Category In The News

Originally Published by By ROI-NJ, Anjalee Khemlani
Trenton | Apr 30, 2018 at 6:55 am : https://www.roi-nj.com/2018/04/30/healthcare/sarlo-in-letter-to-muoio-asks-n-j-to-look-into-details-of-health-insurance-contracts/

Budget and appropriations chair has questions about reimbursements, audits. State Sen. Paul Sarlo has asked Treasurer Elizabeth Muoio about the state heath plans’ third-party administrators. Reining In health care costs continues to be a challenge for many corporations and self-funded plans.

The story Isn’t any different for the state of New Jersey, the largest employer In the state. State Sen. Paul Sarlo (D-Wood-Ridge) is trying to find new solutions – and potentially hundreds
of millions of dollars In savings for the state – by addressing the Issue In a different way: Paying closer attention to how the state pays its contracted plan managers.

Last week, in a letter to state Treasurer Elizabeth Muoio, Sarlo asked the Department of the Treasury to determine if the health insurers are keeping any recovered funds, through savings from appeals, and if the plans are charging the state anything additional to what they pay the providers. 

Sarlo Letter to NJ Treasurer re TPA & Response

Sarlo also asked about surcharges related to out-of-state visits by plan members, and whether or not the state can cap those. 

In addition, he asked if the state is auditing Aetna and Horizon Blue Cross Blue Shield of New Jersey, the third-party administrators of the State Health Benefits Plan and School Employers’ Benefits Plan, which together cover more than 600,000 current and retired state employees and cost the state $6 billion in 2016 alone. 

The contract for both is set to expire in June, and a request for proposals with the same rules and requirements as the existing contract is currently out for bid. 

And, while the RFP adds to the timeliness of Sarlo’s request, it was not necessarily the impetus. 

Legislators began looking into the process in January after a New Jersey doctor, Rajnik “Raj” Raab, alerted them to a white paper he paid a California-based health care reimbursement recovery firm, AVYM, to produce. 

In the six-page white paper, the firm said New Jersey could save up to $1 billion annually: AVYM Transparency and Disclosure in Health Care Insurance

AVYM said such huge savings are possible because third-party administrators may not be paying back the state any savings they receive over time from claim appeals. 

Sarlo, the deputy majority leader who serves as the chair of the Senate Budget and Appropriations Committee, told ROI-NJ how such a scenario could play out. 

“Here’s what we think happens,” he said. “A public worker in town XYZ cuts his hand, severs his hand, it’s a serious accident. He incurs $50,000 worth of bills. He petitions the fund representing the town … we pay. Now they (insurers) scrutinize and, over time, after arguing back and forth, reduce it to only $40,000.” And, if the reduced amount comes after the $50,000 has already been paid to the insurers, there is no way to check or prove the extra $10,000 is returned the state. Sarlo said there is no evidence that the state has ever received a refund from the insurers. 

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The contract between the state of New Jersey and Aetna and Horizon, which ROI-NJ obtained through an Open Public Records Act request, shows that the practice in question is prohibited, and that the state can audit the payments at any time. 

Representatives from Horizon and Aetna declined or did not return requests for comment on the issue, pointing instead to the agreements they have with the state.  

The contract with the insurers addresses potential overpayments. 

According to the contract, the state only reimburses the insurer after the payment is made.  

“The (insurer) will be reimbursed for claim checks and electronic fund transfers to providers that have cleared the (insurer’s) bank account by the (insurer) transmitting the total amount cleared via electronic mail or facsimile machine to the Commission by 11:00 a.m., EST daily, to determine the total amount that will be funded by wire transfer to the (insurer)’s designated bank on the same day. The transmission must include a breakdown between state and local amounts,” according to the contract. 

The contract also has a provision about any overpayments or refunds: 

“(Insurer) must disclose, fully account for, and remit, to the Commission any and all funds received by it as the result of a recovery of an overpayment or incorrect payment, prescription drug rebates and other pharmaceutical revenues, or subrogation of a claim or lien. Any discounted or negotiated rates or payment arrangements, any price adjustment, or refunds, and any retroactive or supplemental payments or credits negotiated with regard to covered services received by SHBP members must be remitted to the Commission. (Administrative) fees must take into consideration this provision,” according to the contract. 

And, if the state believes there is a problem with the payments, it can audit at any time. 

“(Insurers) must cooperate in the administration of routine audits performed by the Commission or its designee, on various aspects of the administration of the Plan, including but not limited to claims processing, medical management and enrollment data.  The various audits are designed to ensure (1) contract compliance, (2) that the interface system is working properly, (3) proper payment of claims where the individual should have coverage or (4) proper rejection of claims where the individual’s coverage has terminated, and (5) correct allocation of claims according to SHBP experience groups and (6) efficient and effective medical management,” the contract said. 

“An audit may be conducted if the Commission has a reasonable and good faith belief that a situation exists that will result in harm to the Plan. Audits must encompass records held by any subcontractor or related organization and held by any entity that is a member of the contractor group of companies.” 

