Federal Court Cuts Down Aetna: Rules “Aetna’s Cross-Plan Offsetting Violates ERISA”

On June 21, 2021, in an unpublished decision, the United States District Court for the District of NJ rules “Aetna’s Cross-Plan Offsetting Is Unlawful.” Court also concludes Aetna’s state-law-based justifications for its cross-plan offsetting are preempted by ERISA.

This watershed case is the culmination of many cases we have written about over the years, in regards to “Cross-Plan Offsets”. United States District Judge, Brian R. Martinotti, put the final nail in the coffin with respect to the health insurance industry practice of cross plan offsetting with his extraordinary ruling:

“Aetna’s Cross Plan Offsetting violates ERISA”

Cross-plan offsetting is a method insurers use to pull back alleged overpayments related to patients from one plan by reducing or eliminating payments related to patients from a different self-insured plan. Alleged overpayment recoupments and offsets (post payment adverse benefit determinations) are the nation’s No.1 medical claim denial, as insurers and TPA’s increasingly use post-payment audits as a means to recover what they allege to be prior overpayments of health care benefits, particularly when other self-insured health plan assets are involved. According to industry estimates and court records from a different case, national insurance carriers collect Billion$$ a year in offset activity.

As we have written about before, the No. 1 health care claims denial in the country is “overpayment” recoupments through “Cross-Plan Offsets”; in the same way,

The No.1 hidden cost for Self-Insured health plans, is “Overpayment” recoupment through “Cross-Plan Offsets” and subsequent embezzlement of plan assets. 

Accordingly, all self-insured health plans nationwide should look to recover Billion$$ in refunds from the past decade of successful plan assets TPA/ASO anti-fraud recoupments and managed care savings in the private sector.

“It can be argued that the failure to safeguard plan assets is definitely a breach of fiduciary duty, under ERISA, and now the courts have provided a legal formula for plan assets recovery” says Mark Flores, Vice President of Avym Corp. and national healthcare claims expert.

As the DOL ramps up audits and enforcement actions against health plan claims and appeals, every ERISA self-insured health plan sponsor or fiduciary should keep in mind that they are required to monitor TPA/ASOs successful overpayment recoveries and managed care savings, in order to determine whether:

  • any of the billions of dollars of successful TPA/ASO overpayment recoupments and offsets nationwide each year are ERISA plan assets;
  • all TPA/ASOs must refund all ERISA plan assets as ERISA prohibits all self-dealings;
  • all self-insured plan administrators are liable for fiduciary breach in failing to safeguard or recover plan assets.

Case Info: Lutz Surgical Partners, PLLC, et al. vs Aetna, Inc., et al., Case No.: 3:15-cv-02595, (BRM) (TJB) Document #: 202, Filed: 06/21/21, in the United States District Court for the District of New Jersey.

This landmark case, in conjunction with the relevant US Supreme Court Montanile decision, potentially rewards trillions of dollars in plan assets recovery for all self-insured ERISA plans nationwide, from cross plan overpayment recoupments and offsets done by plan TPAs. 

Aetna Conducted Cross-Plan Offsetting

Cross-plan offsetting refers to “the practice of not paying a benefit due under one plan in order to recover an amount believed to be owed to another plan because of that other plan’s overpayment.”

According to the court records, “A typical cross-plan offsetting proceeds as follows. “[O]ut-of-network providers . . . provided services to . . . a patient who was insured under a Plan A administered by” a plan administrator…The “providers submitted claims to” the plan administrator and “received payment for those claims from the Plan A.”…The providers “were later informed by [the plan administrator] that they had been paid too much,” but the providers “refused to return the alleged overpayment.”…The plan administrator “responded by recouping the disputed overpayment through cross-plan offsetting.”…“In other words, when [the plan administrator] learned that [the providers] had submitted a subsequent claim regarding . . . a different patient who was insured under . . . a Plan B,” the plan administrator “did not pay for those claims by transferring money to” the providers….“Instead, [the plan administrator] purported to pay for those claims by cancelling debt that [the providers] allegedly owed to the Plan A.”

