A federal appeals court on Tuesday unanimously ruled against UnitedHealth Group over the insurer's policy of withholding payments to out-of-network physicians and hospitals in order to recover previous overpayments.
The U.S. Eighth Circuit Court of Appeals upheld a Minnesota district court decision that sided with provider groups against the insurer, saying UnitedHealth overstepped administrative authority over its employer-sponsored health plans with a practice that recoups overpayments to a physician or hospital from one plan by cutting another plan's subsequent payments to the same provider. This is known as "cross-plan offsetting."
Circuit Judge L. Steven Grasz said UnitedHealth went too far because the individual health plans under the insurer's umbrella don't explicitly allow the company to do this in their plan documents.
UnitedHealth contended that as the administrator of these health plans, it has broad authority to do so.
But Grasz blasted that argument as "akin to adopting a rule that anything not forbidden by the plan is permissible." He also said it would undermine the ability of the people enrolled in these plans to rely on plan documents to understand the scope of UnitedHealth's authority.
A UnitedHealth spokesperson said overpayment recovery is an important tool for the insurer to improve affordability. "We will continue to enhance this process for our customers, who support our efforts to recover these funds on their behalf," the spokesperson said.
The impact of the ruling is limited since the Eighth Circuit fell short of barring this relatively common payment practice as a violation of the Employer Retirement Income Security Act (ERISA) that governs employer-sponsored plans. The plaintiffs did not challenge whether the practice violated overarching federal law.
Nevertheless, Grasz wrote that cross-plan offsetting certainly comes close to a violation, writing that it "approaches the line of what is permissible."
"Regardless of whether cross-plan offsetting necessarily violates ERISA law, it is questionable at the very least," Grasz said. "Considering this, alongside the fact that there is no plan language — only broad, generic grants of administrative authority — that would authorize the practice, leads us to conclude that United's interpretation is not reasonable."
The court's position on ERISA law is significant but won't end these kinds of cases against insurers, said Brian Hufford, an attorney for Riverview Health Institute from the firm Zuckerman Spaeder.
"This ruling alone won't eliminate the insurance industry's abusive repayment demand practices, but it's an important blow against one that has hurt many of our nation's health providers and the patients they serve," Hubbard said.
Jason Cowart, another attorney for the plaintiffs, said they will now head back to the district court to lay the groundwork for claiming financial damages from UnitedHealth.
The same attorneys are involved in a similar case against Aetna in New Jersey and another lawsuit against UnitedHealth Group, also in New Jersey, challenging the way the insurer seeks repayments from physicians and hospitals.
The initial lawsuit came after UnitedHealth decided in 2007 to make cross-plan offsetting its policy.
In 2014 a physician sued over the practice and then Ohio's Riverview Health Institute followed with a separate complaint in 2015. A district court merged the two claims into a class action and the Department of Labor weighed in to support the plaintiffs.
UnitedHealth has asserted that without this practice the insurer would recover far less money than it does now. In its appellate brief, the company said it sampled six of its employer self-funded plans that were under scrutiny in this lawsuit and found that it recovered nearly 25% more through this cross-plan billing method than they would have from just trying to offset payments for any single plan.