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AVYM co-founders Mark Flores and Vincent Flores told ROI-NJ that the organization specializes in helping providers navigate claims and has seen a number of questionable practices since its inception in 1999. 

The white paper looked at claims from a Sparta school employee’s surgery and suggested that the provider was only paid 50 percent of the amount originally claimed, and the remainder was pocketed by the insurer. 

“Based on court cases (cited in the paper), it seems apparent TPAs can and do hide ‘undisclosed’ administrative compensation fees within medical claims payments. These undisclosed fees, which can account for 30 to 60 percent of a plan sponsor’s health claims expenditures, are usually siphoned into the TPA variance account through ‘retention reallocations’ and ‘cross plan overpayment’ offsets, among other techniques. Based on industry estimates and national claims processing standards, we believe the New Jersey State Health Benefits Plan and the School Employees’ Health Benefits Plan can realize a $1 billion (per) year reduction in expenditures by rigorous monitoring of TPA practices,” the AVYM report said. 

Mark Flores said that the actions of the TPA occur in a black box and are not visible to the state. “The big issue is that there’s no way to confirm whether or not the doctor is receiving the amount the (state) is paying the TPA for the claim,” he said. And that could save the state at least 30 percent of its current medical claims expenditures. 

Sarlo said one of the reasons he is pursuing the matter is the insurers’ response to transparency legislation. 

“When I had in my bill, when I had transparency disclosure to follow the money on these claims, which include TPAs out to providers, they opposed that bill,” Sarlo said. “Aetna, Horizon and all the health insurers opposed that bill.” 

Sarlo hopes the answers from Muoio will result in, at the very least, changing language for the new contract with the insurers. 

“Greater transparency on the operations of these third-party administrators will help identify cost savings that should be passed on to the state,” Sarlo said in a statement accompanying the letter. “There needs to be an accounting of the savings that insurance companies retain as fees and commissions.  

“We must ensure that the majority of these savings flow to the state as they should. Every year, doctors and other health care providers complain of decreasing reimbursements. At the same time, health care consumers complain of rising premiums and increasing costs. The obvious question that needs to be asked is: Where is all the money going?” 

Sarlo told ROI-NJ he realizes the answer won’t be a cure-all for the state, but it’s one worth getting. 

“I’m not saying this is going to save the budget at the end of the day,” he said. “But it’s worth a look. 

“This is serious dollars. The state of New Jersey is paying $37,000 per employee. If we can find savings in those health care plans, we must do it.” 

In Unprecedented Move, DOL Exercises Authority to Issue Cease and Desist Order Under Section 521 of ERISA, Shut Down Fiduciaries Accused of Misconduct, “Healthcare Madoff” Scheme

The U.S. Department of Labor obtained a Temporary Restraining Order in the U.S. District Court for the Northern District of Illinois against Multiple Employer Welfare Arrangement (MEWA) service providers for allegedly failing to pay more than $26 million in member’s health bills while keeping a substantial amount of money for themselves, then siphoning off those funds to offshore Bermuda accounts. The court also ordered 2 banks to freeze 14 bank accounts that were alleged to have plan assets in them.

The court ordered Black Wolf Consulting, AEU Holdings and one of its subsidiaries removed and barred from serving as fiduciaries or service providers to the individual employer plans that participate in the AEU Holdings LLC Employee Benefit Plan, a Multiple Employer Welfare Arrangement (MEWA) established by the defendants.

The court’s order immediately appointed an independent fiduciary to oversee the MEWA’s operations, marshal and control the assets of the MEWA as it relates to the underlying participant plans, perform an accounting of the MEWA’s financial position, and determine the MEWA’s ability to pay outstanding participant health claims, according to the DOL.

The order comes on the heels of the DOL lawsuit filed on November 2, 2017 seeking declaratory and injunctive relief including a temporary restraining order and preliminary injunction to remove the fiduciaries. The Complaint also alleges multiple violations of ERISA including, using plan assets to pay excessive fees and expenses, assessing undisclosed fees to the contribution amounts, failing or refusing to pay approximately $16 million for member’s medical claims, then transferring unpaid monies to offshore bank accounts in Bermuda.

Black Wolf kept anywhere from 17 to 44 percent of the money employers and employees paid toward premiums, according to the DOL complaint.

At its height, the MEWA covered approximately 14,000 participants and beneficiaries. These participants worked for more than 560 employers in 36 different states. However the increased backlog of unpaid claims created significant problems for many members as doctors refused treatments because of unpaid bills and many members were sent to collections accounts, according to the DOL.  

Additionally, the DOL issued a cease and desist order that prevents sub-brokers and aggregators working on behalf of the MEWA from marketing it to prospective employers or from enrolling new employers. The Secretary has the authority to issue an ex parte cease and desist order pursuant to ERISA § 521(a), 29 U.S.C. § 1151(a), and its implementing regulation, 29 C.F.R. § 2560.521-1. This authority applies only to a MEWA, and the cease and desist order may be issued whenever the Secretary finds reasonable cause to believe, among other things, that the respondent(s) engaged in conduct that creates an immediate danger to public safety or welfare within the meaning of § 2560.521-1(b)(3).  29 C.F.R. § 2560.521-1(c)(1)(i)(B).

