After over a year of waiting, The Eight Circuit Court of Appeals aligns itself with the Department of Labor in determining that the practice of Cross-Plan Offsetting orchestrated by many commercial health insurance companies, and in this case United Healthcare, to recover erroneously overpaid claims from out-of-network health care providers is not only a violation of the terms of a self-funded benefit plan, but may also trigger additional liabilities for commercial health insurers and plan sponsors and administrators of self-funded benefit plans under ERISA. 

Cross-Plan Offsetting is a practice commercial health insurers employ to recover overpayments made to out-of-network providers by withholding the overpaid amount from subsequent payments to be made to the same provider. This is done by commercial health insurers regardless of the fact that the overpayment may have been made by one plan and the offset is taken from a payment to be made by a different plan. 

In Peterson v. UnitedHealth Group, Inc., the Eighth Circuit determined that: (i) nothing in a self-funded plan’s plan documents even comes close to authorizing United Healthcare to engage in Cross-Plan Offsetting; (ii) even the broad authority granted to United Healthcare to administer a self-funded benefit plan does not permit it to engage in this practice; (iii) Cross-Plan Offsetting is in tension with the fiduciary duties of a commercial health insurer acting as a third-party claims administrator (TPA) of a self-funded benefit plan and the fiduciary duties of a plan sponsor because it may amount to failing to pay a benefit owed to a beneficiary under one plan in order to recover money for the benefit of another plan; and (iv) Cross-Plan Offsetting may constitute a transfer of money from one plan to another in violation of ERISA’s “exclusive purpose” requirement. 

Importance to Out-of-Network Providers

Though this practice is likely permitted between providers who are contracted with commercial health insurers, those providers who are not contracted with commercial health insurers (i.e. out-of-network providers) that have overpayments made to them, erroneous or otherwise, that are offset against future payments owed to them, likely have recourse as a result of the Eighth Circuit’s ruling. The Eighth Circuit has opened the door to out-of-network providers to attempt to collect money that may have been unlawfully offset from one plan by a commercial health insurer/TPA in order to recover an overpayment made by a different plan. 

Importance to Plan Sponsors and Plan Administrators

Plan sponsors and administrators of self-funded benefit plans governed by ERISA often contract with commercial health insurers to act as the TPA of their plans. Unknown to plan sponsors and administrators, many TPAs, not just United Healthcare, engage in Cross-Plan Offsetting to recover overpayments. As a result of the Eighth Circuit’s ruling, liability for this practice may extend beyond the commercial health insurer/TPA to the plan sponsor and administrator since one fiduciary of a benefit plan may be held liable for the breach of another fiduciary to the same plan (29 U.S.C. §1105). Plan sponsors and administrators should inquire with their TPAs to determine whether the TPA is engaged in this practice, and, in the event, it is, determine whether the benefit plan should remain a participant.