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After Four Years, Lawsuit against UnitedHealth Moves Forward; New Brief Sheds Light on Insurer’s Failure to Comply with ERISA

Class Action Seeks to End Repayment Demands without Notice or Appeal Rights; Thousands of Hospitals and Health Providers Could be Affected

August 31, 2015

In a case challenging UnitedHealth Group’s (NYSE: UNH) lucrative “recoupment” practice, plaintiffs in a nationwide class action lawsuit today filed a brief that sheds new light on the insurer’s internal procedures and its failure to comply with the Employee Retirement and Income Security Act (ERISA).

Led by Zuckerman Spaeder LLP, the case of Integrated Orthopedics, Inc. v. UnitedHealth Group challenges the insurer’s practice of demanding recoupments or “take-backs” from providers, citing alleged claim overpayments. If it does not receive payment in response to the demand, UnitedHealth (“United”) typically takes that money out of subsequent payments to the provider for new and unrelated claims. United annually makes about 1.6 million such demands without giving providers any meaningful opportunity to question or challenge the demand. The practice is used industry-wide and is estimated to return over $1 billion annually to insurers.

In a brief filed today, Zuckerman Spaeder partners D. Brian Hufford and Jason S. Cowart, and counsel William K. Meyer provide evidence that the practice violates United’s responsibilities under ERISA, which requires insurers to give claimants certain rights – especially regarding notice and appeal – when benefits are reduced or eliminated. The brief includes testimony under oath, in which United’s employees who train or supervise claims processors and those who oversee United’s repayment demand operation admit they have never been trained in ERISA and never apply any ERISA rights to their demand / recoupment operations.

Mr. Hufford commented, “This case could affect every out-of-network hospital, medical practice, medical equipment maker, and individual provider in the country that files claims with United. While we have already won important victories against United’s take-back practices, this case holds the possibility of providing widespread relief for healthcare providers by lifting the veil that presently covers these types of repayment demands.”

The brief filed today with New Jersey District Court Judge Esther Salas, comes after more than four years of legal maneuvering. The class was certified last December, and one particular repayment demand has been designated to serve as the basis for trial on Plaintiff’s claims.

The demand at the center of the case involves Plaintiff Integrated Orthopedics (“IO”), a Chicago-based supplier of post-surgical orthopedic supplies. It was paid $849.16 by United for care provided to a patient (“RM”). A computerized audit correctly flagged RM as not having received proper pre-authorization. But instead of applying only a 10% penalty under RM’s United plan, United incorrectly applied a 100% penalty, and demanded that IO refund the entire payment. Despite IO’s multiple requests for information about the reasons for the demand and repeated attempts to challenge the demand, United never explained its reasons, never provided copies of RM’s plan documents (which would have clearly shown United’s mistake), and ignored IO. It was only a result of the lawsuit brought by Zuckerman Spaeder that IO discovered that the demand was a mistake, and United just recently agreed to withdraw its demand.

The brief filed by Zuckerman Spaeder asks Judge Salas to find that United violated ERISA. Further proceedings would then determine how United’s take-back practices would be reformed.

Zuckerman Spaeder’s success in challenging take-backs and other questionable health insurance industry practices has been driven by novel legal approaches developed my Mr. Hufford and Mr. Cowart. Their work has led to historic and precedent setting wins – including a $350 million recovery for providers in 2010 that was the largest settlement of an ERISA benefit class action in history.

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