Health Plan Recoupment Defense – How to Fight Back

By Thomas J. Force, Esq. & Giulia Palermo, Esq. The Force Law Firm, P.C.

In our prior emails and as we have been reporting to you, if you are an out of network provider, it is imperative that you balance bill your patients for the difference between charge and payment. Many of the special investigations we have been assigned on behalf of our out of network clients involve failure to balance bill patients as a component of the SIU Investigation. If you’d like to receive our prior articles concerning balance billing, please email us.

‍When faced with a health plan recoupment, refund demand or SIU Investigation, the first thing you should do is:

  1. Respond in writing objecting to the recoupment, take back, refund demand or special investigation (the “Health Plan Action”); and
  2. Make sure you remind the health plan in writing that they are obligated to comply with federal ERISA Regulations by virtue of the Health Plan Action which is essentially an “Adverse Benefit Determinations” (“ABD”) much like a claim denial is, as defined by ERISA; and
  3. Make an ERISA Demand in writing (you are entitled to anything “relevant” to the ABD so request the health plan’s entire investigative file including any internal memos, emails and so on); and
  4. Take allegation of insurance fraud seriously, but determine the exact reasons that the health plan believes fraud was committed (most times, the term is used to intimidate only and there is little to no evidence of insurance fraud); and
  5. Do not agree to refund anything until your ERISA demands have been complied with by the health plan.

‍We have been carefully reviewing and analyzing recent case law and have found some interesting cases pertaining to Health Plan Actions and specifically the recoupment issue that you may find useful in your defense of these type of matters. We take this opportunity to summarize the most relevant cases.

Case Summaries

Pennsylvania Chiropractic Association, et al., v., Blue Cross Blue Shield Association, et al., No. 09-C-5619 2013 (D.R.I. Nov 7, 2013)

The plaintiff was a chiropractic association. The case was filed in federal court in the District of Rhode Island. The doctor involved in the case performed a spinal decompression treatment on Blue Cross patients and was paid for these services from 2004 to 2006. In 2006 the insurance company conducted a review and concluded they over paid the doctor $110,000 and demanded the money back or they would take back the funds from future payments.

Blue Cross attempted to argue that the doctor did not have standing due to a provider agreement which stated that a provider could not go after a patient for recoupment or payment errors. Ultimately, the court decided that the date of actual execution of the provider agreement was unclear, which seemed to make a huge difference in this case. Since the court did not look to the provider agreement, for all intent and purposes, the doctor was out of network. In any event, the doctor’s patients all signed a document with the heading “Assignment and Release,” which assigned to the provider “all insurance benefits, if any, otherwise payable to [him] for services rendered.” It also included a statement that the patient was, “financially responsible for all charges whether or not paid by insurance.” As such, the doctor, the court ruled, had standing as a beneficiary under ERISA, standing in the shoes of his pt.

Since the rights were assigned to the provider, the provider was entitled to all of the rights available under ERISA including the right of notification and appeals. The provider, the court rules, was entitled to any remedy available to a beneficiary under ERISA.

Blue Cross contended that its recoupment was not an “Adverse Benefits Determination” as defined by ERISA because “the provider has no recourse against the claimant” for money that the insurer does not pay.” The Court ruled that a “reasonable fact finder could conclude that Anthem did deny specific claims involving specific patients” and because the provider could have sought to bill his patients for amounts that insurance did not cover.” (Quoting Pa. Chiropractor Ass’n 903 F.Supp.2d at 613-14) The net effect of the Court’s ruling was that they found that the insurer’s retroactive refusal and recoupment was indeed an adverse benefit determination under ERISA. It did not matter that the provider did not actually bill the patients for the money recouped by the insurance company.

The Court granted Summary Judgment for the provider.

Blue Cross & Blue Shield of R.I v. Korsen, No. 09-317L WL 2247460 (D.R.I. May 22, 2013)

Blue ambushed and sandbagged by the provider’s audit. The Court clearly felt that the provider committed no wrongdoing. The Court wrote, “Blue Cross’s investigation into both the operation of the intersegmental traction equipment and the use of this equipment in chiropractic community was limited and perfunctory. Likewise, its assessment of Dr. Korsen’s motives hasty and indicative of its prejudgment. Moreover, Blue Cross’s failure to provide Dr. Korsen and Barlow with any meaningful review process, given the procedures specified by ERISA and included in their own Providers Agreements, was also unjust.” Conversely, the court seemed to have

Premier Health Center P.C., et al. v. UnitedHealth Group, et al., Civ. No. 11-425, 2013 WL 3943516 (D.N.J. Aug. 1, 2013)

This case arose out UnitedHealth Group Inc.’s methods of monitoring and recouping benefit overpayments from a variety of health care providers. The

“The administrative procedure by which an insurer attempts to recoup overpayments based on what it believes to be fraudulent activity must allow the provider the opportunity to challenge that determination in accordance with ERISA procedures.” Therefore, if an insurer makes an adverse benefits determination under ERISA, that member or beneficiary is entitled to ERISA rights, including the right to appeal the recoupment.