According to the DOL Memorandum:

“Over $15 million in processed claims from 2016 and over $11 million in processed claims for 2017 remain unpaid. During the same time period as these claims have gone unpaid, AEU and Black Wolf have enriched themselves substantially by paying themselves and other entities millions of dollars in “fees.” Meanwhile, hundreds of unsuspecting employers have joined the AEU Plan to provide affordable medical benefits for their employees, only to have their employees be saddled with thousands of dollars in unpaid medical claims-some facing escalating collections actions and others unable to obtain life-saving treatment.“

The Memorandum goes on to point out:

“This results in thousands of participants incurring additional medical claims that will never be paid. Current and former participants report being turned away by their doctors because claims have gone unpaid. They have had to forego life-saving treatments for cancer and other illnesses. Parents who have just given birth are saddled with unanticipated medical claims at the same time they are trying to care for their newborn children. Collections agencies are calling and knocking at their doors. Many fear for their family’s future financial security. Despite the over $26 million in current unpaid claims and the harm facing these participants, Defendants continue to seek out new, unsuspecting employers to feed what is to them, a very profitable enterprise.”

Original DOL Press Release

These new ERISA embezzlement cases are part of a growing trend consistent with the court’s Hi-Lex decisions and as well as other cases we have written about before.

This lawsuit in particular should serve as a warning and wake up call for all Plan Administrators to continually monitor their TPAs in accordance with the Plan Administrator’s statutory fiduciary duties and to discharge its duties with respect to a plan solely in the interest of the participants for the exclusive purpose of providing benefits to them.

For over 7 years, Avym Corp. has advocated for ERISA plan assets audit and embezzlement recovery education and consulting. With new Supreme Court guidance on ERISA anti-fraud protection, we are ready to assist all self-insured plans recover billions of dollars of self-insured plan assets, on behalf of hard-working Americans. To find out more about Avym Corporation’s Fiduciary Overpayment Recovery Specialist (FOR) and Fiduciary Overpayment Recovery Contractor (FORC) programs click here.

Third Party Administrator, MagnaCare to return $14.5 million to Health Plan Clients after getting sued in federal court, alleging “MagnaCare breached its fiduciary duties and committed prohibited transactions, including dealing with plan assets in its own interest.”

In a case we have written about before and as part of a greater, ongoing slew of self-insured health plans suing their third party administrators, MagnaCare, agreed to return $14.5 million to its health plan clients, as part of a settlement agreement with the US Department of Labor (DOL) – with possible additional payments of $4.5 million based upon business volume through 2019.  This agreement comes on the heels of the DOL lawsuit, filed in 2016, alleging multiple violations of ERISA, including committing prohibited transactions and acting in its own interest with plan assets, among other violations.

According to the DOL and court records:

“MagnaCare charged fees that were not disclosed to its ERISA plan clients…The plans paid MagnaCare the full amount, yet MagnaCare remitted the lower charges to the providers and retained the undisclosed markup”

This case is just the tip of the national healthcare crisis iceberg. Recent reports have indicated most employers, particularly large employers will continue to offer health insurance as a benefit, in spite of the fact self-insured health plans are spending more on health benefits. Additionally, while self-insuring is common among large employers, an increasing number of smaller employers are self-insuring as well. Based on these facts, and with an increasing number of patients forced into bankruptcy due to unpaid medical bills, employer plans, medical providers and patients need to understand the implication of this case and others like it.

It’s a well-known fact from federal court documents and in healthcare industry news reports, that Billion$ of ERISA plan claims payments from self-insured plans may have been recouped or offset by self-insured plan TPA’s for the TPA’s fully-insured accounts. Additionally, many Billion$ more may have been similarly siphoned off based on “Fake PPO” discounts or  Phantom “Savings” fees.

DOL Case info and copy of “Complaint”: Acosta v. MagnaCare Administrative Services, LLC and MagnaCare LLC Civil Action No.:  1:16-cv-07695-DAB

Copy of “Consent Order”: United States DOL v. Magnacare Administrative Servcies, LLC and Magnacare, LLC-Consent Order

The court documents also contain allegations that MagnaCare actually siphoned off money that was supposed to go towards the payment for medical claims:

“At times relevant to this Complaint, MagnaCare acted in own interest when it kept the difference between the Plan Charges and the Provider Rates as additional compensation without disclosing the amounts to the Plans.”

According to court records, MagnaCare LLC, and MagnaCare Administrative Services, LLC (MagnaCare) is a third party administrator of health plans or TPA, and provides administrative and claim adjudication services as well as “Network Access” services which purportedly enables its clients to obtain healthcare from providers at discounted rates.  

