The 8th Circuit panel held thata “cross-plan offsetting” effort is too far away from the languagein the UnitedHealth health plan documents reviewed to be allowedthrough use of UnitedHealth's discretionary clauses. (Photo:Thinkstock)

A three-judge panel at the 8th U.S. Circuit Court of Appealssays UnitedHealth Group Inc.'s insurancecarrier units must put clear warnings in the health plan documentsif they want to combine different health plans when trying torecover overpayments from the providers.

The Employee Retirement Income Security Act of 1974(ERISA) gives a health plan discretion to interpret planprovisions, the panel acknowledged in its ruling.

But the 8th Circuit panel held that a “cross-plan offsetting”effort is too far away from the language in the UnitedHealth healthplan documents reviewed to be allowed through use of UnitedHealth'sdiscretionary clauses.

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“To adopt United's argument that the plan language granting itbroad authority to administer the plan is sufficient to authorizecross-plan offsetting would be akin to adopting a rule thatanything not forbidden by the plan is permissible,” Circuit JudgeL. Steven Grasz wrote in an opinion discussing the ruling. “Such anapproach would undermine plan participants' and beneficiaries'ability to rely on plan documents to know what authorityadministrators do and do not have.”

The court issued the ruling in connection with Peterson v.UnitedHealth Group Inc. and Riverview Health Institute v.UnitedHealth Group Inc.

In both cases, providers sued UnitedHealth over the carrier'scross-plan offsetting effort.

Cross-plan offsetting

Like many other health carriers, UnitedHealth is a holdingcompany that owns many different health insurance companies andhealth maintenance organizations. The company also administersemployers' self-insured health plans.

Physicians, hospitals and other providers may participate in theprovider networks for some UnitedHealth plansand not for others.

A health plan often believes it has paid a physician, hospitalor other provider too much for care. A health plan mayhandle overpayments with “offsets,” or moves to deduct overpaymentsfor past care from payments for new care.

The providers in the Peterson and Riverview cases saidUnitedHealth took offset arrangements a step further. In somecases, they said, a doctor or chiropractor might care for somepatients with UnitedHealth coverage out-of-network, and for otherpatients with UnitedHealth coverage on an in-network basis.

In that situation, the providers said, UnitedHealth might cutpayments for the out-of-network care to offset overpayments for thein-network care.

The 8th Circuit panel suggested that cross-plan offsetting “isin some tension with the requirements of ERISA.”

“While we need not decide here whether cross-plan offsettingnecessarily violates ERISA, at the very least it approaches theline of what is permissible,” Grasz wrote. “If such a practice wasauthorized by the plan documents, we would expect much clearerlanguage to that effect.”

Reactions

D. Brian Hufford of Zuckerman Spaeder, the lead counsel for theplaintiffs, welcomed the ruling.

“Cross-plan offsetting is an all-too-common strategy thatinsurers use to hold onto money that is rightfully owed to doctorsand other providers for services they have performed on behalf ofinsured patients,” Hufford said in a statement.

UnitedHealth said in a statement that overpayment recovery is animportant tool in the company's efforts to improve coverageaffordability.

“We will continue to enhance this process for our customers, whosupport our efforts to recover these funds on their behalf,” thecompany said.

ERISA and discretionary clauses

ERISA is a major federal health system change law.

Congress adopted it in an effort to keep individual states'benefits mandates from driving up costs, and to keep other forms ofred tape from driving up costs. One provision in ERISA preemptsstate contract law claims.

Benefit plan designers, meanwhile, often include “discretionaryclauses,” or clauses that give the plan administratorthe freedom to interpret the terms of theplan. Under ERISA rules, federal courts may be able toreview a plan administrator's claim determinations only todecide whether the administrator made reasonable use of discretion,not to see whether the underlying determination was correct.

Plan members, plan members' health care providers and stateofficials have clashed with employers, insurers and independentplan administrators over the years over the limits of discretionaryclauses and over the correct standard of review for suits involvingconcerns about use of discretionary clauses.

A list of some earlier articles about pastdiscretionary clause litigation is available here.