Compliance August 2, 2023

UnitedHealth Group Insurance TPA, UMR Sued by DOL

The Department of Labor’s complaint may indicate health care regulations are going the way of rules for retirement plans. 

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Insurance company UMR Inc. was sued Monday by the Department of Labor for allegedly breaching plan documents under the Employee Retirement Income Security Act by denying certain emergency room claims based solely on diagnosis codes and not the standard established by the Patient Protection and Affordable Care Act.

The DOL, in the name of Acting Secretary Julie Su, sued the third-party benefits administrator on two counts of ERISA fiduciary breach. The claims are in connection with UMR denying emergency services claims and urinary drug screening claims for thousands of health plan participants, according to the complaint.

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“Specifically, UMR violated ERISA, including ERISA’s prudence provisions and requirement to follow plan documents under ERISA § 404, 29 U.S.C. § 1104, by denying ER claims based solely on diagnosis codes and not applying a prudent layperson standard,” the DOL alleges. “UMR’s explanation of benefits for denied emergency services claims [also] failed to comply with the requirements of the ACA [Affordable Care Act] and the U.S. Department of Labor’s claims procedures regulation.”

The lawsuit is Julie A. Su v. UMR, Inc. The complaint was filed in U.S. District Court for the Western District of Wisconsin.

UMR is a third-party administrator providing services to self-funded employee welfare benefit plans, that provide medical, surgical, or hospital care or benefits to participating employees, the complaint explains. UMR is headquartered in Wausau, Wisconsin.

UMR provided services to at least 2,136 ERISA-covered health plans, the complaint says. United Health Group Inc. is the parent company for UMR, notes the complaint. According to UnitedHealth, UMR is the nation’s largest TPA, the complaint states.


The Lawsuit

The DOL claimed UMR’s procedures failed to comply with standards set under The Patient Protection and Affordable Care Act, which is incorporated in ERISA and the terms of the ERISA plans UMR administers, DOL says.

A UMR representative, responding to a request for comment on the lawsuit by email, explains that the complaint deals with administrative processes that are no longer in place.

“We have been in ongoing conversations with the DOL regarding this matter and will continue to defend our position vigorously,” says the UMR spokesperson.


Early ERISA Indications

The DOL’s complaint may indicate that the regulator is elevating its’ enforcement actions against providers in the private health care industry, using ERISA lawsuits to bolster heightened fiduciary standards and increased transparency.

“We can expect increased enforcement actions by the Department of Labor with regard to welfare plans—health plans in particular,” says Douglas Neville, St-Louis-based ERISA attorney, officer and practice group leader at Greensfelder, Hemker & Gale, P.C Neville. “Although ACA was passed more than a decade ago, it added a staggering volume of new rules for health plans. The DOL is one of the agencies tasked with enforcement of those rules, so it is not surprising that we are seeing more DOL actions regarding health plans.”

In the course of DOL’s general investigatory initiatives, the regulator has sued self-funded medical and other health and welfare benefits providers that are unrelated to retirement.

“There was some lag between ACA’s passage and the uptick in DOL enforcement activity—in part because it took years for regulatory guidance under ACA to be issued,” adds Neville. “But there has been an increase in DOL scrutiny of health plans and fiduciary practices in connection with those plans in recent years. I expect that trend will continue for some time.”

In 2020, Congress passed the Consolidated Appropriations Act, furthering the DOL’s ability to regulate health care providers.

The transparency rules stemming from what is commonly called CAA ‘21 imposed several new obligations on plan fiduciaries, similar to the rules that have governed retirement plan fiduciaries, explains Drew Oringer, partner in and general counsel at the Wagner Law Group, which is not involved in the litigation.   

“Congress also has indicated interest in purported abuses, in passing new disclosure rules in the CAA to track certain indirect compensation under covered group health plans,” Oringer adds. “It will be interesting see whether the DOL’s efforts in this regard reflect a basic change in investigative priority, or whether these examples represent individual alleged abuses to which the DOL was made aware.” 

DOL’s enforcement efforts for health plans go back to the 2016 fiduciary rule, adds Oringer.

“The DOL, when amending the fiduciary rule [in 2016], was clear as to its concern about retail investment practices, and even though the amended fiduciary rule was vacated, that concern does not appear to have waned,” he says. “If the DOL is or were to become similarly concerned about health-plan practices, it is not impossible that we could see the kind of concerted activity that we’re used to seeing in the [defined contribution] arena.”


Is it a Trend?

The DOL reached a settlement with Prudential Insurance Company of America, earlier this year, Oringer notes.

Whether the Prudential settlement and UMR lawsuit indicate the DOL is pursuing health care plans, “It may be too early to say that ‘two’ is a trend,” Oringer notes.