The Court also ruled that United’s recoupment notifications all violated ERISA in three ways. First, by not including a description of the plan’s review procedures and time limits. Second, by failing to provide, upon request and free of charge, all relevant documents and records and other information relevant to the overpayment. Third, by failing to provide claimants with 180 days receipt of a notification of an adverse benefits determination within which to appeal the determination. It is not enough to refer a provider to the appeals procedures. The Court further ruled that United’s notice and appeal processes violated ERISA, as a matter of law.

‍What do these cases mean for you?

All of these cases clearly stand for the proposition that audits, recoupments and other Health Payor Actions are “Adverse Benefit Determinations” and, as such, subject to ERISA, the federal law that governs:

  • Written notice to the provider provided prior to recouping funds
  • Written notice that specifically states the reason for the audit and the recoupment
  • Written notice that the provider has the right to receive all relevant claim documents and audit materials “free of charge”
  • Written notice setting forth specific plan provisions on which the determination is based, specific references to the plan documents and citations of exclusions and limitations that preclude coverage and which resulted in the over-payment
  • Written notice explaining, and providing the specific rule, guideline, protocol, or other similar criterion relied upon in making the adverse determination with specificity, protocols, guidelines and/or service standards that were allegedly consulted
  • Written notice setting forth the Plan’s review procedures and the time limits applicable to such procedures; including a statement of the claimant’s right to bring a civil action as well as an explanation of appeals rights and specifically how to file an appeal

If over-payment resulted from lack of medical necessity, or for experimental, written notice explaining the scientific or clinical judgment for the determination, applying the terms of the plan to the claimant’s medical circumstances, or a statement that such explanation will be provided free of charge upon request.

The Courts in all three (3) cases indicated that the payor investigation must be thorough. It cannot be a hasty, rush to judgment investigation. In addition, since ERISA applies to Payor Health Actions, the health plan may not retaliate against the provider for asserting its rights under ERISA. ERISA §502(a) (3) prohibits retaliatory behavior from insurance companies. If the health plan attempts to retaliate against the provider or the member, the provider can obtain injunctive relief in federal court. Moreover, the health plan can be assessed a rather large attorney fees award under ERISA if the matter is litigated in federal court. Attorneys’ fees pursuant to ERISA §502(g) (1) are available where the party seeking fees in an ERISA action obtains “some degree of success on the merits.”

Last and most importantly, the provider is entitled to complete copies of the health plan’s entire investigative file. Under ERISA, a health plan must afford a beneficiary (which) includes a provider under a valid assignment of benefit) with a reasonable opportunity for a “full and fair review” of a claim and adverse benefit determination unless the claims procedure provides that a claimant shall be provided upon request and free of charge, reasonable access to and copies of all documents, records, and other information relevant to the claimant’s claim for benefits.” 29 C.F.R. §2560.503-1(h) (2) (iii). “A document, record, or other information will be considered “relevant” to a claimant’s claim if such document, record, or other information:

(i) Was relied upon in making the benefit determination;

(ii) Was submitted, considered, or generated in the course of making the benefit determination, without regard to whether such document, record, or other information was relied upon in making the benefit determination;

(iii) Demonstrates compliance with the administrative processes and safeguards required pursuant to paragraph (b) (5) of this section in making the benefit determination; or

(iv) In the case of a group health plan or a plan providing disability benefits, constitutes a statement of policy or guidance with respect to the plan concerning the denied treatment option or benefit for the claimant’s diagnosis, without regard to whether such advice or statement was relied upon in making the benefit determination. 29 C.F.R. 2560.503-1(m) (8) (I)-(IV).

In addition, pursuant to 29 U.S.C.A. § 1021(a)(1) & (2) and 29 U.S.C.A. §1024(b)(4), the administrator is required to supply a participant or his/her designee with the Summary Plan Description (“SPD”) and, upon written request, a copy of any “. . . trust agreement, contract, or other instruments under which the Plan is established or operated . . .” Pursuant to 29 U.S.C.A. § 1132 (c), if an administrator fails or refuses to comply with such a written request within thirty days, the administrator could be held personally liable to the participant in the amount of up to $110 a day from the date of such failure or refusal. Federal Courts have issued severe sanctions for non-compliance. For example, a U.S. District Court had imposed statutory sanctions of over $14,000 against a plan’s Administrative Committee for failing to produce “upon request and free of charge” the records relevant to the denial of a participant’s claim for benefits. The court also remanded the claim – after three years of examination under the plan’s claims procedure which resulted in successive denials – for a potential de novo review. Weddell v. Retirement Committee of the Whirlpool Production Employees Retirement Plan, No. 3:07-cv-0006, 2008 WL 343137 (N.D. Ohio, Feb. 5, 2008).

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