health insurance

🌭 Ketchup (Kraft-Heinz) vs. Mustard (Aetna)

Aetna served as Kraft Heinz's TPA since 2012, processing over $1B in claims. Kraft Heinz accuses Aetna of breaching their duty as the plan administrator.

I decided to go deeper than headlines and news clippings today. My target? The Kraft Heinz lawsuit against Aetna going on right now in federal court. 

Here's what you need to know: 👇

Aetna has served as Kraft Heinz's Third-Party Administrator (TPA) since 2012; it has processed over $1B in claims in that time. Kraft Heinz accuses Aetna of breaching their fiduciary duty as a plan administrator under the Employee Retirement Income Security Act (ERISA).

Aetna's maneuvers, Kraft Heinz alleges, are all about maximizing profit at Kraft Heinz's expense. The allegations detail:

✖️ Cross-Plan Offsetting
🔄 Reprocessing Claims
💸 Taking More from the Plans Than It Pays Out-of-Network Providers
🧑‍⚕️ Using Exclusion Lists to Limit Claims Scrutiny
👥 Commingling Plan Funds with Its Own Funds
🚫 Less Rigorous Claims Adjudication Standards to Self-Funded Plan Claims Than Its Fully Funded Plans
💾 Refusing to Provide Claims Data

Let's dive into each of these:

Cross-Plan Offsetting: Aetna overpays providers using funds from Kraft Heinz. Rather than collect the overpayment back from the provider, Aetna deducts the overpaid amount from the next payment to the provider. Often, however, the “next” reduced payment (or offset) comes from a different plan such that the reduced amount of the “next” payment does not benefit Kraft Heinz. Instead, that “next” payment comes from either another self-funded plan or, most frequently, one of Aetna’s fully insured plans. So, another self-funded plan or Aetna itself, in the case of a fully insured plan, gets the benefit of the reduced payment amount.

Reprocessing Claims: Aetna takes funds from Kraft Heinz in an amount close to the provider-billed amount or the amount the provider is owed pursuant to an in-network agreement. Aetna frequently reprocesses the claims. It does this for one reason: to adjudicate the claims at an amount lower than the amount taken from the plan. As a result of the reprocessing, Aetna uses the lower reprocessed amount to justify paying the provider less than the billed amount or the amount Aetna otherwise would be contractually required to pay the provider. Aetna is able to obtain negotiating leverage over the provider because reprocessing the claim, whether justified or not, results in a substantial delay of any payments to the provider.

Out-of-Network Claims: When Aetna receives a claim from an out-of-network provider, it frequently engages a “repricing” company or companies to negotiate a lower amount that Aetna actually pays the providers. The repricing companies have one job: to delay payment until the provider’s biller relents and agrees to accept an amount well below the billed amount and well below what Aetna wrongfully obtained from the plan. If one repricing company is not making headway with a provider, then Aetna shifts the claim to another repricing company, and then another, and then another. Aetna’s agreements with the repricing companies require it to pay them a percentage of the amount they “save,” i.e., a bounty. Aetna pays the repricing companies from the excess funds it wrongfully obtains from the plans. Aetna does not pay the repricing companies their “bounty” from the per-member per-month fee Kraft Heinz pays to Aetna. Rather, Aetna extracts the “fee” for the repricing companies from the amounts it seeks and obtains from Kraft Heinz to pay provider medical claims.

Exclusion Lists: To induce providers to join Aetna’s network of providers and enter into “in-network” agreements, and perhaps for other reasons, Aetna agrees to place providers on “exclusion lists.” A provider on this list benefits because being on this list commits Aetna to providing no scrutiny or limited scrutiny of the claims the providers submit for reimbursement. Or, it commits Aetna to scrutinize and properly adjudicate only a small number or a small percentage of the claims submitted for adjudication.

Commingling Plan Funds with Its Own Funds: Aetna directs the plans to fund their accounts in certain bulk and undifferentiated amounts. Aetna transfers funds from the plans’ accounts not to providers but to an account or accounts owned and controlled by Aetna or one of its affiliates. Aetna makes payments to providers from the Aetna account or accounts. The Plans have no access to these accounts, so they do not know how much the providers receive for specific claims and whether that matches the amounts the Plans transferred to Aetna for those specific claims. Aetna’s continued refusal to produce the underlying financial information needed to link financial transfers to the medical claims continues to inhibit Kraft Heinz’s ability to assess the extent to which Aetna is fully compensating providers for the services provided and whether the amount paid is commensurate with what is being drawn from the Plan.

Less Rigorous Claims Adjudication Standards to Self-Funded Plan Claims Than Its Fully Funded Plans: When Aetna is not responsible for paying claims with its own money, and instead pays claims with money from self-funded plans, Aetna applies far less rigorous standards for accepting, processing, and paying claims submitted for payment. As a result, the claim rejection rate for self-funded plans generally is lower than the rate for Aetna’s fully insured plans. As a fiduciary, Aetna must devote equal resources of these departments to claims submitted to fully insured plans and self-funded plans. It cannot prioritize its own interests to the detriment of those for whom it acts as a fiduciary. Yet, the bulk of Aetna’s overpayment, subrogation, coordination of benefits, and fraud, waste, and abuse efforts are devoted to claims submitted to Aetna’s fully insured plans. By prioritizing its own assets and resources to the detriment of the Plans, Aetna has breached and continues to breach its fiduciary duty to the Plans.

Not Providing Claim Data: On September 22, 2021, Kraft Heinz’s Senior Counsel, Litigation, sent a letter to Thomas Moriarty, Executive Vice-President, Chief Policy and External Affairs Office, and General Counsel for CVS Health Corporation regarding Kraft Heinz’s investigation into Aetna’s claims administration. On September 28, 2021, Hillary Dudley, Senior Legal Counsel at Aetna responded to Kraft Heinz and invited a discussion of the letter. On or about October 12, 2021, Kraft Heinz’s Senior Counsel, Litigation wrote to Ms. Dudley requesting from Aetna Kraft Heinz standard transaction data sets and related information. Seven weeks later, Ms. Dudley responded that she was “not familiar with the items requested in your letter.” It is implausible that Aetna’s senior counsel does not know about the regulatory required standard transactions, the backbone on which Aetna’s core business runs. 

In addition, the Agreements with the Plans contain limited “audit” provisions that prevent the Plans from assessing Aetna’s practices and from understanding how the Plans’ money was actually spent. For example, in the 2015 Agreement: 

a. Aetna presses the Plans to limit its audit sample to 250 claims. On average, Aetna processes more than 100,000 medical claims annually for the Plans such that the Plans can audit no more than 0.25% of processed claims.
b. The audit must be at Aetna’s location.
c. Aetna can veto any auditor chosen by the Plans.
d. The Plans have to identify for Aetna the claims to be audited four weeks before starting the audit.
e. Aetna has to agree how the claims to be audited were selected.
f. Aetna has the right to see the draft audit report and meet with the auditors before any draft goes to the Plans.
g. The results of any audit cannot be extrapolated across the entire population of claims.

In other words, Aetna’s contractual audit provisions deprive Kraft Heinz of any visibility into, much less a remedy for, any improperly processed but unaudited claims. Kraft Heinz had no choice but to accept these terms. 

Wow. The accusations in this filing are wild and crazy. As the old saying goes, sunlight is the best disinfectant. Hopefully, as a result of this lawsuit, employers will get better line-of-sight into these massive, for-profit insurers so that we can begin to reign in unearned profits and lower healthcare costs for working people!

The full lawsuit can be found here: 👉 link

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