Published by Anne Brunson and Lee Rufty on March 29th, 2019

A big part of the value Trustmark Health Benefits delivers for our clients comes from our flexibility. But there are some things we won’t do, like Cross-Plan Offsets.

What is a Cross-Plan Offset?
If they’re lucky, your clients may not even know what cross-plan offsets are, or how they work. It’s a practice which comes from the carrier part of our industry, and it gets a little complicated. Here’s the basics of offsetting:
  1. Sometimes, despite everyone’s best efforts, a carrier makes an overpayment to a provider
  2. The carrier asks for the money back
  3. The provider refuses to refund the money
  4. The carrier just waits until someone else from the plan utilizes that provider again
  5. The carrier withholds payment, which offsets the losses from that initial overpayment
  6. Everyone is reasonably happy
But what happens if no one from the plan incurs any further expenses from that provider? In that case, the carrier may decide to withhold payments to that provider for services rendered to a patient from a completely different plan. Hence the cross-plan part of cross-plan offsets.

So, for example, someone from Company A visits a doctor, and the carrier pays out $200 on a $100 claim. The doctor happily cashes that check and refuses to pay back the overage. Next, someone from Company B visits that same doctor, but the carrier pays out exactly zero dollars for a $100 claim. As far as the carrier is concerned, everything is fixed.

Is it “Legal?”

The U.S. Court of Appeals for the Eighth Circuit recently decided, Louis J. Peterson, D.C., et al. v. UnitedHealth Group Inc. et al, 913 F.3d 769 (8th Cir. 2019), in which a group of out-of-network healthcare providers, representing the members of various plans administered by UnitedHealth Group, brought suit against the carrier over cross-plan offsetting. In this specific case, the court found that nothing in the plan documents came close to authorizing cross-plan offsetting.  
While the court did not rule on the overall legality of the practice, it said that cross-plan offsetting will “push the boundaries of what ERISA permits,” ultimately calling the practice “questionable at the very least.” and that “If such a practice was authorized by the plan documents, we would expect much clearer language to that effect.”

Is it a “Good Idea?”

In the case of Peterson v. United, definitely not, and it gets to the heart of the difference between fully insured and self-funded benefits. As the court noted in its ruling, many of the plans involved in this case were self-funded plans, which sets up a possible/inevitable conflict of interest for a carrier. The court stated, “While administrators like United may happen to be fiduciaries of multiple plans, nevertheless, each plan is a separate entity and a fiduciary’s duties run separately to each plan.  Cross-plan offsetting is in tension  with this fiduciary duty because it arguably amounts to failing to pay a benefit owed to a beneficiary under one plan in order to recover money for the benefit of another plan.“ 
At Trustmark, our clients will never have to worry about this. We do not cross-plan offset.  We work hard to provide our clients with flexibility, transparency, and greater savings.