DOL Settles in ERISA Fiduciary Breach Investigation Involving Cross-Plan Offsetting

On September 29, 2023, the DOL entered into a settlement agreement with EmblemHealth Inc. (“Emblem”), a New York-based insurer and third-party administrator (TPA) of ERISA group health plans, resolving claims that Emblem breached its fiduciary duties under federal law by engaging in a practice known as “cross-plan offsetting.”

According to the DOL’s investigation, Emblem used “cross-plan offsetting” to recoup alleged overpayments made to healthcare providers under employer-sponsored group health plans. Specifically, Emblem recovered its overpayments to providers by withholding subsequent payments owed to the same providers for healthcare expenses incurred by participants covered under completely different ERISA group health plans. The DOL alleged that this practice violated Emblem’s ERISA fiduciary duties because Emblem benefitted at the expense of the ERISA group health plans and their participants by wrongfully retaining assets from one health plan for a debt allegedly owed by a different health plan.

Additionally, cross-plan offsetting harms participants in the out-of-network setting because participants are at risk of being balance billed by out-of-network providers for the offset claims. Balance billing is when an out-of-network provider charges a participant the difference between the provider’s charge and the allowable amount under the plan. In this case, the balance billing may happen because the insurer withheld payment to the provider to recoup the overpayment made on another group health plan even though the participant’s healthcare services obtained from the out-of-network provider should have been covered by Emblem.

Under the settlement, the insurer agreed to stop engaging in cross-plan offsetting and amend its policies, procedures, and practices no later than January 1, 2024, or as soon as reasonably practical for insured plans prospectively. Additionally, with respect to retrospective corrective actions dating back to July 16, 2015, the insurer must repay current and former participants and beneficiaries whose reimbursements were reduced due to its cross-plan offsetting practice according to the details outlined in the settlement agreement.

In response to this settlement agreement, employers, especially self-insured ERISA plan sponsors, should carefully review their plan’s terms relating to the claim overpayment recovery process to ensure that it complies with the ERISA rules. Moreover, self-insured employers should review the administrative services contract or other contracts with their TPA that administers plan claims to determine whether the plan’s TPA engages in the cross-plan offsetting practice. If the plan terms include cross-plan offsetting practice, it is advisable to review these issues with legal counsel.

Settlement Agreement »
News Release »