In Peterson v. UnitedHealth Group Inc., No. 17-1744 (8th Cir. 2019), UnitedHealth Group Inc. (“United”) administers thousands of health insurance plans. In the course of processing millions of claims for benefits, United at times erroneously overpays service providers. United can generally recover these overpayments from “in-network” providers because it has agreements with those providers that allow it to “offset” the overpayment by withholding the overpaid amount from subsequent payments to that provider. In 2007, United implemented an aggregate payment and recovery procedure in which it began to offset overpayments made to “out-of-network” providers, even where the overpayment was made from one plan and the offset taken from a payment by a different plan, a practice known as cross-plan offsetting.
The named plaintiffs in these consolidated class action cases are out-of-network medical providers who United intentionally failed to fully pay for services rendered to United plan beneficiaries in order to offset overpayments to the same providers from other United administered plans. The plaintiffs, litigating under ERISA on behalf of their patients, the plan beneficiaries, claim the relevant plan documents do not authorize United to engage in cross-plan offsetting. The district court agreed and entered partial summary judgment to the plaintiffs on the issue of liability. United appealed the summary judgment order.
Upon reviewing the case, the Eighth Circuit Court of Appeals (the “Court”) affirmed the district court’s decision. The Court found that, first, nothing in the plan documents even comes close to authorizing cross-plan offsetting, 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. Second, the practice of cross-plan offsetting is in some tension with the requirements of ERISA. While the Court said that it need not decide here whether cross-plan offsetting necessarily violates ERISA, it said that, at the very least, the offsetting approaches the line of what is permissible. If such a practice was authorized by the plan documents, the Court said that it would expect much clearer language to that effect. This led the Court to conclude that United’s interpretation and offsetting practice is not reasonable.