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Overpayment Refunds from Providers (for your eyes only)

Overpayment Refunds from Providers (for your eyes only)
Candid (non-legal) advice from SPBA Active Past President Fred Hunt

Nothing from SPBA should ever be considered legal advice.  Only a competent attorney with access to all the facts can render a legal opinion.  Below is merely a generic description.

We occasionally get calls from SPBA members asking how to get (or force) refunds from doctors or medical facilities for overpayments (even those for which there is no argument if there was overpayment or even duplicate payment).  My response is to ask if the caller would like the short answer or the long answer.  The short blunt answer is “Lots of luck”.

The long answer is that the main law relating to plan assets is ERISA fiduciary duty.  That is what assures prudent honest dealings from TPAs & plan sponsors.  However, fiduciary duty only applies to entities to the extent that they have discretionary power over plan assets & administration (such as a TPA with power to evaluate & approve payment of a claim).  A vendor, such as a medical provider, did not evaluate & approve the overpayment.  The provider/vendor simply received it.

Of course, the honorable thing for the vendor to do would be to investigate, and if an error was made, refund the overpayment, just as they would expect if they had accidentally overpaid a store, restaurant or law firm.   Unfortunately, too many medical entities seem to have a mental block and often imaginative reasons why their system could not do a refund.

WARNING:  ERISA is not an ally in this!  In fact, DOL’s first reaction would be to look at the TPA (or whoever made the payment) and view the overpayment as a goof caused by the TPA, and thus the TPA becomes the scapegoat to be held responsible.  Also, if you think you can (and the provider might even offer) simply deduct the overpayment from the next bill for some other plan participant, DO NOT DO IT.  Though it seems like common sense, you would actually be committing a breach of fiduciary duty, because ERISA looks at each transaction separately.  So, if you fail to pay the full proper amount for patient #2, you have cheated #2 of the full promised benefit (especially if the provider or later debt collector ever “forgets” or “loses” the overpayment trade-off deal, and starts harassing  plan participant #2 or the plan.)

What if it was fraud or waste?  Unfortunately, DOL has always avoided getting itself into positions of judging or second-guessing the professional judgment or pricing of medical providers.  So, fraud & waste doesn’t spark them into action, and, again, DOL is apt to see it as a failing of the TPA (whom they think of as all-knowing experts) to spot and stop the fraud or waste.

So…the applicable law for overpayment situations would normally be like any ordinary business transaction, just as if you accidentally paid too much for a car repair.  Therefore, the applicable laws & remedies would be the business laws for that kind of situation in that state.  These vary, so you have to check, but you can usually ask a local business law attorney or state consumer or legal office for insights & options about reclaiming overpayments (and it is often easier to start the conversation in general rather than saying it is a health payment).