Let’s Play The % Of Savings Game (But I Make Up The Rules)

Lawsuit accuses administrator of underpaying benefits for out-of-network care for self-funded plans

MyHealthGuide Source: Alan GoforthALM Benefits Pro, 12/29/2022

Case: Popovchak and Gonzalez v UnitedHealthcare Group, et al., Civil Action No. 1:22-cv-10756, US District Court, Southern District of New York

Editor’s Note: UnitedHealthcare Group will certain respond and defend its actions.  This article is included for us to follow its course through proceedings.  The plaintiff alleges the plan administrator is paying a low out-of-network rate to increase its percentage-of-savings profits. Managing ERISA funds is a required priority for the plan sponsor (employer) as fiduciary … and the plan administrator, also as a fiduciary (as many courts have ruled). Further, the plaintiff’s attorney mistakenly states, “…duty under ERISA to act solely in the interest of plan members.”  The duty of the fiduciary is to act solely in the interest of the plan … not the plan members.  Of course, acting in the interest of the plan will benefit the members..

A class-action lawsuit accuses UnitedHealthcare Group of systematically underpaying benefits for care received from out-of-network health care providers. This practice violates the terms of their plans and breaches United’s fiduciary obligations under ERISA, according to complaint.

Many self-funded health plans administered by United, including those of the plaintiffs, state that United will base reimbursement amounts for covered out-of-network services on “competitive fees” in a provider’s geographic area. But according to the complaint, United often ignores this promise and instead uses deeply discounted “repricer” rates that make just a fraction of a billed charge eligible for reimbursement. Out-of-network providers are not required to accept this rate, which means plan members are legally obligated to pay the difference.

United has significant motivation to shortchange plan members, plaintiffs say, because doing so directly boosts the insurer’s profits. Under its so-called “shared-savings” program, United charges self-funded plans, including the plaintiffs’ plans, a fee for its purported cost-containment services whenever United decides to recognize less than the provider’s full billed charge as eligible for reimbursement.

“In boosting profits this way, United is illegally reducing coverage and violating its duty under ERISA to act solely in the interest of plan members,” Zuckerman Spaeder partner D. Brian Hufford says. “By using pricing data that is inconsistent with the terms of its plans, United is effectively denying claims that should rightfully be covered. And because United’s pricing scheme clearly serves its own financial interests, the insurer is failing to live up to its fiduciary obligation to act solely in the interest of the plan and plan members it serves.”

Complaint Excerpts

IV. United’s Self-Serving “Savings Fee” Scheme

62. For many years, the per member, per month administrative services fees were all United earned for its claims-administration services to self-funded plans. More recently, however, United realized that it could bring in substantially more revenue by charging self-funded plans an additional “savings fee” each time it secured a “discount” on an ONET provider’s billed charges—especially if United unilaterally imposed a discounted rate on the provider.

63. Self-funded plans do not promise to pay benefits for 100% of a provider’s billed charges, but rather, they owe only the amount the claims administrator determines is “eligible” for payment under the plan terms in accordance with applicable law. Nevertheless, United sold this additional “savings fee” to the plans by representing that it was “saving” the plan members from financial liability for the full amount of the provider’s billed charge.

64. Starting in about 2016, United began to encourage its self-funded plan clients to move to a “shared savings initiative,” which featured these “savings fees.” Under the “shared savings” program, United calculates the “savings fee” it charges to self-insured plans as a percentage—often as high as 35%—of the difference between the provider’s billed charge and the Eligible Expense determined by United. Thus, the greater the difference between the provider’s billed charge and the Eligible Expense, the more money United “earns” through its savings fees.

65. United quickly realized that, by using repricers to set Eligible Expenses, rather than basing its determinations on FAIR Health Charge Data, United is able to collect substantially more money in “savings fees,” since the rate recommended by the repricer is usually a fraction of the competitive fees reflected in FAIR Health Charge Data, generating a greater delta on which to calculate the savings fee percentage.

69. Among the various problems inherent in United’s scheme is the fact that ONET providers never agreed to participate in it. Plaintiffs’ ONET surgeons did not agree to accept as full payment the 1-2% of their billed charge that United offered them. Nor did they agree to refrain from billing the Plaintiffs for the unpaid balance of the billed charges—a practice known as “balance billing.” As a result, the Plaintiffs are left footing almost the entire bill for services that United determined are otherwise covered by their plans.

V. United Used Data iSight to Set the Eligible Expenses for Plaintiffs’ Healthcare
Services at Unreasonably Low Amounts

A. Plaintiff Popovchak

76. Ms. Popovchak received an emergency appendectomy on December 29, 2020 from Dr. Emil Shakov of Specialty Physicians of New Jersey (“SPNJ”), an ONET provider with respect to United. Dr. Shakov billed $36,569.80 for his services as Ms. Popovchak’s surgeon, and SPNJ submitted a claim for that amount to United on Ms. Popovchak’s behalf.

77. United determined that the surgery was a covered service under the Morgan Stanley Plan.

78. On April 9, 2021, UHS LLC issued a Provider Remittance Advice (“PRA”) to SPNJ, which reported on how United had determined the claim. Of the total bill, United only allowed $1,031.91 for the emergency appendectomy, of which it paid just $925.32.

79. Although United reported in the PRA that Ms. Popovchak’s “Patient responsibility” was only $16,106.59, in fact, under her plan, Ms. Popovchak was responsible for $35,537.89—i.e., the entire difference between the $925.32 United paid for Dr. Shakov’s services and the full billed charge.