Health Providers Seek Level Playing Field Against Insurers In Overpayment Recoupment Battle; Rely on ERISA for Protection in Claim Disputes

Health Providers Seek Level Playing Field Against Insurers In Overpayment Recoupment Battle; Rely on ERISA for Protection in Claim Disputes

All employer sponsored health plans must comply with federal ERISA regulations when making demands for overpayment refunds.  Attempts to recoup or withhold monies from providers are and should be treated as any other claim denials.  Providers should submit compliant appeals requesting due process and a full and fair review.

The number of stories appearing in the national media regarding medical claim denials, audits and recoupments by health insurers are growing every day. With the passage of PPACA by congress and the U.S. Supreme Court ruling, more and more media outlets are asking questions about how insurers conduct business.   

As insurance companies increasingly fight to contain costs and recoup allegedly improper payments to health care providers, a spike in lawsuits has occurred and may be attributed to newly empowered healthcare providers pursuing ERISA, a federal law, in order to level the playing field against insurer’s denials and recoupment claims.

The crux of the issue is whether alleged overpayment recoupment attempts are billing issues, or retroactive claim denials, thereby triggering ERISA rights and review processes.  Because recoupment attempts by insurers typically go as far back as possible in order to retrieve payments made years ago, the total dollar amount at issue nationwide is tremendous.  According to industry estimates, successful industry overpayment recoveries have reached into the billions of dollars nationwide over the past 5 to 7 years.  Thus recoupment, when used as an anti-fraud initiative, has become an increasingly popular source of revenue for insurers.   While it is important to implement anti-fraud initiatives in healthcare today, it is critical that every health plan comply will all applicable federal laws, ERISA and PPACA claims regulations, as well as statutory fiduciary duties.

Besides the obvious monetary implications, there are other sweeping consequences.  Should the courts rule these alleged overpayment recoupments are not preempted by ERISA, insurers would be able to move even more aggressively in their recoupment practices thereby creating a nearly insurmountable task for providers when challenging insurer payment policies.  Additionally, patients could be caught in the crossfire of these recoupment practices causing financial hardship and in some cases bankruptcy.

On the other hand, if the courts determine recoupments of allegedly overpaid claims are indeed retroactive claim denials, thereby triggering ERISA rights and review processes, insurers and Health Plans will be forced to comply with all applicable federal laws, ERISA and PPACA claims regulations, as well as statutory fiduciary duties before recouping one single dollar.

Nevertheless the issue of whether the practice by insurance companies of recouping money from providers for alleged overpayments, sometimes by withholding payments for covered services from other patients is an issue that has not been clearly defined by the courts –until now.  There does seem to be a growing consensus on the interpretation of these practices.

In a recent case before the Third Circuit, the U.S. Department of Labor filed an Amicus Brief in support of plaintiff providers in an overpayment ERISA class-action urging judges to allow a lawsuit against Aetna Inc. to proceed under ERISA, which allows for appeal and review rights protections for providers before insurers can recoup reimbursements.

The DOL’s position on the pertinent issues included:

  • Aetna must comply with federal law ERISA for all post-payment overpayment demands due to ERISA plan coverage dispute guidelines;
  • A healthcare provider with a valid assignment has federal rights to ERISA appeals and lawsuit in federal court;
  • Post-payment, retroactive, overpayment demand is an ERISA adverse benefit determination, triggering full and fair reviews guaranteed under ERISA;
  • Aetna’s hypothetical state law claims of fraud may not short-circuit federal ERISA procedural protections for both in-network and out of network providers and patients.

This is the first time the federal government had effectively clarified and interpreted federal law ERISA as the primary governing law for all overpayment conflicts due to plan coverage disputes. The significance and timeliness of the DOL’s action in federal appeals court cannot be overstated, as it came less than two months after a federal court in Chicago reached the same conclusion for plaintiff providers in another provider ERISA overpayment class-action against numerous Blue Cross Blue Shield entities.

The profound impact of these decisions is that they protect patients and providers under the federal law ERISA in all overpayment disputes with ERISA plans.

Ironically, providers have tried suing insurers for claim denials and unauthorized recoupments in state courts seeking punitive monetary damages only to have insurers successfully remove these cases to federal courts through ERISA preemption.  Now it seems the providers have started to catch on.

Furthermore, in federal court, even if the insurers were granted equitable relief insurers would face a difficult task because many payments would have been paid sometimes years earlier.  Funds must be traceable and segregable, that is they must be identifiable.  “In reality, it is nearly impossible to trace the funds in these circumstances,” according to D. Brian Hufford, a senior partner at Pomerantz Grossman Hufford Dahlstrom & Gross LLP who in May won a recoupment suit in Rhode Island federal court against a Blue Cross Blue Shield plan.

