Kraft Heinz, Aramark sue UnitedHealth over ‘bogus’ health claims

Six major employers, including Aramark and Kraft Heinz, are suing UnitedHealth Group, alleging the healthcare giant improperly approved fraudulent medical claims, diverted employee health plan assets and charged undisclosed fees.

UHG administered self-funded medical benefits plans for the plaintiffs, according to the lawsuit, filed Tuesday in the U.S. District Court for the Eastern District of Texas.

UHG and several subsidiaries allegedly breached contractual and fiduciary duties under the Employee Retirement Income Security Act by approving improper claims, overpaying health care providers and failing to recover overpayments, plaintiffs claim.

The plaintiffs — Aramark, W.W. Grainger, Kraft Heinz, Ralph Lauren, Sterling Jewelers and Whirlpool — accuse UHG of “cross-plan offsetting” and say the conduct cost their health plans millions of dollars and forced employers to contribute more money to cover medical expenses.

Cross-plan offsetting is an insurance and third-party administrator practice where an overpayment made to a healthcare provider on one health plan is recovered by underpaying or withholding money from a completely different health plan.

For example, if UHG paid a provider $1,000 from one plan when the appropriate payment was $600, it might recover the $400 difference by reducing a later payment owed to the provider for treating a patient covered by a different plan. The plaintiffs allege the original plan would not receive a corresponding credit.

“United’s duty of loyalty required it to act solely in the interest of the Plans and Plan Participants,” the lawsuit said. “Cross-plan offsetting violates this duty because United used Plan assets to benefit other plans, including United’s own fully insured plans, rather than acting solely in the interest of the Plans that overpaid.”

The plaintiffs seek reimbursement for their losses, recovery of profits allegedly earned through the practices, attorneys’ fees and court orders requiring United to provide complete medical claims data.

UnitedHealth released this statement: "It’s disappointing that a small number of our customers chose to pursue a lawsuit instead of meaningfully engaging with us to address their concerns. We strongly disagree with these allegations and intend to vigorously defend against them."

Claims administration under scrutiny

The employers operate self-funded medical benefits plans, meaning they retain the financial risk of employees’ healthcare costs rather than transferring that risk to an insurance company in exchange for premiums.

As a TPA for the plans, UHG and its affiliates process medical claims, determining appropriate payments to providers and identifying fraudulent or improper charges.

The complaint alleges United exercised discretionary authority over the plans’ claims and assets while failing to adequately scrutinize claims that should have been flagged for investigation or denied.

“United’s automated claims processing system routinely approved and paid claims without meaningful human review,” plaintiffs claim. “In most instances, United’s wrongfully approved claims were paid almost immediately using Plan assets, with no substantive human oversight.”

The employers contend United was obligated to use reasonable care in administering the plans and to protect their assets for the benefit of employees and other beneficiaries.

The complaint also alleges United withheld or manipulated medical claims data, restricted the employers’ audit rights and provided inaccurate or misleading reports, preventing the plans from independently verifying payments and fees.

"When United is not responsible for paying claims with its own money and instead pays claims with money from self-funded plans, like the Plans, United applies less rigorous standards for accepting, processing, and paying claims submitted for payment," the lawsuit stated.

Alleged self-dealing

The lawsuit accuses UHG of using several practices that allegedly benefited the company or its affiliates at the expense of the self-funded plans.

The employers allege that UHG transferred money from plan accounts into accounts controlled by the insurer or its affiliates, commingling assets from different plans and UHG itself before making payments to providers.

According to the lawsuit, the plans lacked access to those accounts and could not determine whether the amounts transferred to United matched the payments ultimately made to providers. UHG retained the difference between amounts collected from the plans and amounts paid to providers under a practice described as a shared savings plan, plaintiffs alleged.

The lawsuit cites testimony in a separate Nevada case involving UHG’s shared savings practices. A former UnitedHealthcare executive testified at a 2021 trial that fees could exceed payments to providers and that United earned $1.8 billion in such fees in 2020, according to the complaint.

The employers argue that the fees were unreasonable because they already paid United to properly adjudicate claims and administer their plans.

Incomplete claims data alleged

The lawsuit also challenges UHG’s alleged failure to provide complete medical claims data, including electronic remittance advice records known as 835 files. Those records detail claim payments and adjustments, allowing employers and providers to determine what was billed, what was paid and why a payment differed from the original charge.

The complaint alleges UHG failed to provide the records despite contractual obligations to make claims data and payment information available to the employers.

Plaintiffs argue that access to the data is essential to auditing UHG’s work, identifying improper payments and determining whether the company complied with federal health care transaction standards.

Plaintiffs seek a preliminary injunction requiring UHG to provide complete claims data and an order ensuring plan sponsors or their authorized representatives can access 835 records associated with covered medical encounters, subject to applicable privacy protections.

The complaint asserts claims involving alleged breaches of fiduciary duty, prohibited transactions under ERISA, breach of contract, breach of the implied covenant of good faith and fair dealing, negligence, gross negligence and unjust enrichment.

Plaintiffs contend that UHG acted as an ERISA fiduciary because of its contractual designations, discretionary authority over benefit determinations and control over plan assets.

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.