This case was undoubtedly spurred on by a previous lawsuit against MagnaCare, by its own self-insured plan client. In that case, the plaintiff alleged:

“MagnaCare represented to Plaintiffs in a written contract between the parties that providers of diagnostic laboratory and ancillary services had “accepted” a “fee schedule” which included a “management fee” for MagnaCare. In fact, the providers had never “accepted’ a fee schedule containing a “management foe” for MagnaCare. Rather, the providers had agreed to a fee schedule, which was a fraction of the amounts collected by MagnaCare from Plaintiffs. MagnaCare – without disclosure to Plaintiffs or the providers – simply misappropriated the difference between what Plaintiffs paid MagnaCare and what MagnaCare negotiated to pay the providers.” 

Court case info: UNITED TEAMSTER FUND, et al v. Magnacare Administrative Services, LLC et al, Case 1:13-CV-06062-WHP-FM, First Amended Complaint (FAC), filed on Oct. 29, 2015, original Complaint, filed on august 27, 2013,  in United States District Court Southern District Of New York.

These lawsuits come on the heels of the Oct. 20, 2014 U.S. Supreme Court decision to deny all appeals on a BCBSM’s $6.1 million fraud judgment for a self-insured ERISA plan by the U.S. Court of Appeals for the Six Circuit, upholding the decision by the District Court for the Eastern District of Michigan. On May 14, 2014, the federal appeals court (Sixth Cir. 2014) upheld the district court’s $6.1 million decision for Hi-Lex, a self-insured ERISA plan, against BCBSM for violating ERISA in prohibited transactions and fiduciary fraud, according to court documents.

Hi-Lex Controls, Inc. v. Blue Cross Blue Shield of Michigan, (SC Case #. 14-168, 6th Cir. Case #: 13-1773, 13-1859).

These cases together with the ERISA case listed below, offer insight into the healthcare industry’s prevalent overpayment offset wars:  

Peterson, D.C. et al v. UnitedHealth Group Inc. et al, U.S. District Court, U.S. District of Minnesota (DMN) CIVIL DOCKET FOR CASE #: 0:14-cv-02101-PJS-BRT

These new ERISA embezzlement cases are part of a growing trend consistent with the court’s Hi-Lex decisions.

This lawsuit in particular should serve as a warning and wake up call for all Plan Administrators to continually monitor their TPAs in accordance with the Plan Administrator’s statutory fiduciary duties and to discharge its duties with respect to a plan solely in the interest of the participants for the exclusive purpose of providing benefits to them.

For over 7 years, Avym Corp. has advocated for ERISA plan assets audit and embezzlement recovery education and consulting. With new Supreme Court guidance on ERISA anti-fraud protection, we are ready to assist all self-insured plans recover billions of dollars of self-insured plan assets, on behalf of hard-working Americans. To find out more about Avym Corporation’s Fiduciary Overpayment Recovery Specialist (FOR) and Fiduciary Overpayment Recovery Contractor (FORC) programs click here.

**UPDATE**

On August 1, 2017 US District Judge Michael W. Fitzgerald issued an order granting class certification against ILWU-PMA Welfare Plan and its third party administrator, Zenith American Solutions, for breach of fiduciary duty.

According to court records;

“Plaintiffs’ claims seeking removal of the Plan’s fiduciaries raise issues that apply generally to the class, and thus a class can be certified under Rule 23(b)(1).’

As part of his rationale for certifying class, the judge explained, “Because the underlying issue does not turn on the approval or denial of any given claim for benefits, but rather on Defendants’ course of conduct as a whole, the issues discussed above do not preclude class certification on the fiduciary claims.”

ILWU-PMA and Zenith argued class should be denied because the plaintiffs failed to exhaust the administrative remedy, but the court disagreed, “Defendants contend that typicality and adequacy of representation are not met because Lead Plaintiffs have failed to exhaust their administrative remedies. But exhaustion is not required for claims alleging a breach of fiduciary duty. Spinedex Physical Therapy USA Inc. v. United Healthcare of Arizona, Inc., 770 F.3d1282, 1294 (9th Cir. 2014). Accordingly, exhaustion is no bar to certifying the class, and the requirements of Rule 23(a) are met.“

ILWU-PMA and Zenith next argued class should be denied because the proposed class is not “cohesive” and therefore presents very little risk of “inconsistent judgments” going forward. However the court again disagreed, “The relief requested, however, would benefit all Plan members in the same way, and thus the class is sufficiently cohesive.”

“Moreover, the risk of inconsistent judgments is apparent from the face of the claim: If each of the four Lead Plaintiffs brought individual actions seeking removal of Zenith and the PMA Trustees in four separate courts, and half were granted the requested injunctive relief while the other half were not, the Plan would be required both to remove and not to remove Zenith and the PMA Trustees.

Ultimately, this ruling should serve as a wake-up call to all Plan Administrators and Fiduciaries, to ensure any and all TPAs are acting in the best interest of the members and their beneficiaries. Thus avoiding costly litigation and possible penalties.

