Eighth Circuit Affirms Dismissal of Putative Class Action Challenging United’s Cross-Plan Offsetting due to Lack of Article III Standing

Smith v. UnitedHealth Grp. Inc., No. 23-2369, __F.4th__, 2024 WL 3321646 (8th Cir. July 8, 2024) (Before: Colloton, Chief Judge, Erickson and Kobes, Circuit Judges).

Plaintiffs, who are participants in separate self-funded health insurance plans administered by UnitedHealth Group Inc. (“United”), appealed the district court’s dismissal of their putative class action complaint alleging that United’s practice of cross-plan offsetting violated its fiduciary duties under ERISA. The Eighth Circuit affirmed the dismissal, concluding that Plaintiffs lacked Article III standing.

United administers fully insured and self-funded health insurance plans governed by ERISA. Plaintiffs’ self-funded health benefit plans contain recoupment provisions that permit United to recover amounts overpaid to a provider under one health plan by not paying or paying less on other claims charged by the same provider under a different health plan; a practice described as cross-plan offsetting. The health plans also give United the discretion to decide how to implement cross-plan offsets when paying benefits. Plaintiffs underwent medical procedures covered by United. When United paid their bills, it paid the providers less than the amount covered based on an offset from a past overpayment. They allege that the offsets leave them liable to the providers for the unpaid difference, but they did not allege that the providers were seeking payments from them for the shortfall.

Plaintiffs filed a putative class action lawsuit against United seeking to represent other self-funded plan participants who had at least one claim not paid in full due to United’s cross-plan offsetting. United moved to dismiss under FRCP 12(b)(1) because Plaintiffs have not suffered a concrete injury and lack standing. It also moved to dismiss under FRCP 12(b)(6) for failure to state a claim. The district court dismissed Plaintiffs’ claims under FRCP 12(b)(1) for lack of constitutional standing. Plaintiffs appealed.

On de novo review, the Eighth Circuit upheld the dismissal on the basis that Plaintiffs have not suffered a concrete injury. Even if there is a statutory violation, a plaintiff must still demonstrate a concrete injury. Here, the health plans specifically allow for cross-plan offsetting so Plaintiffs are not contractually entitled to having payment of approved benefits be made in cash, distinguishing this case from Mitchell v. Blue Cross Blue Shield of North Dakota, 953 F.3d 529 (8th Cir. 2020) and Carlsen v. GameStop, Inc., 833 F.3d 903 (8th Cir. 2016). Plaintiffs argued that United breached its fiduciary duties under ERISA because the plans’ language is inconsistent with ERISA. “By seeking to construe their plans consistent with ERISA, Smith and Ghanim have asserted a statutory cause of action but have not shown a concrete injury.” Lastly, the court found that Plaintiffs did not allege a material risk of future harm to satisfy the concrete-harm requirement because the risk that providers will seek to collect on their outstanding debts in the future is speculation and not sufficiently imminent and substantial. Dismissal affirmed.