Archives October 2014

On October 24, 2014, Aetna was slapped with a new provider class-action lawsuit alleging ERISA violations and fraud for its overpayment recoupment and offset practice. The suit also alleges Aetna engaged in withholding or offsetting new payments from providers as part of an “enterprise level” scheme of “illegally” withholding payments for covered services.

Case Info: MAYER-et-al-v.-AETNA-INC.-et-al U.S. District Court for the Central District of CA Civil Docket For Case #: 2:14-cv-08266, Filed 10/24/14.

This class action comes on the heels of another overpayment provider class action lawsuit filed against United Healthcare (UHC) on June 23, 2014. In that case, the overpayment recoupment and offset practices of UHC are alleged to be in violation of ERISA and fiduciary fraud. Avym’s support services were instrumental in allowing multiple plaintiffs the chance to fight back.

Overpayment offset and recoupments continue to be the Healthcare provider industry’s No. 1 claim denial as evidenced by UHC’s own admission that it had recovered $430 million worth of overpayments in 2011 alone. Correspondingly, for self-insured health plans, the No. 1 hidden cost is overpayment recoupment and possible plan assets embezzlement. In another recent case that intertwines ERISA violations and hidden fees, the U.S. Supreme Court rejected an appeal by BCBSMI of a lower court’s ruling which awarded a self-insured ERISA health plan a $6.1 million fraud judgment. The immediate impact of all these cases could be billions of dollars for all self-insured ERISA health plans nationwide, as a result of the ASO/TPA industry’s potential recovery of a billion dollars in overpayment recoupments and anti-fraud campaigns over the past 10 years.

This Aetna case illustrates the need for all employer sponsored health plans to comply with federal ERISA regulations when making demands for overpayment refunds. Attempts to recoup or withhold monies from providers are and should be treated as any other claim denials.  Additionally, Providers need to level the playing field by ensuring they submit ERISA/PPACA compliant appeals which properly request due process and a full and fair review.

According to the lawsuit,

• Aetna has been withholding or offsetting new payments in part or in whole from providers from one patient to satisfy another alleged overpayment in the past from other unidentified and completely separate patients in violation of ERISA;
• Aetna then misleads patients and the plan sponsors as to payments made to the providers by claiming that a “payment” had been “issued” when in fact it was not paid;
• Aetna has never complied with ERISA claims regulation when requesting alleged overpayments and offsetting new payments from other patients.

The putative class on behalf of all similarly situated providers is seeking for ERISA benefits payments due, injunctive and declaratory relief. The provider class action also alleges additional ERISA violations by Aetna for withholding and offsetting newly adjudicated claim payments from one patient to satisfy another alleged overpayment in the past from other unidentified patients which in some cases are members of a completely separate plan, in violation of ERISA.

The complaint also alleges that Aetna misled patients and the plan sponsors on patient EOB’s that indicated “payment” had been “issued”, when in truth and in fact no such payment was ever made to the providers, according to the Court Complaint.

In particular, the complaint alleged the following:

“Aetna is engaged in an enterprise-level scheme whereby it illegally withheld such payments. It did so in order to offset what it believes to be prior overpayments to Plaintiffs made by different Aetna Plans relating to services provided to different Aetna Insureds. It has done so without any legal authority under the Aetna Plan or otherwise, and leaves the Aetna Insureds financially responsible for unpaid bills for Covered Services that their respective Aetna Plans are obligated to pay”

The complaint goes on to allege that:

Instead of availing itself of lawful means of recovering such overpayments under ERISA, Aetna instead engages in illegal self-help designed to circumvent the ERISA regulatory regime. Neither the Aetna Insureds, their ONET providers, nor the language of the Aetna Plans granted Aetna the rights to recover alleged overpayments in this manner”.  The Plaintiffs also allege that Aetna “did not provide any of the informational items or appellate procedures mandated by the ERISA Claims Procedure.”

As more and more of these cases make their way through the courts, it is clear that the previously questionable or “legal gray area” of overpayment recoupment practices engaged in by many of the nation’s biggest insurance carriers, effectively trigger ERISA appeal rights.  Insurers and Health Plans will be forced to comply with all applicable federal laws, ERISA and PPACA claims regulations, as well as statutory fiduciary duties before recouping one single dollar. Providers or patients that face Aetna or any payor recoupments or offsets would do well to understand the implications of these lawsuits as well as their rights under ERISA.

