Federal Court Certifies Provider Class “Without Condition” Against UnitedHealth For Violating ERISA

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On Dec 15, 2014 a federal judge certified a class of healthcare providers suing UnitedHealth for alleged improper over-payment recoupments.  This case is another in a series of cases involving insurance carriers and alleged over-payment recoupment tactics.

The crux of the cases is the notion that healthcare providers must be allowed due process and a “full and fair” review for denied claims, even if they are denied post payment. As more and more of these cases make their way through the courts, it is clear that the questionable or “legal gray area” of overpayment refund demands and unauthorized offsets effectively triggers ERISA appeal rights. Overpayment demands and recoupments that do not comply with ERISA rules have become the nation’s #1 claim denial reason.

These offsets can go as far back as several years, in order to retrieve payments made years ago, and affect all types of claims, potentially resulting in inevitable provider bankruptcy and subsequent patient bankruptcy. Providers or patients that face UHC or any payor refund demands, recoupments or offsets must understand the implications of these lawsuits as well as their rights under ERISA.

The total dollar amount at issue nationwide is tremendous.  According to industry estimates, successful industry overpayment recoveries have reached into the billions of dollars nationwide over the past 5 to 7 years and involve many large carriers.  Thus recoupment, when used as an anti-fraud initiative, has become an increasingly popular source of revenue for some insurers. While it is important to implement 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 will be forced to comply with all applicable federal laws, ERISA and PPACA claims regulations, as well as statutory fiduciary duties before recouping one single dollar.

The issue has also drawn the attention of the Obama Administration, where in a different case before the Third Circuit, the U.S. Department of Labor filed an Amicus Brief in support of plaintiff providers in an overpayment ERISA class-action urging judges to allow a lawsuit against Aetna Inc. to proceed under ERISA, which allows for appeal and review rights protections for providers before insurers can recoup reimbursements.

The DOL’s position on the pertinent issues included:

  • Compliance with federal law ERISA for all post-payment overpayment demands due to ERISA plan coverage dispute guidelines;
  • Healthcare providers with valid assignments have federal rights to ERISA appeals and lawsuits in federal court;
  • A post-payment, retroactive, overpayment demand is an ERISA adverse benefit determination, triggering full and fair reviews guaranteed under ERISA;
  • Any hypothetical state law claims of fraud may not short-circuit federal ERISA procedural protections for both in-network and out of network providers and patients.

Significantly, this ERISA putative provider class-action for the “Recoupment Class” was certified in the wake of and in accordance with a similar provider class-action filed recently in Minnesota for the “Offset Class”

Case Info: Premier Health Center, P.C. et al v. UnitedHealth Group et al., Case#: 2:11-cv-00425-ES-SCM, Filed 12/15/2014, United States District Court for The District of New Jersey. (Unpublished)

In this case the court previously opined against UHC in its overpayment recoupment practice and rejected many of UnitedHealth’s arguments, labeling them at times as “irrelevant,” “misguided” and “red herrings”.

Specifically, Judge Debevoise stated:  “To be sure, as previously discussed, United’s recoupment procedures violate three specific ERISA regulations across the class.” according to the court document.

In 2011, United recovered approximately $430 million in overpayments to providers. 58% of the $430 million was recovered as a result of providers’ voluntarily sending a check to United, while 42% was recovered through offsets”, according to the court document.

However, they all violate ERISA in three respects. First, they fail to provide “[a] description of the plan’s review procedures and the time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action under section 502(a) of [ERISA] following an adverse benefit determination on review.” 29 C.F.R. § 2650.503-1(g)(1)(iv).25 Second, they fail to indicate that the provider, “upon request and free of charge, [will have] reasonable access to, and copies of, all documents, records, and other information relevant to the” overpayment determination. 29 C.F.R. §2650.503-1(h)(2)(ii). Third, they fail to “[p]rovide claimants at least 180 days following receipt of a notification of an adverse benefit determination within which to appeal the determination.” 29 C.F.R. § 2650.503-1(h)(3)(i).” according to the court document.

The trend continued in Judge Debevoise’s latest ruling. UnitedHealth argued that Integrated Orthopedics is not a suitable plaintiff because of insurance policy anti-assignment provisions. However Judge Debevoise rejected that argument, finding that UnitedHealth previously paid Integrated Orthopedics and therefore waived the anti-assignment provision.

Additionally, UnitedHealth unsuccessfully argued that “the patient-insured does not currently have standing to pursue the ERISA claims set forth by the ONET Repayment Demand Class because the patient-insured is no longer a subscriber to a United healthcare plan. “The patient thus has no stake in the forward-looking injunctive relief that is sought by [Integrated Orthopedics], and has no Article III standing to raise these claims.” (ECF No. 315.) Integrated Orthopedics “cannot derivatively acquire standing to raise ERISA claims through an assignment executed by a patient who does not himself have standing[.]” (Id.)

Again, Judge Debevoise disagreed with UnitedHealth’s argument and basically reiterated his prior description of that position as a “red herring,” writing: “This argument is a red herring. While the patient-assignors who are no longer United insureds may not submit future benefit claims to United that would be subject to future repayment demands, the fact remains that there are pending repayment demands regarding claims while they were United-insureds. Thus, in challenging United’s overpayment recoupment procedures, those patient-assignors would necessarily seek prospective relief because the repayment demands on their claims have yet to be resolved. That such relief may also apply to benefit claims of other United-insureds is of no moment, as it would not in any way restrict those individuals’ rights or ability to sue under ERISA

The court document went even further on the subject of standing by saying: “As a general matter, the Court fails to see how an insurer who makes a direct payment of benefits to a provider, and subsequently seeks repayment from that provider, can later turn around and logically contend that the provider has no valid assignment of benefits. Such a contention would mean that the insurer should have been dealing directly with the patient-insured all along.

This and other cases illustrate the need for all employer sponsored health plans to comply with federal ERISA regulations when making demands for overpayment refunds.  Attempts to recoup or withhold monies from providers are and should be treated as any other claim denials.  Providers need to level the playing field by ensuring they submit ERISA/PPACA compliant appeals which properly request due process and a full and fair review. Additionally, as a matter of best practices, all healthcare providers should comply with ERISA claims regulations using a valid ERISA compliant designation of authorized representative before appealing any claim (be it an overpayment recoupment or any other type of denial) on behalf of any member of any employer sponsored health plan.

 

 

 

 

 

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