United States District Court, D. Minnesota
LOUIS J. PETERSON, D.C., on behalf of Patients E, I, K, L, N, P, Q, and R, and on behalf of all others similarly situated, Plaintiff,
v.
UNITEDHEALTH GROUP INC.; UNITED HEALTHCARE SERVICES, INC.; UNITED HEALTHCARE INSURANCE COMPANY; and UNITED HEALTHCARE SERVICE LLC, Defendants. RIVERVIEW HEALTH INSTITUTE, on its own behalf and on behalf of all others similarly situated, Plaintiff,
v.
UNITEDHEALTH GROUP INC.; UNITED HEALTHCARE SERVICES, INC.; UNITED HEALTHCARE INSURANCE COMPANY; and OPTUM, INC., Defendants.
Jason
S. Cowart, D. Brian Hufford, and William K. Meyer, ZUCKERMAN
SPAEDER LLP; Karen Hanson Riebel and Kristen G. Marttila,
LOCKRIDGE GRINDAL NAUEN P.L.L.P.; Anthony F. Maul, THE MAUL
FIRM, P.C.; Vincent N. Buttaci, John W. Leardi, and Paul D.
Werner, BUTTACI & LEARDI, LLC, for plaintiffs.
Gregory F. Jacob, Brian D. Boyle, Michael J. Walsh, Jr., and
Meaghan VerGow, O'MELVENY & MYERS LLP; Timothy E.
Branson and Erin P. Davenport, DORSEY & WHITNEY LLP, for
defendants.
ORDER
Patrick J. Schiltz United States District Judge
Two
health-care providers-Dr. Louis Peterson and Riverview Health
Institute (“Riverview”)-bring these actions on
behalf of certain of their patients against UnitedHealth
Group Inc. and various of its affiliates (collectively
“United”). United acts as the administrator for
numerous health plans governed by the Employee Retirement
Income Security Act (“ERISA”), 29 U.S.C. 1001 et
seq. According to plaintiffs, United has wrongfully failed to
pay them and other providers who have treated patients
enrolled in United-administered plans. Instead of paying the
providers what they are owed, plaintiffs allege, United
withholds some or all of their payments in order to offset
overpayments that United claims to have made to the providers
in connection with their treatment of different patients
enrolled in different plans. Plaintiffs allege that this
practice-known as “cross-plan
offsetting”-violates ERISA and the terms of the plans.
This
matter is before the Court on the parties' cross-motions
for summary judgment on the issue of whether the relevant
plans authorize cross-plan offsetting. For the reasons
explained below, the Court holds that they do not. But
because this order “involves a controlling question of
law as to which there is substantial ground for difference of
opinion” and because “an immediate appeal from
the order may materially advance the ultimate termination of
the litigation, ” the Court certifies this order for
immediate appeal pursuant to 28 U.S.C. § 1292(b).
I.
BACKGROUND
A.
Cross-Plan Offsetting
United
is one of the largest health insurers in the world. It both
administers and insures health-insurance plans. Some of the
plans that United administers are fully insured, meaning that
United uses its own funds to pay claims. Other plans that
United administers are self-insured, meaning that United uses
the funds of the plan sponsor to pay claims. Bishop-Heroux
Dep. 26-27. United's fully insured business accounts for
22 percent of all claim payments; the remainder come from
self-insured plans. Bishop- Heroux Dep. 55-56.
Administering
health-insurance plans is a complex business, and United
inevitably makes mistakes. One type of mistake is to pay a
provider more than the provider is owed under the
patient's health-insurance plan. This litigation
challenges a particular technique that United uses to recover
such overpayments-a technique known as “cross-plan
offsetting.” The technique takes a little explaining:
Suppose
that a patient named Andy is insured under a health plan
administered by United. Andy sees Dr. Peterson for treatment
of a sore neck. Dr. Peterson submits his bill to United.
United pays $350 to Dr. Peterson. Later, however, United
discovers that it should have paid only $200 to Dr. Peterson.
United contacts Dr. Peterson, brings the overpayment to his
attention, and asks him to return $150.
If Dr.
Peterson agrees that he was overpaid and returns the $150,
the problem is solved. But if Dr. Peterson does not agree
that he was overpaid and refuses to return the money, United
has limited options for getting back its $150. In theory,
United could initiate administrative or legal proceedings
against Dr. Peterson. As a practical matter, however, United
is unlikely to do so, as United would spend far more than
$150 in pursuing the $150 overpayment.
Another
option might be to engage in same-plan offsetting.
Under this approach, United would wait until Andy or anyone
else covered by Andy's health plan is treated by Dr.
Peterson. When Dr. Peterson submits a bill to United on
behalf of that patient, United would deduct $150 from the
payment that it would otherwise make to Dr. Peterson. From
United's perspective, however, same-plan offsetting
presents a big problem: Dr. Peterson may never again treat
Andy or someone who is insured under Andy's plan. Dr.
