The Recovery of an Overpayment of Insurance Benefits
- To a company or government insurer, overpayments equal bad management or bad debt. This can happen when a benefits provider pays a claim that should have been denied. It also happens when a serviced is overvalued. Each is a loss if not recovered. If the overpayment went to the patient, the insurer can write a demand letter asking that the amount overpaid be returned. If this does not work, hiring a collection agency or attorney experienced in recoupments can help.
Physician pay is another source of insurance overpayments. Once an insurance company has record of a physician being overpaid it should send written notice to the physician and give him 30 days to return the payment before taking any further action. The law varies by state, but there is normally a statute of limitations on claims against physicians. - For unemployment insurance, an overpayment is defined as the receipt of more money than the individual is eligible to receive. Overpayments can happen because of fraud or an employer's reporting error or other oversight. States disburse unemployment insurance, but most will adjust overpayments by reducing future payments. Benefits recipients may also voluntarily repay the overage amount. Those in dire financial straits have the option of asking for a waiver of overpayment liability. If one is granted, no benefits will be reduced, but they will continue at the rate for which the individual is eligible.
- When the government administers benefit plans, the process for collecting overpayments is more systematic. Government insurance programs include Social Security, Medicare and Medicaid. These program administrators can withhold benefits to make up for the overpayments, go through the IRS to recover overpayment from income tax refunds or garnish wages. They can also use more traditional means like debt collection agencies.
- Federal employees who receive benefits and overpayments are subject to the Federal Employee's Compensation Act. This act requires any overpayments of insurance or other benefits to be returned to the employer within a reasonable time. As with Social Security, Medicare, Medicaid and other government insurance programs, individuals with financial problems can request a waiver of liability for the overpayment. Private employers must request voluntary repayment from the employee. If the two agree to have the overage amount deducted from payroll, the employee must give his written consent.
