Cross-plan offsetting occurs when a valid payment from one plan is artificially reduced to “offset” an errant overpayment made to the same provider from a different plan.

Back in 2019, an Eighth Circuit Court of Appeals case offered key insight about “cross-plan off-setting.” Without directly ruling on the matter, that Appellate Court sharply questioned whether ERISA permitted cross-plan offsetting. Now, a New Jersey District Court has directly held that cross-plan offsetting represents an ERISA fiduciary violation. [Lutz Surgical Partners, PLLC v. Aetna, Inc. 2021 WL 2549343 (D. N.J., June 21, 2021).]

Although a district court sits at the lowest rung of the federal judiciary, this ERISA ruling casts insightful handwriting on the wall that employers sponsoring self-funded plans should carefully contemplate. As more fully described below, cautious employers may even consider reaching out to their TPAs to ensure that its plan operations correctly satisfy ERISA fiduciary obligations.

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