“It is difficult to tell from the [UMR] case whether these claims have resulted from a general DOL initiative regarding investigations of insurers’ practices, or whether this particular allegedly abusive situation specifically came to the DOL’s attention,” explains Oringer.  

The DOL posted FAQs on implementing certain provisions of the Affordable Care Act and CAA ‘21 earlier this year.

Hugh O’Toole, CEO of Innovu LLC, a benefits consultancy that offers services related to CAA ’21 to plan sponsors, says the lawsuit is part of a trend. 

“It is 2006 all over again but instead of retirement now [lawsuits are against] health insurance,” he explains.  

In this litigation, the DOL is asking the court to require UMR to reform its procedures for ER claims and UDS claims to comply with ERISA; readjudicate all such claims that were denied or partially denied from January 1, 2015, to present,  and require UMR from future violations of ERISA; and granting such other relief as may be appropriate. 

Requests for comment to the DOL were not returned.

Data and Research August 2, 2023

Retirement Savings Gap Widens Further Between High, Low-Income Employees

High-income households increasingly hold larger retirement account balances than lower income households and are more likely to reap tax perks associated with workplace plans, GAO research shows.

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Retirement account balances of high-income households were drastically higher than low-income households in 2019 compared to 2007, exemplifying that disparities in retirement savings across socioeconomic class and race still persist, according to new data from the Government Accountability Office.  

The median retirement account balance for households aged 51 to 64 for the highest income group in 2019 was $605,000. This balance is nine times higher than that of middle-income households in 2019, which was $64,300, GAO found. 

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This retirement savings gap has widened significantly since 2007, when high-income households had a median retirement account balance that was about four times higher than middle-income households—which was $86,000compared to $33,000, respectively.  

In 2022, tax incentives for workers to save in tax-preferred retirement accounts cost the federal government nearly $200 billion in forgone revenue, according to the Department of the Treasury. As a result, Congress is concerned that federal tax incentives for workers in tax-preferred retirement accounts are going mostly toward higher income workers and are doing little to help lower-income workers save for retirement. 

Senator Sheldon Whitehouse, D-Rhode Island, and Senator Bernie Sanders, I-Vermont, asked the GAO to examine disparities in the distribution of retirement account balances across income class, age and race. 

Tax Breaks Benefit High Earners 

In its report, the GAO found that low-income households were less likely to even have a retirement account balance in 2019 than in 2007. Ten percent of low-income households had a balance in 2019, compared to 20% in 2007. For high-income households, 90% had a retirement account balance in both 2007 and 2019. 

“For those with a balance, the median balance was higher for high-income households over the period, while any chance for the other income groups was not statistically significant,” the report stated. 

Only about 23% of low-income workers have access to a workplace retirement account and many may not choose to participate if they have limited disposable income or expect Social Security to provide most of their income in retirement. Increasing contribution limits for workplace retirement accounts almost entirely benefits high-income workers, GAO argued, as about 23% of high-income compared with about 3% of middle-income older workers contribute up to the individual limit.  

Angela Antonelli, research professor and executive director at the Georgetown University Center for Retirement Initiatives, said via email that an estimated 57 million private sector workers lack access to retirement savings, and most of those workers are employed by businesses with fewer than 20 employees and earn less than $50,000 per year.  

“State-facilitated retirement savings programs are designed to reach these forgotten employers and workers and while significant progress is being made, we still have a long way to go,” Antonelli argued. 

GAO reported that “limited access to workplace retirement accounts continues to be an impediment to expanding the percentage of households with retirement savings.” 

GAO also found that high-income households are much more likely to benefit from tax perks associated with retirement plans, whereas low-income households are more likely to make hardship withdrawals, thus causing them to pay additional taxes.  

More than twice the share of low-income households than high-income households withdrew all the money from their workplace account when they left their employer between 2016 and 2018, the report shows. 

Other Factors and Disparity 

Besides income, job-related factors and race were strongly related to disparities in older worker households’ retirement account balances. As a whole, households with higher income, longer job tenure and a college education tended to have larger balances and received larger employer contributions, according to GAO’s analysis. 

In addition, non-white households and households with children had about 28% and 20% smaller balances, respectively.  

For example, about 63% of white households had a retirement account balance in 2019, compared to about 41% of households of all other races than white. For Black or African American households, GAO found a significant decline from 50% with a retirement account balance in 2007 to 35% in 2016. 

In 2019, white households had median balances of about $164,000, about twice that as households of all other races, where median balances were about $80,300.  

Low-income households are also more often divorced, widowed or separated and tend to experience unemployment more frequently. All the factors can impact overall retirement savings, the research found. 

Antonelli added that plan sponsors “can and should do more to boost plan participation, such as offering a plan and using auto-enrollment,” which GAO points out is highly effective.  

“However, there are also powerful headwinds that make saving challenging for many lower income workers and disproportionately affect people of color, including the lack of employment opportunities and education and income inequality,” she said.  

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