In the case, which we have written about before, plaintiffs sued the International Longshore Workers Union-Pacific Maritime Association Welfare Plan, (ILWU-PMA) and its third party administrator, Zenith American Solutions (Zenith) for failing to properly administer and pay benefit entitlements to the employees of ILWU and their beneficiaries. The suit also named Pacific Maritime Association trustees, who manage the plan, individually, saying that they were not acting in the best interest of employees.

Case Info: Amijo et al v. ILWU-PMA Coastwise et al U.S. District Court for the Central District of CA (Western Division- Los Angeles) Civil Docket for Case #: 2:15-cv-1403, Filed 02/26/2015.

The original complaint alleged Zenith, and its agent TC3, failed to properly process member medical claims leading to many claims going unpaid, and members having to foot the medical bills out of pocket. According to the complaint: 

“the backlog of unpaid medical bills increased dramatically in early 2013. According to the Interim Report, by the summer of 2013, there were 286,000 unprocessed claims from the Cigna era, and there were also growing numbers of unprocessed claims from the Zenith era.’

After an arbitrators hearing, Zenith assured the ILWU employees their claims would be processed and paid in a timely manner, but that did not happen, and in fact the backlog grew even worse, according to court records,

“Although Zenith promised [it] would, put in place mechanisms to address the backlog of unpaid medical bills, in the latter half of 2013 the backlog became worse, with about 90,000 new claims each month.”

Ultimately, the members sued the plan in a class action, seeking benefits and the removal of the fiduciaries for failing to monitor administration of the Plan. The suit also alleged Zenith and the PMA Trustees’ breach of their fiduciary duty harmed the Plan as a whole by, among other things, causing doctors to stop providing services the the employees and their beneficiaries.

OFFICE OF INSPECTOR GENERAL- U.S. Dept. of Health and Human Services FY 2017-Work-Plan -The U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG)
Work Plan for fiscal year (FY) 2017 summarizes new and ongoing reviews and activities that OIG plans to pursue with respect to HHS programs and operations during the current fiscal year and beyond

HHS OIG Work Plan 2017

Federal Judge rules that Blue Cross Blue Shield Michigan has to repay $8.4 million for violating ERISA and charging “Hidden Fees” to the Saginaw Chippewa Indian Tribe.

On July 14, 2017 U.S. District Judge Thomas L. Ludington ruled Blue Cross Blue Shield of Michigan (BCBSM) had to repay the Tribe $8.4 million for charging “hidden fees” in violation of ERISA. According to court records, the Tribe had two separate plans under BCBSM. The Tribe claimed that BCBSM charged $8,426,278 for Group 1 and $5,035,145 for Group 2. However the court ruled one of the plans was not an ERISA plan, and therefore, BCBSM was not liable for those fees.

 The judge summarized the issues by providing the following backdrop:

“BCBSM had ‘complete discretion to determine the amount of the Disputed Fees, as well as which of its customers paid them.’ As a result of the hidden nature of the fees, the savings from using BCBSM as an administrator appeared greater to customers that they truly were.”

According to the court:

It is undisputed, that, like in the multitude of other similar cases that have been brought against BCBSM, the company included hidden administrative fees in its charges to the Tribe. BCBSM agrees that, between 2004 and 2012, the tribe paid approximately $13 million in hidden administrative fees

Case info: Saginaw Chippewa Indian Tribe of Michigan, et al v. Blue Cross Blue Shield of Michigan, No. 1:16-cv-10317, E.D. Mich., 2017 U.S. Dist. LEXIS 109366 

The “multitude of other similar cases” that have been brought against BCBSM, stem from more than 50 other similar cases in the same court. The decisive point for all these cases was the Hi-Lex case, where the Sixth Circuit Court of Appeals upheld a $6.1 million judgement against BCBSM for, you guessed it, charging clients hidden fees!

The Six Circuit Opinion: “SILER, Circuit Judge. The Hi-Lex corporation, on behalf of itself and the Hi-Lex Health & Welfare Plan, filed suit in 2011 alleging that Blue Cross Blue Shield of Michigan (BCBSM) breached its fiduciary duty under the Employee Retirement Income Security Act of 1974 (ERISA) by inflating hospital claims with hidden surcharges in order to retain additional administrative compensation. The district court granted summary judgment to Hi-Lex on the issue of whether BCBSM functioned as an ERISA fiduciary and whether BCBSM’s actions amounted to self-dealing. A bench trial followed in which the district court found that Hi-Lex’s claims were not time-barred and that BCBSM had violated ERISA’s general fiduciary obligations under 29 U.S.C. § 1104(a). The district court also awarded pre- and post-judgment interest. We AFFIRM.” according to the Sixth Circuit Court document.

“according to BCBSM’s own survey of its self-insured customers, a substantial majority – 83% – did not know the Disputed Fees were being charged.”, according to the Sixth Circuit Court document.

As more and more of these cases make their way through the courts, self-insured health plan administrators charged with properly monitoring and safeguarding plan assets should do so, independent of their TPA’s own reporting. Additionally, as a result of this and other cases, including the Supreme Court’s decision to deny the BCBSM challenge of the Sixth Circuit Court decision, these same self-insured health plan administrators, should seek return of Billions in plan assets.

