Health insurers often pay providers directly who have assignments from their patients and then determine months later that it paid incorrectly and demand the money back. Sometimes this demand is accompanied by accusations of fraud and abuse on the part of the provider. When the provider doesn’t pay, the insurer recoups the money from current payments and offsets from future payments. In sum, all payments from the insurer stop until the full amount is paid off.

Most of the time, the provider and her staff, overwhelmed by the accusations and financial demands, either agrees to pay the money back up front, gets offset, or enters into negotiations with the insurer.

What rarely happens, though, is appealing the health insurer’s repayment demand in the first place. In 2011, for example, only 2.25% of all of United Healthcare’s repayment determinations were appealed.

Why is that? Well, providers didn’t think they had legal rights to challenge recoupments, and insurers took the position that providers (as compared to their patients, as plan members) had no legal rights at all. In most cases insurers did not even give information to providers about the existence of an appeal. Instead, they usually sent a letter stating the amount of the recoupment, and a deadline to pay.

All that should change as a series of court decisions have now made it clear that repayment determinations and recoupments fall under ERISA, which governs most commercial employer plans. This means, for providers who are out of network, a repayment demand and recoupment are actually denials of benefits, and they have the right to notice, the right to an appeal, and the right to full and fair review of the appeal.

Are there limitations to this critical decision? For example, say an insurer determined that the provider never provided the service to the patient in the first place, but billed for it. Ostensibly that’s fraud, right, and fraud arises under state law, not ERISA.

In Premier Health Center, P.C. v. UnitedHealth Group (D. N.J. Aug. 28, 2014), the court differentiated an insurer’s claim against a provider for fraud (which might arise under state law, not ERISA) and the procedure an insurer uses to recoup payments based on what it believes to be fraudulent activity (which does arise under ERISA). That is, an insurer “must allow the provider the opportunity to challenge that determination in accordance with ERISA procedure, lest the determination be accepted at face value.”

And there it is. Every accusation of fraud and abuse by an insurer was not simply an accusation but an unchallengeable, non-appealable statement of fact. Now the tide has turned in the providers’ favor.

What is the takeaway from all this? What should providers do when health insurers send them a repayment demand and seek to recoup payments?

  1. You do not need to pay the demanded amount upfront or over time. Under ERISA, you have substantial appellate rights. You should make use of them.
  2. You need to determine for the payments at issue with respect to each of your patients’ plans whether you are in network or out of network with the health insurer.
  3. Even if you are in network you may have contractual appellate rights that you should utilize.
  4. You must insist that the insurer gives you the reason for the repayment demand upfront. Remember, a repayment demand is a denial, just like any other denial you have received.
  5. You must draft all appeals very carefully and fully. Boilerplate appeals will receive boilerplate rejections.
  6. Should your appeals be rejected anyway, you have options to consider, including mediation, arbitration, and litigation.