Aetna’s Cross-Plan Offsetting Is Unlawful

According to the decision, “Finally, even if Plan A, Plan B, the PGA, and the NRA permit cross-plan offsetting, they cannot circumvent ERISA requirements. Fifth Third Bancorp v. Dudenhoeffer, 573 U.S. 409, 422 (2014)) (quoting Cent. States, Se. & Sw. Areas Pension Fund, 472 U.S. 559, 568 (1985)) (“[T]rust documents cannot excuse trustees from their duties under ERISA.”); see also In re SunTrust Banks, Inc. ERISA Litig., 749 F. Supp. 2d 1365, 1374 n.11 (N.D. Ga. 2010) (quoting Kuper v. Iovenko, 66 F.3d 1447, 1457 (6th Cir. 1995)) (“[A] fiduciary may only follow plan terms to the extent that the terms are consistent with ERISA.”); Williams v. Rohm & Haas Pension Plan, 497 F.3d 710, 714 (7th Cir. 2007) (“The [p]lan cannot avoid that which is dictated by the terms of ERISA.”); La Barbera v. J.D. Collyer Equip. Corp., 337 F.3d 132, 136 (2d Cir. 2003) (“ERISA of course trumps the collective bargaining and [t]rust agreements in the case of a conflict.”). In conclusion, Aetna’s cross-plan offsetting is prohibited by ERISA.”

ERISA Overrides Aetna’s State Law Justifications for its Cross-Plan Offsetting

The court also ruled that ERISA overrides Aetna’s state law justifications for its cross-plan offsetting. According to the court records, Aetna’s state law counterclaims were also pre-empted by ERISA. Aetna requested a motion to set-off, which allows entities that owe each other money to apply their mutual debts against each other. However the court denied Aetna’s request reasoning “Aetna has not yet established the existence of mutual debts between the parties, which precludes granting a motion to setoff at this stage.”

Finally, the court declined Aetna’s request to construe Aetna’s counterclaims as ERISA claims, reasoning, “Although legal claims can be pled in the alternative, a party cannot use summary judgment briefing as a way to inject new legal theories into a case…Here, Aetna’s proposal to recast its state law counterclaims as ERISA ones is essentially a request to introduce new legal theories or claims, which is improper at this stage.”

Over the past decade, Avym has closely followed decisions from the Supreme Court as well as federal appeals courts on ERISA prohibited self-dealing against ERISA plan TPA’s for managed care savings. These new ERISA embezzlement cases are just the initial impact of 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.

This monitoring should be done 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.

Avym Corp. has been at the forefront and 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 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.

Federal Appeals Court Sides with Out-Of-Network Doctors Against UnitedHealth

On January 15, 2019, in what turned out to be a belated Christmas gift for patients, out-of-network medical providers and self-insured health plans, the 8th Circuit Federal Appeals Court stood with out-of-network medical providers, ruling they have standing to sue opposing UnitedHealth’s “cross-plan offsets”- by affirming the district court and opining:

Because United’s interpretation of the plan documents is not reasonable, we affirm the district court’s grant of partial summary judgment to the plaintiffs.”

This bellwether appellate court decision undisputedly strikes a death blow to the collective, industry standard, practice of “cross-plan offsetting” and has national implications for patients, medical providers and self-insured health plans.  As we have written about 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 as UnitedHealth Group continues to see record revenues and earnings year after year.

With the new legal guidance this landmark case provides, self-insured plan sponsors, like AT&T and Gap Inc. may be held accountable for allowing United to engage in likely ERISA violations such as embezzlement, conversion, self-dealing and breach of fiduciary duty.

According to industry estimates, the total dollar amount at issue nationwide could be as high as 1/3 of total claim expenditures annually. Successful industry overpayment recoveries have reached into the trillions of dollars nationwide over the past decade and involve many large carriers as well as many of the nation’s biggest self-insured health plans such as Apple, JP Morgan Chase and Amazon.  Thus recoupment through offsetting, when used as an anti-fraud initiative, has become an increasingly popular source of revenue for many of the nation’s largest insurers. While there is a need for anti-fraud initiatives in healthcare today, it is critical that every health plan and claims administrator comply with all applicable federal laws, ERISA and PPACA claims regulations, as well as statutory fiduciary duties.

