Department of Labor Settles Cross-Plan Offsetting Case
Cross-plan offsetting refers to the practice by which a health plan insurer or TPA recoups alleged overpayments to a healthcare provider under one plan by reducing subsequent payments owed to the same provider or plan participants under a different plan.
Employee Benefits Alert – 11.09.2023
DOL and Emblem Health Ink Robust Settlement on Cross-Plan Offsetting
Last week, the U.S. Department of Labor (DOL) entered into a settlement agreement with EmblemHealth Inc. (Emblem), a New York-based health insurer and third-party administrator (TPA) to health plans governed by ERISA, resolving DOL’s claims that Emblem breached its fiduciary duties and otherwise violated ERISA by engaging in “cross-plan offsetting.”
Cross-plan offsetting refers to the practice by which a health plan insurer or TPA recoups alleged overpayments to a healthcare provider under one plan by reducing subsequent payments owed to the same provider or plan participants under a different plan.
This payment practice has been a focus of DOL enforcement efforts in recent years, with DOL challenging the practice in its amicus curiae brief in the case of Peterson v. UnitedHealth Group, Inc., 913 F.3d 769 (8th Cir, 2019). In that case, the U.S. Court of Appeals for the Eighth Circuit affirmed a district court’s grant of summary judgment in favor of out-of-network providers who sued alleging the payment practice violated ERISA. The Eighth Circuit agreed with the lower court that the plan administrator’s interpretation of the plan to authorize cross-plan offsetting was not reasonable and stated that “cross-plan offsetting is in some tension with the requirements of ERISA,” without definitively ruling on all the plaintiffs’ ERISA claims. DOL argued, in part, that cross-plan offsetting violates ERISA by improperly denying participants and beneficiaries benefits due under their plans and exposing them to balance billing from out-of-network providers when their benefit payments from plans are withheld to recoup overpayments to the providers on prior claims related to other plans. None of the briefs in Peterson contained examples of instances of the alleged balance billing.
The Emblem settlement contains several key provisions:
- Emblem must refrain from cross-plan offsetting prospectively and amend plan documents, policies, procedures, and practices involving ERISA-covered plans to “eliminate references to the practice of cross-plan offsetting.”
- By January 1, 2024, Emblem must pay current and former participants and beneficiaries or their estates any reductions in reimbursement amounts they sustained during the period July 16, 2015, to the present due to cross-plan offsetting.
- Also by January 1, 2024, Emblem must send a prescribed notice to affected participants and beneficiaries or their estates if Emblem withheld payment to a provider on their claims during the period July 16, 2015, to the present due to cross-plan offsetting. The notice advises recipients to contact Emblem and provide information and documentation to facilitate reimbursements that may be due to them from Emblem under the terms of the settlement on account of balance billing that resulted from Emblem’s cross-plan offsetting practices. The notice also requests information to enable Emblem to help resolve ongoing collection activity resulting from these payment practices. The notice must be sent via first-class mail and email and be posted on Emblem’s website. The settlement gives aggrieved parties 365 days to contact Emblem.
- Emblem agrees to make retrospective payments to aggrieved parties in the amount of out-of-pocket expenses, including fees, penalties, and interest, the latter paid due to balance billing following cross-plan offsetting, and to undertake reasonable efforts to resolve any outstanding provider bills or collection activities resulting from its cross-plan offsetting practices. Emblem must also send to parties receiving payment under the settlement a notice advising of Emblem’s agreement to work with credit agencies to resolve any resulting adverse credit reporting.
- Emblem must provide on-going reporting to DOL on all responses to its notices and payments made and other activities under the settlement.
- Emblem executed a consent judgment, which DOL may seek to enforce in court in the event DOL deems Emblem to have breached a material term of the settlement and the parties cannot resolve informally their disagreement over compliance with the settlement terms.
DOL and plaintiffs’ counsel representing participants and beneficiaries who have brought ERISA class action lawsuits related to the practice of cross-plan offsetting have yet to put forth in public complaints or otherwise data indicating that participants and beneficiaries have, in fact, suffered financial harm from the practice of cross-plan offsetting, i.e., whether out-of-network providers are balance billing their patients when a payor or TPA recoups a prior overpayment using this practice. The outreach to participants and beneficiaries and the reporting required under this settlement with Emblem may answer this question once and for all, and that answer will impact how attractive these cases will be for both DOL and the plaintiffs’ bar.
