UnitedHealth “Savings Fee” Boosts Profits by Shortchanging Plan Members, According to New Lawsuit
On behalf of two plaintiffs, who are members of self-funded health plans sponsored by Morgan Stanley and Fresenius, Zuckerman Spaeder LLP has filed a class action lawsuit alleging that UnitedHealthcare Group, Inc. (United) is systematically underpaying benefits for care received from out-of-network health care providers, leaving plan members liable to pay medical costs their plans should have paid. The plaintiffs say this practice violates the terms of their health plans and breaches United’s fiduciary obligations under the Employee Retirement and Income Security Act (ERISA).
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 shoulder the difference between the charged amount and United’s unfairly low reimbursement.
The plaintiffs say that United has significant motivation to shortchange plan members 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—whether the provider agrees to the discount or not. United measures its fee as a percentage of the difference between the billed charge and the amount United deems eligible, and charges fees as high as 35% of the difference. As the complaint states, “The lower United can push the eligible expense, the greater this difference, and the greater United’s ‘savings’ fee.”
“In this profit-motivated scheme, United rewards itself for underpaying consumers’ health claims,” said Zuckerman Spaeder partner Caroline E. Reynolds. “The insurer is generating billions in additional profit by forcing plan members to accept pennies on the dollar in benefits for services they thought were covered.”
United has pocketed billions of dollars in “savings” fees since it began the initiative in 2016, according to the complaint. And, for its role in the scheme, the repricer has been given a percentage of the fees collected by United – an amount totaling more than one billion dollars so far.
Despite its use of repricer data, United has acknowledged that the proper and accurate source of pricing information is FAIR Health, an independent non-profit that operates the largest database of private health insurance claims. According to the complaint, if United had used such FAIR Health data to determine the two plaintiffs’ claims, the plaintiffs would have received tens of thousands more in benefits to cover their medical expenses. The complaint alleges, moreover, that United may have injured “many thousands” of other ERISA plan members in the same way.
“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,” said Zuckerman Spaeder partner D. Brian Hufford. “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.”
The case number is 1:22-cv-10756 in the U.S. District Court for the South District of New York. A copy of the complaint can be found here.