISA case law to defer to “an otherwise reasonable plan construction that is lawful under ERISA but, in the court’s view, pushes ERISA’s boundaries.”
In my view, neither issue is presented by Peterson. The Eighth Circuit did not, as United’s first question asserts, hold that United’s plan interpretation was unreasonable merely because the plans were silent. Instead, the Eighth Circuit looked not only to plan language but also to ERISA’s fiduciary requirements, in concluding that United acted unreasonably.
Furthermore, the plans were not merely silent: they addressed offsets and allowed them only for claims made under the plan. United’s second issue assumes that the Eighth Circuit determined ERISA permits cross-plan offsetting, but the court did not. It merely declined to resolve that issue. And the Eighth Circuit also did not conclude that United’s construction was otherwise reasonable; it strongly suggested that it was not.
This does not mean that the Supreme Court will necessarily decline to take the case. There is a decision from another court of appeals – the Fifth Circuit – that allowed cross-plan offsetting based on very similar language.
And United is right about the amount of money at stake, which is likely in the billions of dollars and has undoubtedly added greatly to United’s record earnings and profits, often at the expense of plan participants and their medical providers. The Court will decide whether to take this case in the Fall after the plaintiffs have responded. We will be following this case closely.
The Retirement Benefits attorneys at Kantor & Kantor keep up to date on issues such as these so we can better protect our clients with ERISA legal concerns. For more information, please contact our law firm or use our online contact form. We offer free consultations!