Attorney Articles | When Insurance Plans Ask For Their Money Back

Articles by Legal Department Staff

The Legal Department articles are not intended to serve as legal advice and are offered for educational purposes only. The information provided should not be used as a substitute for independent legal advice and it is not intended to address every situation that could potentially arise. Please be aware that laws, regulations and technical standards change over time. As a result, it is important to verify and update any reference or information that is provided in the article.

When Insurance Plans Ask For Their Money Back

A number of members who work with insurance plans have received a “notice of overpayment” in the mail from some insurance plans, requesting reimbursement for specified “overpayments” made to the provider for claims filed during 2013. Providers who receive such notices must decide whether to repay the amount requested, or, to file a written objection with the plan within 30 days of receipt of the notice. This article will provide an overview of the issues involved, including requirements and procedures that apply in responding to these notices.

Michael Griffin, JD, LCSW
Staff Attorney
The Therapist
March/April 2014

In recent weeks, a number of providers who work with insurance plans have received a “notice of overpayment” in the mail from some plans, requesting reimbursement for specified “overpayments” made to the provider for claims filed during 2013. Providers who receive such notices must decide whether to repay the amount requested, or, to file a written objection with the plan within 30 days of receipt of the notice.1 The following information provides an overview of the issues involved, including requirements and procedures that apply in responding to these notices.

It is important for providers to promptly review and respond to such notices
Under California law, if a provider does not contest a notice of overpayment, he or she is required to reimburse the insurance plan for the amount requested, within 30 working days of receipt of the notice.2 If a contracted provider does not contest the notice of overpayment within 30 days of receipt of the notice, the plan can “offset” the amount requested, (withhold the funds from other payments that are owed to the provider), so long as the provider’s contract specifically authorizes the plan to do so.3

Why is this occurring?
Health plans are allowed to seek reimbursement from a provider for overpayment of a claim, so long as the plan sends a written request for reimbursement to the provider within 365 days of the date of payment on the overpaid claim. The written notice must clearly identify the claim, the name of the patient, the date of service and a clear explanation of the basis upon which the plan believes the amount paid on the claim was in excess of the amount due.4 If the health plan allows more than 365 days to elapse from the date of overpayment, they are barred from making the request. This is probably why providers are beginning to receive overpayment notices at this time.

In January 2013, a revised version of “CPT” (procedure) codes, which are used by all health care providers in billing insurance plans, was released by the American Medical Association.5 When this occurred, a number of CPT codes that were previously used by therapists in billing insurance plans, were either revised, or replaced. Therapists were required to utilize the new CPT codes, and insurance plans had to determine what their reimbursement rates would be for the new codes. Given that insurance plans establish their own reimbursement rates, providers had to wait for each of the plans to communicate with them regarding the rates to be paid for the new codes. Although some plans quickly communicated the information to providers, others took as long as several months to inform providers what their new rates of reimbursement would be. During this period of time, providers submitted claims to the plans using the new CPT codes, and were reimbursed by each of the plans. Insurance plans that ultimately determined that they had reimbursed some of the claims at a higher rate than they intended to, are now seeking reimbursement from providers for the alleged overpayments.

What are the options for providers?
It is up to the individual provider to decide whether or not to contest a notice of overpayment.If a provider believes that the claim was not overpaid, he or she may challenge the plan’s request for reimbursement, by filing a written statement with the plan within 30 working days of receiving the notice of overpayment, stating the basis upon which he or she contends that the claim was not overpaid. 7 8

If a provider elects to contest a notice of overpayment, some of the possible assertions that he or she may consider include, but are not limited to: 9 10

If treatment was rendered pursuant to a pre-authorization, the health plan may not request repayment from the provider.

  • According to Health & Safety Code, §1371.8 and Insurance Code, §796.04, “A health care service plan that authorizes a specific type of treatment shall not rescind or modify this authorization after the provider renders the health care service in good faith and pursuant to the authorization for any reason.”11

It is unreasonable for the health plan to request reimbursement for an overpayment, where the rate of reimbursement for the services was not declared until after the services were rendered.

  • Every health plan in California was aware of the fact that new CPT codes were going into effect as of January 1, 2013. It was the responsibility of the plan to inform providers regarding rates of reimbursement for CPT code changes that were planned to occur on January 1, 2013. This information was of critical importance to the provider. In spite of the plan’s failure to communicate such information, the provider was ethically obligated to continue to provide services to clients and to respond to requests for treatment.
  • The fact that the plan determined, after services had been rendered, that they reimbursed the provider according to the wrong reimbursement schedule, simply reflects that the plan misapplied their rates of reimbursement. The more salient fact is that the rates were determined and communicated after the services were rendered.
  • Although it is not unusual for a health plan to seek reimbursement for overpayment on a claim, where the amount paid to the provider was in excess of an established, contracted rate for the services in question, the facts are very different in this matter. In this case, the health plan failed to establish reimbursement rates in a timely manner for CPT codes which practitioners were obligated to utilize on January 1, 2013.

