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Article | Insider

Federal court rules cross-plan offsetting violates ERISA

Benefits Administration and Outsourcing Solutions|Health and Benefits
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By Anu Gogna and Benjamin Lupin | July 7, 2021

Employers whose plan administrators use the practice of cross-plan offsetting should determine whether their plan agreements need updating.

A federal district court in New Jersey has ruled that the practice of cross-plan offsetting violates ERISA’s fiduciary rules and results in a prohibited transaction.

In Lutz Surgical Partners PLLC v. Aetna, Inc., the court held that Aetna Health violated multiple provisions of ERISA when it engaged in cross-plan offsetting, a billing practice by which health plan administrators withhold payments owed to medical providers for care given to specific patients. The reductions are meant to correct overpayments the providers previously received on accounts of different patients who participate in other health plans administered by the same company.1

Unlike previous rulings on this topic, the court expressly stated that Aetna breached its fiduciary duties as a plan administrator when it used cross-plan offsetting to recoup money from the plaintiff, and that the offsetting is not permissible under ERISA.

In light of this decision (which is aligned with the Department of Labor’s position on cross-plan offsetting), employers whose plan administrators engage in cross-plan offsetting should consult with their legal counsel to determine if changes to the agreements between the plan sponsors and administrators need to be made.

Footnote

1 For more information on cross-plan offsetting, see “Court and DOL challenge ‘cross-plan offsetting’,” Insider, April 2019.

Authors

Senior Regulatory Advisor, Health and Benefits

Senior Regulatory Advisor, Health and Benefits

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