Peterson ex rel. Patient E v. UnitedHealth Group Inc., 242 F. Supp. 3d 834

Background

UnitedHealth administers many ERISA-governed health plans, some fully insured (United pays) and many self-insured (plan sponsor pays). United implemented a cross-plan offsetting system in 2007 to recoup alleged provider overpayments by cancelling debts owed to a different plan it also administered.
Under cross-plan offsetting, an overpayment by Plan A (often fully insured) is recovered by reducing payments owed to a provider by Plan B (often self‑insured), rather than suing the provider or waiting for same-plan recoupment opportunities.
Plaintiffs (Dr. Peterson and Riverview, suing as assignees/authorized representatives of patients) challenge United’s use of cross-plan offsetting for claims where United recouped disputed overpayments by cancelling debts across different plans.
United claimed (post hoc) that Plan B language (generic payment and administrator-discretion clauses, some ASA language, and a 2007 notice/opt-out to clients) authorized the practice; most Plan Bs, however, contain overpayment/offset provisions that only permit recovery when the plan itself made the overpayment and do not expressly authorize cross-plan offsets.
The court reviewed United’s plan interpretations for abuse of discretion and analyzed ERISA fiduciary duties, finding cross-plan offsetting raises substantial conflicts of interest where the administrator insures some plans but not others and where United personally benefits.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Plan Bs authorize cross-plan offsetting	Plan language does not authorize other plans to recover from Plan B; most offset provisions permit only same-plan recovery	Generic payment/discretion clauses and some ASA language implicitly authorize cross-plan offsetting; clients were notified and could opt out	Held for plaintiffs: Plan Bs cannot reasonably be read to permit cross-plan offsetting
Whether United reasonably interpreted plan language under abuse-of-discretion review	United’s post hoc search for authority is unreasonable; specific offset clauses would be rendered meaningless	Administrator discretion allows reading remedial powers broadly (Pilger)	Held: United abused its discretion; its interpretation is unreasonable
Whether ERISA permits the cross-plan practice given fiduciary duties	Cross-plan offsetting creates conflicts and may harm participants; fiduciary must act solely for plan’s participants	Cross-plan offsetting can yield administrative savings and recoveries beneficial to plans; sponsors could be deemed to have authorized by opt-out notice	Held: Even if potentially beneficial, fiduciary duties and lack of explicit plan authorization make United’s practice impermissible as interpreted here
Whether United shifted fiduciary decision to plan sponsors by disclosure/opt-out	Disclosures were incomplete, rushed, and failed to reveal United’s conflict; many clients never validly authorized the practice	2007 letter and later disclosures (and some ASA provisions) show sponsors were informed and had/ have opportunity to opt out or accepted the system	Held: Court rejects that sponsors validly assumed the fiduciary decision; disclosures were insufficient to shift responsibility

Key Cases Cited

Finley v. Special Agents Mut. Benefit Ass’n, 957 F.2d 617 (8th Cir.) (factors for reviewing administrator interpretations under ERISA fiduciary principles)
King v. Hartford Life & Accident Ins. Co., 414 F.3d 994 (8th Cir.) (discretionary review standard in ERISA cases)
Braden v. Wal‑Mart Stores, Inc., 588 F.3d 585 (8th Cir.) (ERISA fiduciary duties described as among the highest known to the law)
Cutaiar v. Marshall, 590 F.2d 523 (3d Cir.) (per‑se ERISA violation where identical trustees caused loan between plans)
Barron v. UNUM Life Ins. Co. of Am., 260 F.3d 310 (4th Cir.) (insurer may not use a release obtained in administration of one plan to deny benefits under another plan)
Pilger v. Sweeney, 725 F.3d 922 (8th Cir.) (scope of remedial authority under plan language—distinguished here)
Quality Infusion Care, Inc. v. Health Care Serv. Corp., 628 F.3d 725 (5th Cir.) (upholding cross‑plan offsetting under plan language; court distinguishes approach)
Kennedy v. Georgia‑Pacific Corp., 31 F.3d 606 (8th Cir.) (standards for appellate review of district court’s abuse‑of‑discretion rulings)