In its decision, the Court concluded that UnitedHealth Group, Inc. (“United”) was not authorized to engage in “cross-plan offsetting.” What is cross-plan offsetting? It is a “self-help” practice that third party administrators (“TPAs”) of employer-funded health plans (“ERISA Plans”) engage in by offsetting alleged overpayments made to an out-of-network provider under one TPA-administered ERISA Plan by withholding payments to the same provider under a different TPA-administered ERISA Plan. Cross-plan offsetting is not an issue for in-network providers since most, if not all, in-network contracts include very specific definitions of what an overpayment is and how it may be resolved. However, for out-of-network providers, there is no contract in place and this often leads to disagreements about what should be considered an overpayment and how overpayments may be resolved. From the TPA’s perspective, cross-plan offsetting alleviates the need to wait for the resolution of an overpayment dispute to recapture overpayments made by the TPA to the provider. From the provider’s perspective, cross-plan offsetting is the TPA version of “robbing Peter to pay Paul.”

Sound complicated? Cross-plan offsetting is complicated! However, notwithstanding its complications, cross-plan offsetting is effective. In fact, it is so effective that on May 30, 2019, United filed a Petition for Writ of Certiorari asking the United States Supreme Court to overturn the Eighth Circuit’s decision and allow United and other TPAs to continue using cross-plan offsetting as a way to recover alleged overpayments.

The Eighth Circuit Decision

In its decision, the Eighth Circuit Court of Appeals agreed with the lower court that cross-plan offsetting was not allowed under the terms of the governing ERISA Plan documents. As noted by the Court, the ERISA Plan documents at issue expressly allowed such offsets for provider claims based on patients within the same plan, but said nothing about cross-plan offsets. Although the Court did not render a definitive opinion as to the permissibility of cross-plan offsetting under ERISA[1], the Court remarked that, at a minimum, cross-plan offsetting, as a practice, was “in some tension with the requirements of ERISA,” and “pushed the boundaries of what ERISA permits.” Finally, in recognition of the fact that the ERISA Plan documents explicitly allowed offsets within the same plan but did not explicitly allow cross-plan offsets, the Court concluded that United’s argument that cross-plan offsets were permissible because the ERISA Plan documents did not say otherwise was unreasonable.

United’s Petition for Writ of Certiorari

In its Petition, United asks the Supreme Court to clarify (i) whether a TPA’s determination that a plan which is silent on the permissibility of cross-plan offsetting, yet gives the plan more general authority, is necessarily unreasonable; and (ii) whether a court can reject a TPA’s interpretation of an ERISA Plan based in part upon the conclusion that the TPA’s interpretation, “pushed the boundaries of what ERISA permits.”

In support of its Petition, United argued that the Supreme Court should grant its Petition due to a multitude of conflicts that the Eighth Circuit decision creates and/or amplifies amongst multiple Circuit Courts of Appeals. For example, in its Petition, United describes the Fifth Circuit decision in Quality Infusion Care, Inc. v. Health Care Services Corp., as allowing cross-plan offsets in the case of ERISA plans that were “materially identical” to those at issue in the Eighth Circuit case.

If the Supreme Court grants certiorari…

If the Supreme Court were to allow United and, in turn, other TPAs, to continue their practice of cross-plan offsetting, many have expressed a concern that ERISA Plan members may be the most at risk for the continuation of the practice. For example:

  1. If a TPA were to reduce a physician’s reimbursement for services provided to a Plan A member in order to recover an overpayment that the TPA made to the physician for services provided to a Plan B member, the physician may decide to bill the Plan A member for that portion of the Plan A reimbursement withheld by the TPA. As such, the Plan A member may find him/herself at risk for medical bills that were supposed to be covered by Plan A; and
  2. If more TPAs embrace cross-plan offsetting as a result of a Supreme Court decision in favor of the practice, providers may close their practices to members of ERISA Plans administered by TPAs that engage in cross-plan offsetting. As a result, members of such TPA-administered plans may be faced with diminished access to needed medical care by providers who are unwilling to take on the financial risk that cross-plan offsetting may entail.

On the other hand, if the Supreme Court ultimately bans the practice of cross-plan offsetting, TPAs may try to revise their existing agreements with employers to explicitly allow for the practice. Employers will then have to determine whether it is in their best interests and the best interests of their employees to allow such a practice (at the risk of employees being balance billed or not treated by their desired practitioner at all) or prohibit such a practice (at the risk of losing funds that are overpaid to providers and not otherwise recoverable).  If employers agree to cross-plan offsetting by their contracted TPAs, plan members may again find themselves suffering the financial and access consequences described above.  If employers do not agree to cross-plan offsetting, then providers may see increased reimbursement – at least temporarily – until TPAs begin ramping up their collection efforts to recoop overpayments through in-plan offsets.

What’s next?

As originally scheduled, a response to the Petition was to be filed by the Respondents on or before July 1, 2019. However, on June 17, 2019, the Court granted the Respondent’s motion to extend the time to file the response from July 1, 2019 to July 31, 2019.

[1] Notwithstanding the Court’s hesitancy to rule on the practice’s permissibility under ERISA, in an amicus brief filed by the Department of Labor (“DOL”), the DOL maintained that cross-plan offsetting would violate ERISA’s fiduciary rules.