Located in Los Angeles, CA, AVYM is a leading provider of services focusing entirely on the resolution of denied or disputed medical insurance claims by participating in the nation’s first ERISA PPACA Claims Appeals Certification program.  AVYM also offers free Webinars, basic and advanced educational seminars and on-site claims specialist certification programs for doctors, hospitals and commercial companies, as well as numerous pending national ERISA class action litigation support services.

Case No. 13–2233.

Submitted January 14, 2014. Filed on August 7, 2014 United States Court of Appeals, Eighth Circuit

Silva v. Metropolitan Life Insurance Company, No. 13-2233 [8th Cir]

Brief of the Secretary of Labor, Thomas E. Perez-As Amicus Curiae in support of plaintiff

Ramifications of Court Decision:

1. Following the Supreme Court’s decision in Amara, the 8th Circuit recognizes the remedy of surcharge could be available to provide monetary “compensation” for a loss resulting from a trustee’s breach of duty.  The court cited the 4th circuit decision saying,”The Fourth Circuit stressed why allowing plan participants to seek the full amount of benefits for a breach of fiduciary obligations under § 1132(a)(3) is so important:
   Quote:

   [W]ith Amara, the Supreme Court clarified that remedies beyond mere premium refunds . . . are indeed available to ERISA plaintiffs suing fiduciaries under Section 1132(a)(3). This makes sense—otherwise, the stifled state of the law interpreting Section 1132(a)(3) would encourage abuse by fiduciaries. Indeed, fiduciaries would have every incentive to wrongfully accept premiums, even if they had no idea as to whether coverage existed—or even if they affirmatively knew that it did not. The biggest risk fiduciaries would face would be the return of their ill-gotten gains, and even this risk would only materialize in the (likely small) subset of circumstances where plan participants actually needed the benefits for which they had paid. Meanwhile, fiduciaries would enjoy essentially risk-free windfall profits from employees who paid premiums on non-existent benefits but who never filed a claim for those benefits. With Amara, the Supreme Court has put these perverse incentives to rest and paved the way for [the plaintiff] to seek a remedy beyond mere premium refund.

2. Reformation and Equitable Estoppel could be allowed as a remedy to the fiduciary’s failure to provide the SPD.  According to the court, “Silva argues that MetLife “waived” the “evidence of insurability” provision in the Plan because the company appeared to approve Abel’s request for coverage when it began to deduct premium payments. Silva argues a remedy for his claim exists in the equitable theory of reformation. We find support for this in Amara’s discussion of reformation under § 1132(a)(3).See Amara, 131 S. Ct. at 1879. There, the Court stated that “[t]he power to reform contracts (as contrasted with the power to enforce contracts as written) is a traditional power of an equity court, not a court of law, and was used to prevent fraud.” Id. (citations omitted). On remand, the District of Connecticut described the reformation remedy available under § 1132(a)(3) as allowing courts “to reform contracts that failed to express the agreement of the parties, owing either to mutual mistake or to the fraud of one party and the mistake of the other.” Amara v. CIGNA, 925 F. Supp. 2d 242, 252 (D. Conn. 2012).“
3. The court finds that a claimant can plead, in the alternative, claims for benefits and breach of fiduciary duty.  The court goes on to say, “It [is] well established in [the Sixth] Circuit that plaintiffs [can] bring claims for breaches of fiduciary duty in ERISA cases, and [can] even do so alongside a claim for benefits in certain circumstances.”

According to the court documents, “However, the Supreme Court’s decision in Amara changed the legal landscape by clearly spelling out the possibility of an equitable remedy under ERISA for breaches of fiduciary obligations by plan administrators. Amara, 131 S. Ct. at 1881. The Amara Court directly addressed the need for this remedy, stating: “[i]t is not difficult to imagine how the failure to provide proper summary information, in violation of the statute, injured employees. . . . We doubt that Congress would have wanted to bar those employees from relief.” Amara, 131 S. Ct. at 1881.

Silva argues the remedy for his claim against Savvis is the equitable theory of surcharge. The Amara Court described equitable surcharge under § 1132(a)(3) as follows:

Amara, 131 S.Ct. at 1880 (internal citations and citations to authority omitted). To obtain relief under the surcharge theory, a plan participant is required to show harm resulting from the plan administrator’s breach of a fiduciary duty. See Amara, 131 S. Ct. at 1881–82 (“We believe that, to obtain relief by surcharge for violations of §§ [1022 and 1024(b)], a plan participant or beneficiary must show that the violation injured him or her. But to do so, he or she need only show harm and causation. Although it is not always necessary to meet the more rigorous standard implicit in the words ‘detrimental reliance,’ actual harm must be shown.”).”