Peterson practices in New York City, a giant metropolitan
area. Andy may work for a small company in a distant suburb,
and he may be insured under a company-sponsored plan that
covers only Andy and 20 other employees. The chances may be
slim that Dr. Peterson will ever again treat someone who is
insured under Andy's plan. And thus, United may never
have the opportunity to use same-plan offsetting to recoup
its $150 overpayment from Dr. Peterson.
To get
around this problem, United adopted the practice of
cross-plan offsetting. Under this approach, United
merely has to wait until anyone covered by
any of the thousands of plans that it administers
sees Dr. Peterson. Suppose, for example, that two weeks after
treating Andy, Dr. Peterson treats Betsy, who is injured
while on vacation in New York City. Suppose further that
Betsy is insured under a plan that is administered by United
and that covers Betsy and 50 of her co-employees (all of whom
live in San Diego). When Dr. Peterson submits a bill to
United on behalf of Betsy, United would deduct $150 from the
payment that Betsy's plan would otherwise make to Dr.
Peterson and thereby recoup the overpayment that Andy's
plan made to Dr. Peterson in connection with his treatment of
Andy. It is this practice of cross-plan offsetting that Dr.
Peterson and Riverview challenge in these lawsuits.
In
their briefs, the parties refer to the allegedly overpaid
claims (such as Dr. Peterson's claim for treating Andy)
as the “A claims, ” and the plans that made these
overpayments (such as the plan that covered Andy) as the
“A Plans” or “Plan As.” The parties
refer to the later claims that United purportedly paid
through debt cancellation (such as Dr. Peterson's claim
for treating Betsy) as the “B claims, ” and the
corresponding plans (such as the plan that covered Betsy) as
the “B Plans” or “Plan
Bs.”[1]
Dr.
Peterson and Riverview are both out-of-network providers who
provided services to an “Andy”-that is, to a
patient who was insured under a Plan A administered by
United. Both providers submitted claims to United. Both
received payment for those claims from the Plan A. Both were
later informed by United that they had been paid too much.
Both disputed that they had been paid too much, and both
refused to return the alleged overpayment. With respect to
both, United responded by recouping the disputed overpayment
through cross-plan offsetting. In other words, when United
learned that Dr. Peterson or Riverview had submitted a
subsequent claim regarding a “Betsy”-that is, a
different patient who was insured under a different
United-administered plan (a Plan B)-United did not pay for
those claims by transferring money to Dr. Peterson or
Riverview. Instead, United purported to pay for those claims
by cancelling debt that Dr. Peterson or Riverview allegedly
owed to the Plan A.
Cross-plan
offsetting advantages United and disadvantages providers.
When United and a provider dispute whether a claim was
overpaid, cross-plan offsetting allows United to act as
judge, jury, and executioner. United treats the provider as
being in debt to Plan A-no matter how strongly the provider
denies being in debt to Plan A-and United collects that
disputed debt by offsetting money that Plan B owes to the
provider. In theory, the provider could initiate
administrative or legal proceedings against United to recover
the offset. As a practical matter, however, the provider is
unlikely to do so, as the provider would spend far more than,
say, $150 in pursuing a $150 offset. In short, without
offsetting, the onus would be on United to initiate
proceedings and prove that the provider was overpaid by Plan
A. With offsetting, the onus shifts to the provider to
initiate proceedings and prove that it was underpaid by Plan
B.
As much
as providers such as Dr. Peterson and Riverview may dislike
offsetting, they do not have standing to bring these actions
in their own right. That is because health-insurance plans
are contracts between United, on the one hand, and patients
or in-network providers, on the other hand. Dr. Peterson and
Riverview are out-of- network providers. Moreover, United has
fiduciary obligations under ERISA to the patients, not to
providers. For that reason, Dr. Peterson and Riverview have
brought these actions as assignees or authorized
representatives of their patients, [2] and these actions focus on
whether, by engaging in cross-plan offsetting, United has
violated any legal duties to its insureds.
Speaking
very broadly, plaintiffs make at least two contentions in
these lawsuits. First, they argue that nothing in any of the
relevant plans authorizes United to engage in cross-plan
offsetting. That contention is the subject of the
parties' cross-motions for summary judgment and will be
addressed at length in this order. Second, plaintiffs argue
that, in engaging in cross-plan offsetting, United is
violating ERISA by furthering its own interests at the
expense of its insureds. In particular, when a
“Betsy” (that is, someone insured under a Plan B)
is treated by her doctor, she is legally responsible for
paying her doctor's bill. When United pays her doctor not
with cash, but instead by cancelling a purported debt
that the doctor denies owing, Betsy's doctor may
very well assert that he has not been paid for
treating Betsy and demand that Betsy pay the full amount of
his bill. Betsy would not be placed at such financial risk if
United-which, as administrator of Plan B, owes a fiduciary
duty to Betsy-would use Plan B assets to pay Betsy's
doctor. Instead, United uses Plan B assets to help Plan A
recover a disputed debt.
B.
Development and Implementation of the Cross-Plan Offset
System
United
implemented its system of cross-plan offsetting in March 2007
as part of a wider overhaul of its payment
system.[3] Jacob Decl., Mar. 28, 2016 [hereinafter
“First Jacob Decl.”] Ex. D. United did not
implement cross-plan offsetting in response to a request from
a plan sponsor or insured; instead, United came up with this
system on its own. Burch Dep. 65-70, 177.