In Landmark Class Action Case, a Federal Judge would shut down United HealthCare’s “cross-plan offsetting” practice as a “troubling use of plan assets”, ruling the industry standard practice of “Cross‐plan offsetting creates a substantial and ongoing conflict of interest” for all claims administrators who “simultaneously administer both self‐insured and fully insured plans.” The court also called into question United’s practice of reaching “into the pockets of the sponsors of self‐insured plans” and putting that money “in United’s pocket”.

In an extraordinary decision, US District Judge Patrick J. Schultz has effectively barred cross-plan offsets. The judge weighed in on two very important questions: First, whether UHC acted “reasonably” in interpreting its client’s plans to permit cross‐plan offsetting; and whether the practice complies with the “fiduciary duties imposed by ERISA”. The court offered an answer to both issues while providing very clear guidance for Plans, claims administrators, medical providers and patients.

As we have written about many times before, the No. 1 health care claims denial in the country is “overpayment” recoupments through “Cross-Plan Offsets”; correspondingly, the No.1 hidden cost for Self-Insured health plans, is “Overpayment” recoupment through “Cross-Plan Offsets” and subsequent embezzlement of plan assets. With the new legal guidance this landmark case provides, will self-insured plan sponsors, like AT&T and Gap Inc. be held accountable to allowing United to engage in such ERISA violations such as embezzlement, self-dealing and breach of fiduciary duty?  

The court case info: Peterson DC et al v. UnitedHealth Group Inc. et al, U.S. District Court U.S. District of Minnesota (DMN), Civil Docket For Case #: 0:14-cv-02101-PJS-BRT, Filed 06/23/14

In this class-action, originally filed in 2014, healthcare providers alleged ERISA violations by UnitedHealthcare Group for withholding and offsetting newly adjudicated claim payments from one patient to satisfy an alleged overpayment in the past, from separate, unidentified patients in complete violation of ERISA, and even worse, by misrepresenting to the patients and the plan sponsors on patient EOB’s “payment made to provider”, when in truth and in fact no such payment was ever made to the providers, according to the Court Complaint.

In answering the first question, Judge Schultz considered whether the language in UHC’s client health plans at issue in the case, identified as 46 Plan Bs, authorized UHC to engage in the offsetting practice known as “Cross-Plan Offsets”. According to the court they did not: “the Court finds that United’s interpretation is unreasonable. The plans themselves do not authorize cross‐plan offsetting. To the contrary, most of the plans contain specific overpayment and recovery language that would be rendered meaningless if United was authorized by the generic clauses that it relies upon to engage in cross‐plan offsetting.”

The court went on to clarify: “Every one of the overpayment provisions is triggered only when the plan itself makes an overpayment…In other words, each Plan B authorizes the recovery of overpayments made by the Plan B.

“None of the overpayment…provisions contain any language allowing other plans to recover their overpayments from the plan. “In other words, not one Plan B authorizes recovery of an overpayment made by a Plan A.”, according to the court order.

Remarkably, the judge chided UHC for or creating its cross-plan offsetting process for its own benefit and without examining the language of the plans. The judge specifically drew attention to this point, according to the court order: “It should be noted, that in looking carefully at the language of the plans…the Court is doing something that United itself did not do before implementing cross-plan offsetting…”

“Only after getting sued did United hunt through the plans for any language that might provide a post hoc justification for its conduct…United admits that it was not able to find a single provision of a single plan that explicitly authorizes cross-plan offsetting.”, according to court records.

The judge also questioned whether UHC ever disclosed their intention to engage in “cross-plan offsets” or the likely conflict of interest to its plan clients: “It appears, however, that disclosures concerning United’s system of cross-plan offsetting are mostly or entirely handled by United’s banking team during what appear to be fairly technical explanations for banking, account-setup and account-funding processes. It also appears that such disclosures mostly occur orally and on a somewhat ad hoc basis”.

UHC argued that it did disclose its cross-plan offset provisions to its clients’ “benefits and finance and treasury folks”, to which the court responded “it is not clear whether those individuals have authority to make plan-wide fiduciary decisions, nor is it clear whether these disclosures are made before or after a plan sponsor decides to become a United Client.”

Regarding the second question, whether the practice of cross-plan offsetting violates ERISA, the judge, while weighing possible conflicts of interest in violation of ERISA, went so far as to mention the fact that UHC lined its own pockets with self-insured plan assets: “the money that reimburses United for its alleged overpayment comes out of the plan sponsors’ pockets. Several internal United documents emphasize this point and gush about how cross-plan offsetting will allow United to take money for itself out of the pockets of the self-insured plans…”

“In other words, every one of the cross‐plan offsets at issue in this litigation put money in United’s pocket, and most of that money came out of the pockets of the sponsors of self‐insured plans.” according to the court records.