The plan’s failure to communicate with the provider regarding reimbursement rates, together with their incomplete explanation of the reason for overpayment, is inconsistent with the requirement that health plans employ fair and just policies and procedures in the payment of claims. 12

  • It was the responsibility of the health plan to inform providers regarding the rates of reimbursement for the new CPT codes that were effective on January 1, 2013. Clearly, it was not unreasonable to expect the plan to provide the information to providers in a timely manner.
  • In the case, City of Hope Medical Center v. Superior Court, 8 Cal. App. 4th 633 (1992), the Court held that the insurance plan was not entitled to reimbursement from the hospital for payments incorrectly made to the hospital, and the hospital was not unjustly enriched by virtue of such payments, where the hospital correctly billed the plan for services rendered, and did so without misrepresentation or knowledge of the plan’s mistake at the time payment was made.13
  • In the present matter, the provider was reimbursed by the plan, for true and accurate claims, which the provider timely submitted to the plan, without misrepresentation or knowledge of the plan’s mistake at the time payment was made. The provider reasonably relied upon such payments as accurate, intentional representations of the rate of reimbursement for those services. Therefore, based upon these facts, and the prevailing case law stated in City of Hope Medical Center v. Superior Court, 8 Cal. App. 4th 633 (1992), provider asserts that the claims at issue have not been overpaid, and respectfully declines the related request for reimbursement.

What do I do if the insurer or plan ignores or rejects my appeal/grievance?
In situations wherein you feel that you and/or your patient have been harmed by the unfair business practices of a plan or insurer, or the matter was not resolved in a just manner, you may lodge your complaint with the California State Department that regulates and licenses the plans and insurers. CAMFT also requests that when you are filing a grievance with the departments listed below that you carbon copy (“cc”) your letter to CAMFT.14

The Department of Managed Health Care (“DMHC”) oversees most health care service plans (including Kaiser Permanente), health maintenance organizations (“HMOs”) incorporated in California, as well as California Blue Cross and Blue Shield participating provider organizations (“PPOs”). The Department of Insurance (“DOI”) oversees most other insurance companies and their PPOs in California.2 If you are unsure whether you are working with a plan or an insurer, below are telephone numbers to the two regulatory agencies: DMHC: 1 -888-466- 2219, and DOI: 1 -800-927-4357.

The bottom line
Without a doubt: it is upsetting to receive a request from an insurance plan to return money. It is understandable, therefore, why an initial reaction by many therapists, after receiving such a request, may be the impulse to tear the letter into tiny shreds, or even to simply ignore it. Although such responses are understandable, neither approach is helpful in the long run. The reality is, after receiving an overpayment notice from a plan, it is necessary for the therapist to review the specific request that is being made by the plan, and to decide what his or her course of action shall be in the matter.

Michael Griffin, JD, LCSW, is a Staff Attorney at CAMFT. Michael is available to answer member calls regarding legal, ethical, and licensure issues.

1 Code of Regulations, §1300.71(d)(4)
2 Code of Regulations, §1300.71(d)(5)
3 Code of Regulations, §1300.71(d)(6) Plans are required to send a detailed written explanation to the contracted provider, of any overpayment(s) that have been offset.
4 Code of Regulations, §1300.71(b)(5)
5 Current Procedural Terminology (“CPT”) codes are published by the American Medical Association for all health care providers to use in billing insurance plans.
6 The notice of overpayment should include information about the appeals process, such as where to send the appeal and whether particular forms are required. If in doubt, contact the health plan.
7 Code of Regulations, §1300.71(d)(4)
8 The plan is required to process a contested notice of overpayment of a claim as a provider dispute pursuant to Code of Regulations, §1300.71.38.
It is not possible to know whether a provider will be successful in contesting a notice of overpayment. Providers are free to use, or not use the ideas/assertions, which are contained in this article. The information is not intended to be a form of legal advice or a substitute for consultation with a qualified attorney.
10 If a provider is ultimately unsuccessful in contesting the notice of overpayment, he or she has the right to appeal the matter to the Department of Managed Health Care.
11 Health & Safety Code, §1371.8; Insurance Code, §796.04
12 Code of Regulations, §1300.71(8) A “demonstrable and unjust payment pattern” or “unfair payment pattern” means any practice, policy or procedure that results in repeated delays in the adjudication and correct reimbursement of provider claims.
13 City of Hope Medical Center v. Superior Court, 8 Cal. App. 4th 633 (1992)
14 Atkins, Catherine, JD, “Managed Health Care: California Law and Your Rights,” The, Therapist, Nov./Dec., 2008