This 8th Circuit Court of Appeals decision, along with the recent Supreme Court decision in Montanile, should act as a wake-up call to all self-insured health plans for potential rewards in the trillions of dollars in plan assets recovery for all self-insured ERISA plans nationwide, from cross plan overpayment recoupments and offsets done by all plan TPAs.

Insurers and Health Plans must comply with all applicable federal laws, ERISA and PPACA claims regulations, as well as statutory fiduciary duties before recouping one single dollar.

In affirming the district court’s ruling, the 8th Circuit rejected United’s argument that Dr Peterson lacked authority to sue as an authorized representative of his patients.  The appellate court also affirmed the district court’s ruling regarding offsets, where all of the plan documents that United cited explicitly authorized same-plan offsetting; and not one of those plans authorized cross-plan offsetting.

The appeals court further posited:

To adopt United’s argument that the plan language granting it broad authority to administer the plan is sufficient to authorize cross-plan offsetting would be akin to adopting a rule that anything not forbidden by the plan is permissible.”

According to court records, “United’s assertion that it has the authority to engage in cross-plan offsetting can hardly be called an interpretation because it has virtually no basis in the text of the plan documents.

The appeals court also maintained, that regardless of whether cross plan offsetting violates ERISA, it is at the very least, a questionable practice. Taking into consideration the fact that there is no plan language authorizing cross-plan offsetting, the appeals curt ultimately concluded that United’s interpretation is not reasonable.

As we have mentioned many times before, all ERISA health plans, medical providers and patients must educate themselves in order to understand the facts of these cases. Health plans must be proactive in ensuring benefits are adjudicated and ultimately paid solely based on the interest of participants and beneficiaries and for the exclusive purpose of providing benefits and paying plan expenses. Medical providers must be also proactive and adopt compliant practices and policies. Patients must understand their benefits plans and their rights as allowed under ERISA.

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.

Self-Insured Health Plan TPA MagnaCare to Return $14.5 Million for ERISA Violations

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-Lexa 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.

 

UHC “Overpayment” Offset Practice Dealt Deathblow-ERISA Court Rules Cross-Plan Offset Constitutes “Grave Conflict Of Interest”

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.

Cigna Fraud Lawsuit Against Hospital Backfires- Cigna slammed with $13M Judgement in Medical Claims Dispute

In a monumental decision for Out-Of-Network Providers nationwide, on June 1, 2016, U.S. District Judge Kenneth Hoyt of the Southern District of Texas ruled against Cigna and ordered the insurer to pay $11.4 million to cover underpaid claims and, an additional $2.3 million in ERISA penalties, in perhaps the first instance where a claims administrator was ordered to pay ERISA penalties to a medical provider.

U.S. District Judge Hoyt, after a nine day bench trial, ruled that Cigna’s claims of overpayment and fee forgiveness fraud failed, as did its arguments against Humble Surgical Hospital’s (Humble) ERISA claims. According to court records:

Based on the analysis and reasoning set forth herein, the Court determines that Cigna’s claim(s) for reimbursement of overpayments made pursuant to ERISA and/or common law fail, as a matter of law;”.

The court goes on to say, “The Court further concludes that Cigna’s defenses to Humble’s ERISA claims fail and Humble is entitled to recover damages under § 502(a)(1)(B)1 and penalties under § 502(c)(1)(B).

Case info: Connecticut General Life Insurance Co. et al. v. Humble Surgical Hospital, LLC, (Cigna v. Humble) Case number 4:13-cv-03291, in the U.S. District Court for the Southern District of Texas. Entered June 01, 2016

This decision represents a major paradigm shift in Out-of-Network benefits and claim processing for all health care providers and health plans in the nation and establishes clear guidance on critical issues such as cross-plan offsetting, Cigna’s fee forgiveness protocol, SIU practices and ERISA disclosure requirements. The decision sheds light on the payor initiated “out-of-network fraud” enigma 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.

At its core, this court decision provides the entire managed care and plan benefits industry with basic, yet comprehensive legal reasoning and essentially offers a roadmap to addressing modern-day healthcare litigation.