The court went into great detail regarding UHC’s conflict and possible prohibited transaction and breach of fiduciary duty: “In light of this case law and the strict fiduciary duties imposed by ERISA, cross-plan offsetting is, to put it mildly, a troubling use of plan assets—one that is plainly in tension with “the substantive or procedural requirements of the ERISA statute . . . In stark terms, cross‐plan offsetting involves using assets from one plan to satisfy debt allegedly owed to a separate plan—a practice that raises obvious concerns under §§ 1104 and 1106. These concerns are particularly acute in this case, in which every offset that United orchestrated did not just benefit a different, unrelated plan, but benefited United itself.”

“Cross‐plan offsetting creates a substantial and ongoing conflict of interest for claims administrators who, like United, simultaneously administer both self‐insured and fully insured plans…”, according to court records.

The judge, after examining the facts of the case, shed light on an enormous incentive for UHC: “As the single biggest payor of claims, United’s personal stake in cross‐plan offsetting dwarfs that of any self‐insured plan. [United] in this circumstance has every incentive to be aggressive about looking for overpayments from its own fully insured plans (which overpayments can be recovered from self‐insured plans) and less aggressive about looking for overpayments from self‐insured plans (which overpayments might be recovered from fully insured plans).”

“And indeed, this incentive is reflected in United’s internal documents, which enthusiastically describe how cross‐plan offsetting will permit United to reach into the pockets of the sponsors of self‐insured plans to recover the overpayments that United makes in connection with fully insured plans.” (emphasis added) 

The court further clarifies its reasoning and confirms: “It is also undoubtedly true, as United is reluctant to acknowledge, that cross-pan offsetting can harm plan participants” and “It is not fairly debatable, however, that the type of cross‐plan offsetting challenged in this case—that is, cross-plan offsetting engaged in by an administrator who insures some (but not all) of the plans—presents a grave conflict of interest.”

Ultimately, the court concludes, “United labors under a continuing conflict of interest in administering the cross‐plan offset system because United fully insures some but not all of the plans. More importantly, the fact remains that cross‐plan offsetting is in tension with ERISA’s fiduciary rules, is not provided for in the plans, and is at odds with the specific offset language contained in most of the plans. As a result, United did not act reasonably in interpreting the Plan [documents] that are at issue in this case to permit cross‐plan offsetting. The Court therefore grants plaintiffs’ motions for partial summary judgment and denies United’s motions for full summary judgment.”

In ruling against UHC on almost every argument, the judge certified the case for immediate appeal, acknowledging that this was a landscape changing and “exceptional case,” and taking into consideration that United, as the nation’s largest insurer will have to “undertake the extremely expensive and disruptive process if unwinding its cross-plan offsetting practice.”

“This order resolves a controlling and dispositive question of law: whether United acted reasonably in interpreting the plans to permit cross‐plan offsetting.”

“IT IS HEREBY ORDERED THAT:

1. Defendants’ motions for summary judgment are DENIED.
2. Plaintiffs’ motions for summary judgment on Phase I issues are GRANTED.”

Based on the fact that ‘cross-plan offsetting” is pervasive throughout the health care industry, this legal guidance will undoubtedly have tremendous ramifications on all Plans, TPAs, medical providers and patients. Medical providers must be proactive and adopt compliant practices and policies. Health plans must also be proactive in validating that plan assets get returned to their plan, and not applied to cover shortfalls in another plan.

Avym Corp. has advocated for ERISA plan assets audit and embezzlement recovery education and consulting. With new Supreme Court guidance on ERISA anti-fraud protection, we are ready to assist all self-insured plans recover billions of dollars of self-insured plan assets, on behalf of hard-working Americans. To find out more about Avym Corporation’s Fiduciary Overpayment Recovery Specialist (FOR) and Fiduciary Overpayment Recovery Contractor (FORC) programs contact us.

Another Federal Court Rules Against Cigna In Alleged Fee Forgiving/Overpayment Recoupment Dispute With Medical Provider- Court “Bars” Cigna From Relying On “Legally Incorrect” Interpretation of ERISA Plans

On March 10, 2017 in the US District Court of Connecticut, Judge Alfred V. Covello ruled in favor of surgical center defendants and against Cigna, barring Cigna from recouping self-insured plan assets based on alleged “overpayments” which were predicated on Cigna’s “legally incorrect” interpretation of ERISA plans “exclusionary language”.

This decision offers clear guidance on critical issues such as cross-plan offsetting, Cigna’s fee forgiveness protocol, SIU practices and ERISA disclosure requirements, confirming the profound shift in Out-of-Network benefits and claim processing for all health care providers and health plans in the nation.

The decision also further unwinds the payor initiated “out-of-network fraud” enigma as we have written about before, and is one of a series of critical court decisions which address the typical scenario for out-of-network providers: payors refusal to pay claims which leads to “catch-all” out-of-network lawsuits seeking total overpayment refunds of claims previously paid to providers, all based on broad and vague allegations of fraud.