Hufford said a goal of the Rhode Island case was to set the table for bigger victories. “We are trying to set precedents,” Hufford said.  The Rhode Island win, he added, “sends a strong message to providers around the country that if they’ve had this happen to them, they have an opportunity to fight back.”

In that case the United States District Court for The District of Rhode Island ruled against BCBSRI in a landmark lawsuit for overpayment recoupment against two healthcare providers for alleged fraudulent billings. Furthermore the court ruled in favor of the provider defendant’s counterclaims against BCBSRI for withholding monies from future claims.  While relying upon relevant recent Supreme Court decisions, among other things, the court decided the following:

  1. Federal law ERISA is the only mechanism available to BCBSRI regardless of BCBSRI PPO contract;
  2. As a matter of ERISA law, BCBSRI can make no recovery for past payments and can withhold no money from future claims;
  3. Both healthcare providers were absolved of wrong doing as BCBSRI failed to present “clear and convincing evidence” to support fraud, medically unnecessary or mis-coding allegations;
  4. The two providers were not “given any opportunity to appeal or have Blue Cross’s determination reviewed, despite the inclusion of review procedures both under ERISA and the Provider (PPO) Agreements.”
  5. Whatever monies BCBSRI paid to both healthcare providers for alleged fraudulent billing and non-medically necessary treatments, rightfully, equitably, and in good conscience belongs to the providers;
  6. BCBSRI cannot recover the monies already paid out to the providers because those monies are not subject to equitable lien from the BCBSRI PPO contract overpayment provisions.
  7. The court rules for the provider’s counterclaims against BCBSRI for withholding money from future claims and orders BCBSRI to return all monies withheld from future claims with prejudgment interests and attorney fees to be determined by the court.

Simply put, all employer sponsored health plans must comply with federal ERISA regulations when making demands for overpayment refunds.  Attempts to recoup or withhold monies from providers are and should be treated as any other claim denials.  Providers should submit compliant appeals requesting due process and a full and fair review.  Additionally, as a matter of best practices, all healthcare providers should comply with ERISA claims regulations using a valid ERISA compliant designation of authorized representative before appealing any claim (be it an overpayment recoupment or any other type of denial) on behalf of any member of any employer sponsored health plan.

To find out more about PPACA Claims and Appeals Compliance Services email or visit our website




Dawn Harvey

In reading this article is it legal for insurance companies to recoup money by offset without even reviewing the medical record. We are in a situation as a provider of medical services where we have to fight to get back every dollar recouped and no explanation is given by the payer. Many of our payers will send a letter and dispute overpayment, but we have one that does not follow this process. Is there any other articles pertaining to this issue and if so is there a solution.


Dawn-Thanks for reading. As to your question , there are solutions. The first solution is to understand the ERISA appeal process. You have certain rights as a medical provider. Understanding those rights is key to dealing with all denials, including overpayment refund requests


    This information is very helpful, please keep us informed because this issue only seems to get worse as years go by. mflores, what would you say are your top resources in finding legal information pertaining to Insurance Companies’ and Doctors practice’s legal battles over payments and denials?

Lori Ray

Do you know if the recoupment law applies to all California Health Plans even the self funded plans administered by insurance companies.

Shirley Franks

We received a four page list of names from 2014 Tricare stating they paid in error and want all their money back. No warning, two and a half years later. What can be done. We are a provider in Ga.

Peggy Warren

Cigna is asking for money back from one of our California providers (we are a billing service) some of which are over 2 years old, to the tune of about $15,000. What is the ERISA statute of limitations for a refund request? He was paid as out of network originally, but when credentialed to become a network provider, they went back retroactively and those claims were “reprocessed”. Do we have any recourse?


Is it legal for BCBS FEP to retract payment 2 years after the date of service, stating that the patient was not active at the time of service? The DOS in question is 09/08/2015, payment was made on 09/15/2015 and retracted on 09/20/2017. Thank you.

Stephanie Paschal

we had a few of these same problems with insurance stating 2 years after the fact that they overpaid the provider. therefore recouped. one instance i noticed a few payments the provider was receiving was double the amnt i contacted claims told them they said contact provider relations i did all they said was to refer to providers contract rates. i documented and told provider look in around 2 years time they will try to recoup i documented dates and names and emails i sent regarding this. sure enough they sent a recoupment the provider sent all my detail in an appeal. we didn’t hear anything back on the appeal but they started taking payments from clients claims we submit. this is firstcare- but in years past it was tricare and superior and firstcare who we have had this happen to all the therapists. you actually feel defeated because you cant talk to anyone. the rep you talk with just takes notes and gives you refence numbers. but nothing ever happens. anyone else have this happen

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