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Kraft Heinz sues Aetna, says insurer ‘breached’ ERISA fiduciary duties

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The Kraft Heinz Company sued insurer Aetna on June 30 in a Texas federal court, alleging that Aetna “breached its fiduciary duties and engaged in prohibited transactions” while administering Kraft Heinz’s self-funded medical and dental plans and “leveraged its role as [third party administrator] to enrich itself to Kraft Heinz’s detriment.”

Specifically, Kraft Heinz alleged that Aetna paid millions in provider claims “that never should have been paid” and “wrongfully retained millions of dollars in undisclosed fees” since the beginning of 2012. Aetna also engaged in misconduct related to claims processing, Kraft Heinz claimed.

An Aetna spokesperson told HR Dive in an email that the company had no comment on the lawsuit, which Kraft Heinz filed in the U.S. District Court for the Eastern District of Texas.

Per the lawsuit, the two companies’ relationship dates back to at least 2007. In the excerpt of a 2015 agreement between the companies, Aetna is identified as a fiduciary as defined by the Employee Retirement Income Security Act. Per the agreement, Aetna is required to “observe the standard of care and diligence required of a fiduciary under ERISA” and has a duty to identify, deny and prevent payment of fraudulent or improper claims.

But Kraft Heinz alleged that Aetna breached its fiduciary duty under ERISA by approving fraudulent claims without first determining whether the claims were legitimate, then failed to recover payments made to providers for those claims on behalf of Kraft Heinz’s self-funded plan.

Aetna would allegedly engage in “cross-plan offsetting,” per the lawsuit, in which Aetna would overpay providers using funds from Kraft Heinz’s plans and, rather than collect overpayments from providers, deducted the overpayment amount from its next payment to the same 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 [the plaintiffs],” Kraft Heinz said. “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.”

Cross-plan offsetting by insurers has previously been the subject of lawsuits, though federal courts have split on the issue of whether the practice constitutes a breach of fiduciary duty under ERISA, according to a 2022 article by law firm Kutak Rock.

Kraft Heinz further alleged that “Aetna applies far less rigorous standards for accepting, processing, and paying claims submitted for payment” within self-funded plans — such as those operated by Kraft Heinz — than it does for plans that are fully insured by Aetna.

The food and beverage company seeks injunctive relief as well as financial recovery of losses resulting from Aetna’s alleged breach of fiduciary duty.

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