Six Companies Sue UnitedHealth, Alleging Fiduciary Duty Breaches in Employee Benefit Plans

UnitedHealth Group was sued by six employers on October 20, who alleged the insurance provider routinely approved and paid false, fraudulent and inflated medical claims with employee health plan assets while collecting undisclosed fees.

The plaintiffs include Aramark Services Inc., Kraft Heinz Foods Co., Ralph Lauren Corp., Sterling Jewelers Inc., W.W. Grainger Inc. and Whirlpool Corp., as well as the benefit plans and committees that hired UnitedHealth as a third-party administrator in 2020.  

Filed in the U.S. District Court for the Eastern District of Texas, Aramark Services Inc. et al v. United Health Group Inc. et al. stated that UnitedHealth, as the plaintiffs’ TPA, served as a fiduciary under the Employee Retirement Income Security Act in three separate ways.

First, UnitedHealth was an ERISA fiduciary by “express designation by the ERISA plan documents,” according to the complaint.

The plaintiffs said they each had an agreement with UnitedHealth where it was established that the health insurance provider would serve as a named ERISA fiduciary, and they said UnitedHealth also represented itself as an ERISA fiduciary when acting as a TPA to judicial officers in other proceedings.

UnitedHealth was also a functional fiduciary since it exercised discretionary authority over benefit determinations, claims processing, approvals and denials of claims and overpayment recovery renders, according to the complaint. UnitedHealth was also considered a fiduciary by virtue of its control over plan assets.

The plaintiffs alleged that while UnitedHealth was supposed to withdraw the amount of money from plans for claims-related expenses, its automated claims processing system routinely approved and paid claims without proper human review. The automated system allegedly missed billing codes, duplicated claim charges and uncovered services and pricing significantly above market rates.

Employers also accused UnitedHealth of engaging in self-dealing by paying higher rates to more than 2,500 providers it owns, and used a practice called cross-plan offsetting that recovered overpayments in ways that benefited UnitedHealth’s own insured business rather than the self-funded employers whose money was initially overspent.

According to the complaint, UnitedHealth’s fee arrangements for out-of-network claims often left plaintiffs paying UnitedHealth or its affiliate, MultiPlan Corp., more in fees than the amounts paid to participating healthcare providers.

“United[Health]’s duty of loyalty required it to act solely in the interest of plan participants and beneficiaries. A critical component of that duty was providing plaintiffs with complete and accurate medical claims data so that plaintiffs could verify United[Health] was properly administering the plans,” the complaint stated. “United[Health] breached this duty by withholding, manipulating and corrupting the claims data that belonged to plaintiffs.”

Some plaintiffs, such as Kraft, Ralph Lauren and Sterling Jewelers, alleged to have received no usable data at all.

Employers are seeking a preliminary injunction to force UnitedHealth to turn over the full claims data, along with reimbursement for alleged losses, disgorgement of profits and punitive damages, along with a jury trial.

“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,” a UnitedHealthcare spokesperson wrote to PLANADVISER in an email.

According to the company’s website, UnitedHealthcare’s national accounts platform serves more than 500 employers, each with at least 5,000 employees.

Plaintiffs were legally represented by law firm McKool Smith P.C., which did not respond to requests for comments.