The case revolves around Cigna’s fee forgiving protocol, whereby Cigna denies medical claims if its members don’t pay their entire out of pocket cost up front. Based on this premise, Cigna is also seeking recovery of approximately $17 million in alleged “overpayments” made to providers that did not collect the full patient out of pocket liability up front.

Court case info: Connecticut General Life Insurance Co. et al. v. True View Surgery Center One, LP et al. Case No.:3:14-cv-01859-AVC; US District Court Connecticut

In what may have been the impetus for a litigation tsunami, where over 100 Cigna administered health plans were sued for various ERISA violations including embezzlement, issuing “secret checks” and self-dealing, Cigna filed suit on 12/11/2014 against True View Surgery Center One and affiliated health care providers seeking declaratory and injunctive relief under ERISA and essentially asking the court to declare that “no coverage is due” where medical providers “do not enforce the plans’ cost-share requirements”. Cigna also asked the court to order defendant medical providers to “submit to Cigna only claims containing charges that Defendants actually charge the plan member as payment in full”. In other words, no medical coverage is available if the member does not pay their entire out of pocket liabilities up front.

Cigna was also seeking the return of any benefit payments, as “overpayments” made to the medical provider where the member did not pay their entire out of pocket liability up front, specifically requesting the court to impose a “constructive trust on monies currently held by Defendants as a result of the overpayments made by Cigna…pursuant to an equitable lien”.

Out of network provider True View Surgery Center One, argued that the issues were already resolved in a previous case litigated in Texas, and that Cigna was attempting to take multiple bites out of the same apple in order to wrongfully deny legitimate medical claims.

The court focused on two main issues: 1) whether Cigna is barred by the doctrine of collateral estoppel from pursuing their claims on behalf of ERISA plans; and 2) whether Cigna has adequately alleged traceability in order to recover alleged “overpayments”

Ultimately, the court agreed with defendant True View Surgery Center One and ruled “Cigna is barred by the doctrine of judicial estoppel” in its attempt to have the courts validate its fee forgiving protocols, and in its attempts to recover alleged “overpayments”

In his decision, Judge Covello cited the Humble case (Connecticut General Life Insurance Co. et al. v. Humble Surgical Hospital, LLC, Case number 4:13-cv-03291) where Cigna was slammed with a $17 million penalty and opined that the district court in Texas had already “addressed the issue” regarding Cigna’s fee forgiving protocols.

In citing the Humble case, the judge said “In Humble, the court held that Cigna’s interpretation of this “exclusionary” language was “legally incorrect,” and that “ERISA does not permit the interpretation embraced by Cigna.”

The judge went on to say that the Texas court found “because ‘[t]he average plan participant would not understand from the exclusionary language…that his/her coverage is expressly conditioned on whether Humble collects upfront, the entirety of his/her deductible, co-pay and co-insurance before Cigna pays,’ Cigna’s “exclusionary” language interpretation does not pass muster under the “average plan participant” test,” which ERISA requires.”.

The judge ultimately holds: “Cigna is relying on the interpretation of its ERISA plans that the United States District Court for the Southern District of Texas held to be ‘legally incorrect’ in order to effectively deny providers’ benefit claims. Therefore, the doctrine of collateral estoppel bars Cigna from relitigating those [issues].”

As part of Judge Covello’s ruling on Cigna’s lack of traceability, in dismissing Cigna’s claim for “overpayments”, we must again look to the Humble case for clarification. According to the Humble court:

“Cigna is not entitled to equitable restitution of any alleged overpayments based on the “tracing” method, as it cannot identify any specific res separate and apart from Humble’s general assets. See Health Special Risk, 756 F.3d at 366 (reasoning that “Sereboff did not move away from any tracing requirement; it distinguished between equitable liens by agreement—which do not require tracing—and equitable liens by restitution—which do.”). As the Court explained in Knudson, the basis for petitioners’ claim is “that petitioners are contractually entitled to some funds for benefits that they conferred. The kind of restitution that petitioners seek, therefore, is not equitable…but legal—the imposition of personal liability for the benefits that they conferred upon respondents.”Knudson, 534 U.S. at 214.”

All Out-of-Network providers and self-insured health plans should understand the implications of the court’s rulings in order to protect members and beneficiaries from inappropriate medical debt and bankruptcy and to safeguard and protect self-insured health plan assets from possible conversion, abstraction or “hidden fees”.  Education and understanding of these concepts will bring peace, harmony and compliance to the healthcare industry, especially when health plans are determined to contain healthcare costs and healthcare providers are dedicated to providing all patients with high quality, affordable healthcare when exercising their freedom of choice and right to seek out-of-network care.

For over 7 years, Avym Corp. has advocated for ERISA plan assets audit and embezzlement recovery education and consulting. Now with the Supreme Court’s guidance on ERISA anti-fraud protection, we are ready to assist all medical providers and self-insured plans recover billions of dollars on behalf of hard-working Americans. To find out more about Avym Corporation’s Fiduciary Overpayment Recovery Specialist (FOR) and Fiduciary Overpayment Recovery Contractor (FORC) programs click here.