In his ruling, U.S. District Judge Kenneth Hoyt wrote that the health insurer initiated the litigation seeking $5.2 million in restitution and filed claims against the hospital, alleging it engaged in fraudulent out-of-network billing practices, which resulted in “overpayments”.  

Humble denied the allegations and countersued Cigna for (a) nonpayment of current member/patient’s claims, underpayment of certain claims, and delayed payment of all claims in violation of ERISA § 502(a)(1)(B); (b) failure to provide a full and fair review under ERISA; (c) breach of fiduciary duties of loyalty and care under ERISA; and (d) penalties pursuant to ERISA § 502(c,), according to the court documents.

This landmark decision has the potential to save millions of Americans from medical bankruptcy. Additionally, it illustrates one of the most pressing issues facing out-of-network patients and providers across the nation.  Payor initiated Deductible and Co-Pay waiver claim denials and overpayment recoupments or offsets is the No. 1 out-of-network claim denial, contributing to increases in the number of personal bankruptcies. According to many recent surveys, reports and case studies, one in five American adults will struggle to pay medical bills. In fact, medical bills are the leading cause of personal bankruptcy, affecting even those with health insurance. Subsequently, approximately 76% of Americans paid for out-of-network coverage through their employer-sponsored health plans, according to a December 2013 National Composition Summary from DOL Bureau of Labor Statistics. It’s clear that the epidemic of out-of-network deductible balance billing wrongly imposed by ERISA plans has inevitably contributed significantly to unexpected medical bills and personal bankruptcy.

According to the court records, the evidence clearly demonstrated that Cigna flagged Humble’s claims, for SIU processing, never told the hospital and “did not –and by its conduct—could not provide a reasonable meaningful opportunity for a full and fair review of its decision regarding Humble’s claims.”

“Cigna’s method for processing Humble’s claims was simply disingenuous and arbitrary, as it was focused more on accomplishing a predetermined purpose — denying Humble’s claims,”

Cigna argued that it could assert its claim based on the plans “overpayment” provisions, according to the court documents: “Here, Cigna relies on a provision within many of its plan documents entitled, “Recovery of overpayment,” which provides, “When an overpayment has been made by Cigna, Cigna will have the right at any time to: recover that overpayment from the person to whom or on whose behalf it was made; or offset the amount of that overpayment from a future claim payment.”

However, the court rejected that argument, “However, this provision, standing alone, is insufficient to create a lien or constructive trust as it does not: mention the words “lien” or “trust”; state that any overpayment shall constitute a charge against any particular proceeds; give rise to a security interest in such proceeds; even suggest that a trust is being sought for Cigna’s and/or the plan’s benefit on any particular provider payments; or advise of the need for any particular provider to preserve, segregate or otherwise hold such funds or proceeds in trust…Therefore, the Court determines that Cigna has failed to establish that the “Recovery of Overpayment” provision contained in its plan documents creates a constructive trust or equitable lien by agreement.”

Of critical importance is the court’s analysis and decision on Cigna’s “tracing” arguments as well. According to court records, “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.”

The court also weighed in on Cigna’s “fee forgiving “argument, “The plan language does not support denying Humble’s claims based on waiver, due to Humble’s alleged fee-forgiving policy, or, in Cigna’s own novel view, pursuant to a proportionate share analysis.”

Next, the court weighed in on Cigna’s arguments that Humble’s claims were not covered by the plans based on Exclusionary language in the plan documents: “Cigna has not offered evidence that any of the services billed by Humble were not covered by the plans or that they were improperly billed Therefore, Cigna’s interpretation of the “exclusionary” language as rejecting covered services, was improper and violative of the plans’ terms.” “For these reasons, the court determines that Cigna improperly applied the exclusionary language contained in the plans and, in the process, abused its discretion, especially since Cigna admittedly has never used the exclusionary language to reject covered services before and was relentless in engaging in an arbitrary manner with regard to Humble and its claims.”

