The Kraft Heinz Precedent: Is Your TPA Protected from ERISA Liability?

Nov 28, 2025

The year is 2025, and we've put self-driving cars on the road, have AI writing our emails, and can 3D print a house in 24 hours. Yet somehow, the medical billing industry operates like it's stuck in 1985, with error rates that would bankrupt any other business in America.

A staggering 80% of medical bills contain errors, with the average patient overpaying by $1,300. That's not a typo — you're more likely to get an incorrect medical bill than a correct one. It's the equivalent of Vegas rigging the slot machines, except instead of tourists, they're targeting patients at their most vulnerable. Let's expose the most expensive billing errors that are hiding in plain sight on your medical statements and arm you with the knowledge to fight back.

If your finance department discovered that a vendor was routinely overcharging you by 3% on every invoice, and that your accounts payable team was aware of the errors but lacked the resources to dispute them, you would immediately overhaul your internal controls. You would view this not just as an operational inefficiency, but as a failure of fiduciary governance. Yet, this is the precise reality for most self-insured health plans today. The legal landscape of benefits administration is shifting. In 2023, The Kraft Heinz Company sued Aetna, alleging that the insurer leveraged its role as a Third Party Administrator (TPA) to enrich itself to the detriment of the plan sponsor. While the specific legal outcomes of such cases vary, the signal to the market is unambiguous: passive administration is no longer a defense. If your organization is self-insured and relies solely on your TPA for claims integrity, you are likely exposing your plan to avoidable financial leakage and your board to rising ERISA liability. Here is why the structural gap exists and how fiduciary standards are evolving to close it.

The Most Expensive Mistakes on Your Medical Bill

1. Duplicate Charges

The Structural Conflict: Velocity vs. Veracity

This is the equivalent of paying twice for the same apple. Duplicate charges occur when you're billed multiple times for a single procedure, test, or medication. They're shockingly common — appearing in nearly 40% of medical bills. How it can happen:

A nurse documents a medication in two different systems
A lab test gets entered at both ordering and completion stages
Multiple departments bill for the same consultation

The core issue stems from misaligned incentives rather than malice. TPAs are contractually obligated to process claims with speed and efficiency to meet Service Level Agreements. Their systems utilize "auto-adjudication" to pay claims quickly, which maintains provider relationships and avoids penalties. This focus on velocity creates inevitable blind spots regarding veracity. Standard processing workflows miss 2-3% of errors on medical claims. For a plan with $100 million in annual spend, that equates to ~$3 million in avoidable leakage every year. When TPAs do not audit properly, plan sponsors pay the price. The Kraft Heinz complaint alleged that Aetna breached its fiduciary duties by engaging in prohibited transactions and failing to act in the best interest of the plan. Under ERISA, the ultimate responsibility for prudent plan management rests with the plan sponsor, not the administrator.

2. Upcoding

Why Legacy Audits Fail the Fiduciary Test

When Your Cold Becomes Pneumonia (on paper). Upcoding occurs when a simple procedure is billed as a more complex, expensive one. Sometimes this is an honest mistake; other times it's a deliberate attempt to maximize reimbursement. Common upcoding scenarios: A basic office visit (Level 2) billed as a comprehensive exam (Level 4) A simple wound treatment billed as a complex wound closure Routine blood work billed as advanced laboratory testing "Upcoding alone costs patients and insurers an estimated $11 billion annually."

Plan sponsors have historically attempted to mitigate this risk through random sampling or high-dollar threshold audits. These methods are mathematically insufficient for the complexities of modern billing. 1. The Fallacy of Sampling: Legacy tools typically review only a fraction of claims or focus exclusively on outliers. This approach leaves the vast majority of claim volume unchecked. In a modern billing environment, leakage distributes across thousands of mid-sized claims containing nuanced coding errors, such as modifier abuse or quantity mismatches. 2. The "Black Box" of Automated Denials: Many existing solutions rely on opaque algorithms that flag claims without context. This leads to high false-positive rates and provider abrasion. A fiduciary process requires defensible detection backed by clinical evidence. Without reviewing medical records to verify intent, systems cannot effectively distinguish between a necessary medical deviation and a billing error.

