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When You Overpay a Provider

This isn't what you want to hear.  ERISA doesn't really focus on overpayments to providers and the fiduciary duty thereof (assuming that the provider didn't do something blatantly fraudulent such as knowingly billing for something that was never done).  Add to that DOL's hesitancy to ever challenge or pressure the medical community, and you have a predicament.  Yes, we purists can make a great argument about ERISA fiduciary duty, but it is like threatening the provider with a wet noodle.

In fact, (again, assuming no flagrant fraud by the provider that caused the overpayment), DOL tends to look at the TPA to blame.  Fiduciary duty only applies to entities which have any discretionary power in deciding the handling of plan assets and benefits for plan participants.  So, DOL rationalizes that the provider did not make the decision to OK and pay the payment.  The TPA or plan sponsor did.  So, in DOL's logic, YOU or the sponsor should reimburse the plan assets for the loss due to your "error".

In such situations, there is the temptation to either withhold the overpayment amount from the next payment to that provider or to subtract the overpayment from the next check being sent to that provider on behalf of some other plan or participant.  DON'T!!  Unfortunately, this boomerangs trouble back to the TPA or plan again.  ERISA & DOL usually view claims transactions with tunnel vision of per-transaction.   So, if you withhold some payment from the same patient's next bill, or (worse) if you withhold partial payment from someone else's bill, you have then committed a breach of fiduciary duty by not fulfilling your duty to give the proper payment and thus you have short-changed a plan participant from what they rightfully expected to have paid for the new event.

So, playing hardball on collecting accidental overpayments to providers tends to be a much more serious boomerang that comes back to hit you.  You're better off to devise case-by-case strategies, and not rely on ERISA.

SPBA does not give legal advice, so below is merely laymen brainstorming some TPAs have explored:

If the provider is reasonable and is merely saying that they can not generate a refund check, some TPAs or plans have worked out some written agreement with the provider to allow you to deduct from the next payment from that plan, but you would need to be extremely careful that there is absolutely no way in which the second event or patient could be compromised in ANY way by the refund coming from his legitimate claim payment.

If the provider is playing hardball, it would seem that some level of regular state court would be the best route.  In other words, treat it the same way as if you had sent a too-large check to the car repair shop. Usually don't even bother raising ERISA as part of your argument.

Meeting Handout