“Finally, the evidence suggests that Cigna failed to explain to the plan sponsors and/or members/patients/insureds that it was applying a proportionate share analysis to Humble’s claims. Thus, Cigna breached its fiduciary duty when it strayed from the terms of the plans and interpreted its ASO Agreements with plan sponsors as conferring authority upon it that was not specifically set forth in and/or was contrary to the various plans.”

Fallen black chess king on chess board.Essentially, CIGNA was “Checkmated” on all their arguments

Ultimately, the court ruled against Cigna on every major argument and consistent with previous appellate court decisions, provides step by step guidelines on whether Cigna’s “fee forgiveness protocol” and “overpayment offsets” are legally correct,
“Therefore, the Court holds that Cigna’s claims processing procedure and appeals review process violated ERISA and concomitantly, its fiduciary duty of care and loyalty to the members/patients and the plan sponsors. Indeed, Cigna earned handsome returns as a result of its aberrant and arbitrary claims processing methodology. The evidence establishes that it was subject to a double heaping from the plan sponsors’ pockets—first, in receiving a fee for claim processing services–and second, in receiving fees based on “savings,” regardless of how garnered. In the process, however, Cigna forfeited its objectivity and violated its fiduciary duties of care and loyalty by making benefit determinations that did not consider UCR or conform to the plans’ terms in violation of ERISA.”

The court also made an interesting observation regarding Cigna’s third party vendor negotiation and Cigna’s claim that Humble misrepresented the charges: “Cigna’s assessment of Humble’s disclosure duties is fallacious, at best. The fallacy is manifested in several respects. First, Cigna has not publicly disclosed its ASO Agreements with plan providers to any of its members/patients or third-party healthcare providers because it considers such documents to be proprietary as well. To this end, Cigna cannot expect unfettered access to contracts maintained by third-party healthcare providers without permitting them unrestricted access to the same. To require otherwise would be to reward Cigna’s duplicitous conduct.”

Finally, Humble claimed that it was entitled to ERISA penalties, arguing “Cigna’s refusal to provide such plan documents placed it at a serious disadvantage–both in defending against Cigna’s claims for overpayment and in recovering on its own claims for underpayment. “

The court agreed and issued a substantial penalty on Cigna for failing to Disclosure the Plan Terms reasoning: “The Court is of the opinion that, after October 2010, Cigna became more than a third-party “claims administrator” because of the manner in which it processed Humble’s claims. While the evidence establishes that Cigna is not the “designated” or named plan administrator it, nevertheless, became the de facto plan administrator by way of its conduct and admissions under an ERISA-estoppel theory.”

The court concluded:  “Without plan documents, Humble could not know whether Cigna was even processing its claims pursuant to the terms of the plans…In these respects, Cigna interfered with and frustrated the contractual relationship between the plan sponsors and the members/patients by imposing a methodology for claim processing that was not part of any plan.

In essence, Cigna “hijacked” the plan administrator’s role and subverted it for its personal benefit. Indeed, Cigna’s unprecedented claims processing methodology and incessant related acts were extraordinary acts of bad faith.”

All Out-of-Network providers and self-insured health plans must understand this landmark case 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 or abstraction.  Education and understanding of this landmark court decision 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 6 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.

 

 

AT&T- Another United HealthCare Administered ERISA Health Plan Sued for Embezzlement

UHC administered self-insured health plan, AT&T, sued in federal court for embezzlement, self-dealing in medical claims overpayment offset dispute.

On June 1, 2016, in the southern district of Texas Federal Court, United HealthCare administered self-insured ERISA plan, AT&T Inc. and its Plan Administrator Larry Ruzicka were sued in federal court. According to the complaint: “This dispute arises out of Defendants’ ongoing and systematic ERISA violations consisting of an elaborate scheme to abstract, withhold, embezzle and convert self-insured Plan Assets “.

An almost identical separate suit was filed against another United HealthCare administered health plan, GAP Inc. less than 30 days before this case was filed.  According to industry experts, more and more CEO’s, CFO’s and Plan Administrators are exposed to tremendous liabilities due to poorly managed or “Head in the Sand” monitoring practices. As we have written about and predicted, this is evidence of the growing trend of self-insured health plans being exposed to tremendous liability by TPAs.