One
benefit to United of implementing cross-plan offsetting has
already been explained: When United and a provider dispute
whether the provider has been overpaid, United is able to act
unilaterally to recoup the alleged overpayment and thereby
place the burden on the provider to initiate proceedings and
prove that it was not overpaid (something most providers will
not bother to do with respect to most disputed overpayments).
Another benefit to United is not as obvious: Many of the Plan
As-that is, the plans that make the overpayments-are fully
insured; in other words, the money that United mistakenly
pays to a provider comes out of United's
pockets. Many of the Plan Bs-that is, the plans that send
money to the Plan As to reimburse them for the
overpayments-are self insured; in other words, 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 sponsors of self-insured
plans. See Meyer Decl. Ex. A at 13735 (September
2004 presentation stating, in bold text, that the new system
“[a]llows recovery of fully insured overpayments on
self funded claim payments!”); id. Ex. H at
13910 (August 2004 presentation stating that
“[c]rossing policies for bulk recovery helps recover FI
[fully insured] dollars faster”); id. Ex. I at
13757 (callout on a 2005 chart of figures highlighting a
“[f]ully insured o/p recovery on a [self insured]
payment!”).
Before
implementing cross-plan offsetting, United sent a letter to
existing clients[4] describing the new system and how it would
work. First Jacob Decl. Ex. D. The letter described the new
system as follows:
Under our existing process, a claim overpayment for a self
insured plan could only be recovered when both the
overpayment and the claim payment involved the same self
insured plan. Thus, a self insured plan that had a claim
overpayment with a particular provider would have to wait
until its participants incurred additional claims with that
provider before the overpayment could be deducted. Under the
new process, we will, in most instances, be able to recover
claim overpayments made to a provider by reducing future
claim payments to that provider, regardless of whether those
future claim payments involve your plan, another self insured
plan or a fully insured plan.
First
Jacob Decl. Ex. D at 2605. In other words, United emphasized
the potential benefits of cross-plan offsetting to the
self-insured plans, but called no attention to the potential
benefits of cross-plan offsetting to United itself.
United's
system for cross-plan offsetting includes rules for
prioritizing recoveries. This is necessary because United
might allege that multiple overpayments were made to a single
provider. So, for example, United may allege that
self-insured Plan A1 overpaid Dr. Peterson by $100 on May 1,
and that fully insured Plan A2 overpaid Dr. Peterson by $125
on June 1, and that self-insured Plan A3 overpaid Dr.
Peterson by $75 on July 1. When Dr. Peterson submits a claim
to self-insured Plan B1 on August 1, and United decides that
Plan B1 owes Dr. Peterson $200 in connection with that claim,
and United further decides to use that $200 to recoup some of
the overpayments previously made to Dr. Peterson, to which
plan should United transfer Plan B1's money? Plan A1?
Plan A2? Plan A3?
Under
United's system for cross-plan offsetting, fully insured
plans are first in line to recover their overpayments from
fully insured claim payments. Only after fully insured
overpayments have been satisfied may self-insured plans
recover from fully insured claim payments. Likewise,
self-insured plans are first in line to recover from
self-insured claim payments, after which fully insured plans
may recover. Id. at 2606. The 2007 client letter
explained this system and provided several illustrative
examples. Id. at 2606-08.
In this
litigation, every Plan A-that is, every plan that made
overpayments- was fully insured. Meyer Decl. Exs. C, D.
Conversely, the majority of the Plan Bs-that is, the majority
of plans from which the overpayments were recovered-were
self- insured. Meyer Decl. Ex. F; ECF No. 74 ¶ 5. 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.[5]
When
United implemented this system in 2007, it gave existing
clients about two weeks to decide whether to opt out. First
Jacob Decl. Ex. D at 2605 (exemplar letter giving clients
until February 22, 2007 to opt out); id. Ex. A at
3859 (clients were given advance notice of letters by
February 7 and letters were mailed on February 9). New
clients do not have that option; they must participate in
cross-plan offsetting or find a different claims
administrator. Burch Dep. 282-83.
The
parties dispute how much information about cross-plan
offsetting United provides to its new clients and whether any
of that information is in writing. As with several other
issues, the record on this issue is somewhat murky. 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 of the banking, account-setup,
and account-funding processes. Bishop- Heroux Dep. 192-94,
226-27; Bishop-Heroux Decl. ¶¶ 6-7; Second Jacob
Decl. Ex. X. It also appears that such disclosures mostly
occur orally and on a somewhat ad hoc basis, Burch Dep. 282,
although United has identified one written document that
explicitly mentions cross-plan offsetting-a document that
United has apparently given to new clients since 2010.
Bishop-Heroux Decl. ¶ 6; Second Jacob Decl. Ex. X. The
document does not provide nearly as much detail about
cross-plan offsetting as the 2007 letter, however-and, like
the 2007 letter, the document says nothing about the fact or
extent of United's conflict of interest. Second Jacob
Decl. Ex. X at 3816. United says that it provides these oral
and written ...