With respect to the Reformation remedies, the court concluded:”On remand, Silva may be able to show mutual mistake or “fraud of one party and the mistake of the other.” See Id. It was arguably fraudulent for MetLife to collect premiums from a Savvis employee who, MetLife now argues, never had an approved policy. Further, MetLife did not just erroneously collect premiums from Abel—an internal MetLife investigation showed that roughly 200 Savvis employees had been paying premiums for policies that were never approved by MetLife. We conclude that Silva is allowed to make his waiver argument on remand, and if successful, receive monetary damages, as will be discussed below.”

The court goes on to recognize an equitable estoppel remedy may be available, “Because MetLife admitted error in collecting the premiums and Abel relied on that collection as proof that he had a policy, Silva argues that MetLife should also be equitably estopped from claiming that no policy existed. Again, without resolving Silva’s claim on the merits, we find that this alleged wrong can survive a Rule 12(b)(6) motion because relief could be granted under § 1132(a)(3)’s catchall provision using the traditional equitable estoppel theory discussed in Amara, 131 S. Ct. at 1880. The concept of equitable estoppel is simple; it “operates to place the person entitled to its benefit in the same position he would have been in had the representations been true.” Id. (citation omitted).”

Case No. 12–55210.

Argued and Submitted January 7, 2014. Filed on August 20, 2014 United States Court of Appeals, Ninth Circuit

Pacific Shores Hosp v United Behavioral Health 9th Cir

US Department of Labor Office of the Solicitor-Pacific Shores Hospital Amicus Brief in support of plaintiffs

Ramifications of Court Decision:

1. United Behavioral Health violated it’s fiduciary duty under ERISA
2. Medical records outside the Administrative Record can be considered if helpful
3. DOL argues that an Administrator’s benefits decision is an abuse of discretion if it is not based on a full and fair review of “ALL RELEVANT FACTS AND CIRCUMSTANCES”

The appeals court determined that the initial court decision in this case, Pacific Shores Hospital v. United Behavioral Health, (UBH) was based only on the administrative record provided by UBH, which contained numerous errors and inconsistencies, and not on any additional materials.

In its appeal, Pacific Shores Hospital argued that procedural irregularities in UBH’s benefits denial made it necessary for the appeals court to consider the denial anew. It also argued that the patient’s hospital records should be considered. Pacific Shores Hospital also argued that UBH was operating under a conflict of interest because it was concerned with maintaining its relationship with Wells Fargo, and Wells Fargo had its own self-interest in wanting to hold down the cost of benefits.

The 9th Circuit decided “all of the relevant circumstances” needed to be considered, including the hospital records and the fact that UBH had never seen the patient and instead relied merely on a paper review of her case.

“It is painfully apparent,” wrote appeals court Judge William Fletcher, “that UBH did not follow procedures appropriate to (the) case.” And this “raise[s] questions about the thoroughness and accuracy of the benefits determination.”

“UBH owed a fiduciary duty to (the patient) under ERISA,” said the decision, citing Pegram v. Herdrich. “The statute provides that fiduciaries shall discharge their duties with respect to a plan ‘solely in the interest of the participants and their beneficiaries,’ [29 U.S.C.] § 1104(a)(1), that is, ‘for the exclusive purpose of (i) providing benefits to participants and their beneficiaries; and (ii) defraying reasonable expenses of administering the plan,’ § 1104(a)(1)(A).”

The court goes on to say, “Fiduciaries must discharge their duties “with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.” Id. at 224 n.6 (quoting 29 U.S.C. § 1104(a)(1)(B)).”

“UBH fell far short of fulfilling its fiduciary duty to Jones. Dr. Zucker, UBH’s primary decisionmaker, made a number of critical factual errors. Dr. Center, as an ostensibly independent evaluator, made additional critical factual errors. Dr. Barnard, UBH’s final decisionmaker, stated that he arrived at his decision to deny benefits “after fully investigating the substance of the appeal.” He then rubberstamped Dr. Center’s conclusions. There was a striking lack of care by Drs. Zucker, Center, and Barnard, resulting in the obvious errors we have described. What is worse, the errors are not randomly distributed. All of the errors support denial of payment; none supports payment. The unhappy fact is that UBH acted as a fiduciary in name only, abusing the discretion with which it had been entrusted.“, the 9^th circuit said.

“A plan administrator abuses its discretion if the administrator rendered its decision without any expla­nation, construed provisions of the plan in a way that con­flicts with the plain language of the plan, failed to develop necessary facts for its determination, or relied on clearly erroneous findings of fact in making benefit determinations.“, according to the court records.

Click here for a link to the DOL website and Amicus Brief