One of the serious problems these cases present to the self-insured health plans is inaccuracies on the Form 5500/Tax filings. ERISA requires IRS Form 5500 reporting to be accurate. AT&T, GAP Inc. and others may be reporting incorrect amounts on direct and indirect compensation, for example, based on the alleged facts of these cases.

These cases also illustrate an ironic twist, in many cases, the ASO agreements prohibit the plan from auditing the claims that the TPA’s are paying on behalf of the self-insured plan, which on its face, seems to be a remarkably absurd clause that any plan sponsor would agree to sign.

The Court Case Info: RedOak Hospital, LLC v. AT&T Inc., AT&T Savings and Security Plan and Larry Ruzicka, in the United States District Court for the Southern District of Texas, Houston Division, Case 4:16-cv-01542, Filed on 06/01/16.

According to court documents, REDOAK Hospital Plaintiff filed a DOL EBSA Complaint on the alleged overpayment offset by the Defendants Plan, and the plan’s co-fiduciary, UHC, prior to filling this ERISA lawsuit, alleging:

This dispute arises out of [AT&T’s]ongoing and systematic ERISA violations consisting of an elaborate scheme to abstract, withhold, embezzle and convert self-insured Plan Assets that were approved and allegedly paid to Plaintiff for Plaintiff’s claim, to purportedly, but impermissibly, satisfy a falsely alleged overpayment‖ for another stranger claim, especially when the stranger is a plan beneficiary of a fully-insured plan that is insured by the Plan’s co-fiduciary, United Healthcare (hereinafter, “United”).[AT&T] knew or should have known that the Plan’s overpayment recovery provisions cannot be triggered until there is an allegation of overpayment by the Plan to the Plan Beneficiary subject to this action, and that converting the Plan Assets by a fiduciary or co-fiduciary of the Plan, in this case United, to the use of another, and ultimately its own use, to pay to its own account is absolutely prohibited under ERISA statutes. [AT&T] and United have conspired and engaged in many other embezzlement schemes, including, but not limited to, making deductions on entitled claim payments through the misrepresentation that a Viant/Multiplan contract is in place with Plaintiff; this action is only challenging the cross-plan offset embezzlement scheme discussed in detail below.”, according to court documents.

According to RedOak attorney Ebadullah Khan, this and the Gap Inc. case represent the first of many more cases the hospital intends to bring for the same alleged violations. Kahn told Law360, Prior to seeking judicial review for this case, RedOak Hospital had exhausted any and all internal/administrative appeal requirements,” Khan went on to say, “The cross-plan offset practice at issue in this case is the most common form of denial for RedOak Hospital, and as a result RedOak Hospital is preparing to file approximately 100 more cases similar to this AT&T complaint.”

As we have accurately predicted, the No. 1 health care claim denial in the country today is the overpayment recoupment and claims-offset.  Correspondingly, for self-insured health plans, the No. 1 hidden cost is overpayment recoupment and plan assets embezzlement and until the courts offer guidance on the practice of cross plan offsetting, we will continue to see many more cases such as these from providers all across the country. Additionally, should the courts weigh in and bar the practice, will self-insured plan sponsors, like AT&T and Gap Inc. be held liable for these ERISA violations and be removed from serving as fiduciaries.

There are billions of healthcare dollars at stake, according to industry estimates. Overall, overpayment recoveries initiated by the large carriers have reached into the billions of dollars over the past 5 to 7 years. Yet, self-insured health plans have not reaped the benefits of successful overpayment recoupments.  

Consequently, recoupment through offsetting, when used as an anti-fraud initiative, has become an increasingly popular source of revenue for insurers. While there is a need for anti-fraud initiatives in healthcare today, it is critical that every health plan comply with all applicable federal laws, ERISA and PPACA claims regulations, as well as statutory fiduciary duties. Insurers and Health Plans must comply with all applicable federal laws, ERISA and PPACA claims regulations, as well as statutory fiduciary duties before recouping one single dollar.

Over the past 6 years, Avym has closely followed decisions from the Supreme Court and federal appeals courts on ERISA prohibited self-dealing against ERISA plan TPA’s for managed care savings.

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.