3. Misapplied Insurance Payments

A New Standard for Financial Rigor

Your insurance paid their part, but somehow it never made it to your bill. This error typically happens when payments are applied to the wrong patient account or service date. Red flags include: Bills that don't reflect any insurance adjustments Charges that your insurance says they've already paid Bills that don't match your Explanation of Benefits (EOB)

To protect against liability and stop leakage, self-insured employers must move beyond passive reliance on TPA adjudication. The standard for prudence is shifting toward 100% claim auditing using advanced Machine Learning models capable of reviewing every line item at the patient level. Effective oversight requires a system that can execute three specific functions. First, it must audit every claim for code and contract errors post-pay rather than relying on samples. Second, clinicians must validate ML findings to ensure flags are based on medical necessity and contract adherence rather than simple statistical anomalies. Finally, the process must close the recovery loop. Identifying an error is insufficient; a robust fiduciary process must track the dispute cycle through to the actual recovery of funds.

4. Phantom Services

Moving from Passive Administration to Active Governance

These are charges for services you never received. Maybe a doctor ordered a test but later canceled it, or perhaps you were scheduled for physical therapy but couldn't make the appointment. Either way, you're still being billed. Common phantom services: Canceled lab tests or imaging studies Scheduled but not delivered consultations Standard protocols that weren't actually performed

The Kraft Heinz v. Aetna case serves as a precedent because it exposed the fragility of the traditional relationship between TPA and plan sponsor. It demonstrated that when TPAs fail to audit properly, plan sponsors are willing to seek equitable relief in court. For CFOs and benefits leaders, this opportunity allows you to apply the same level of financial rigor to healthcare claims that you apply to every other major expense category. Implementing independent, comprehensive auditing stops systematic overpayments, recovers millions in lost capital, and demonstrates the high level of fiduciary oversight that modern ERISA standards demand.

5. Incorrect Patient Information

A simple typo in your birthdate, insurance ID, or name can result in denied claims and full charges falling to you. These errors are particularly common when you've recently changed insurance plans.

Your Self-Audit Checklist

Think of this as your financial self-defense toolkit against medical billing errors:

Step 1: Request Documentation Ask for a detailed, itemized bill (not just a summary) Obtain your medical records for the visit Get a copy of your Explanation of Benefits from your insurance

Step 2: Basic Verification Confirm your personal information is correct (name, DOB, insurance) Check that service dates match when you actually received care Verify that your insurance was properly applied

Step 3: Line-by-Line Review Match each service on your bill to your medical records Look for identical charges appearing multiple times Question any service you don't remember receiving Check medication quantities (were you really given 10 pills?)

Step 4: Insurance Validation Compare the amount your insurance paid on your EOB to your bill Verify that contracted discounts were applied Confirm that in-network providers were billed as in-network "The most costly errors are often hidden in plain sight — identifiable with just a careful review."

How Avelis Finds Hidden Errors in Seconds

While the self-audit checklist above works, it's time-consuming and requires medical billing knowledge most people simply don't have. That's where technology comes in. Avelis has developed an AI-powered system that can scan medical bills and instantly identify errors that human eyes might miss. The process works like this:

Rapid Documentation Analysis: Avelis scans your medical bills, EOBs, and medical records simultaneously
Pattern Recognition: The system identifies inconsistencies across documents that indicate potential errors
Code Verification: Each billing code is checked against medical documentation to ensure accuracy
Insurance Compliance Check: The system verifies that your insurance benefits were correctly applied
Error Flagging: Any discrepancies are flagged for human review and potential savings.

The Bottom Line

Medical billing errors aren't just common — they're the norm. With 80% of medical bills containing at least one error, it's not a question of if you're being overcharged, but by how much. While hospitals and insurance companies have little incentive to fix this broken system, patients now have the tools to fight back. Whether you're using the self-audit checklist above or leveraging technology like Avelis, taking control of your medical bills isn't just good financial hygiene — it's necessary self-defense in today's healthcare system. Remember: No one cares about your money as much as you do.