Most health care providers and suppliers have a solid understanding of their obligation to repay overpayments that may be owed to Medicare, Medicaid and other Federal health benefit plans.  Unfortunately, they may not fully understand that overpayments never belong to them, even if the monies are not owed to a government payor. If your practice has identified a private insurance overpayment, you are required to refund the monies to the insurance company. In this article, we examine the contractual and statutory obligations that a provider or supplier has to return a private insurance overpayment.
I. Private Insurance Overpayment Obligations Under Your Enrollment Agreement or Contract
Over the last decade, private payors have become increasingly aggressive in their efforts to detect and deter fraud and other improper billing practices by providers. Most private payor enrollment agreements or contracts now incorporate a number of program integrity measures. These include, but are not limited to:
- Require that participating providers collect co-payments and deductibles.
- Require that all services billed must be medically necessary, provided in accordance with community standards of care, be properly documented and be accurately coded and billed.
- Prohibit the provision of improper inducements to patients, referral sources and others.
With respect to overpayments, virtually all private payor contracts affirmatively require that participating providers and suppliers repay any overpayments that are owed to the payor.
II. Federal Statutory Obligations to Refund Private Insurance Overpayments
There are several Federal criminal statutes that arguably require you to refund any monies owed to a private health plan. Depending on the facts in your particular case, a practice’s improper retention of private payor monies could implicate the mail fraud  or health care fraud statutes.  If a provider has made any fraudulent misrepresentations or false certifications made to a private payor, the provider’s conduct may constitute a false statement involving a health care program.  While each of the above statutes could conceivably apply if the fact support it, we believe that one Federal statute in particular (18 U.S. Code §669), obligates a health care provider to return overpayments that are owed to a private insurance payor.
18 U.S. Code §669. Theft or embezzlement in connection with health care. 
“(a) Whoever knowingly and willfully embezzles, steals, or otherwise without authority converts to the use of any person other than the rightful owner, or intentionally misapplies any of the moneys, funds, securities, premiums, credits, property, or other assets of a health care benefit program, shall be fined under this title or imprisoned not more than 10 years, or both; but if the value of such property does not exceed the sum of $100 the defendant shall be fined under this title or imprisoned not more than one year, or both.” (emphasis added).
18 U.S. Code §24. Definitions relating to Federal health care offense. 
“(b) As used in this title, the term “health care benefit program” means any public or private plan or contract, affecting commerce, under which any medical benefit, item, or service is provided to any individual, and includes any individual or entity who is providing a medical benefit, item, or service for which payment may be made under the plan or contract.” (emphasis added).
III. State Statutory Obligations to Refund Overpayments
Several states have enacted specific statutory provisions requiring health care providers and suppliers to repay monies that they were paid but were not owed, to the responsible private payor. For example:
Mass. Gen. Laws ch. 175H, §2(4). False statements on applications for coverage and claims; failure to disclose. 
“(4) having knowledge of the occurrence of any event affecting his initial or continued right to any health care benefit, conceals or fails to disclose such an event with an intent to fraudulently secure such benefit either in a greater amount than is due or when no such benefit is due.” (emphasis added).
IV. Assuming that a Private Payor Returns a Provider’s Check, Can the Provider Keep It?
In several cases we have seen, when a practice attempted to refund an overpayment to a private payor, the check was returned to the provider and the private payor notified the provider that due to the administrative burden of applying an overpayment to a beneficiary’s account (typically due to the complexity of the payment history), the non-Federal payor had chosen to either “waive” collection of an overpayment or not to cash a check sent by the provider. This also regularly occurs when the identified overpayment owed to a private payor is under a certain amount such as $25.00.
When faced with such a situation, however, providers must review applicable state law to ascertain how an overpayment must be handled. For instance, in Texas, Title 6 of the Property Code requires businesses and other entities holding unclaimed property to turn the property over to the Texas Comptroller’s Office after the appropriate abandonment period has expired. As in most states, violation of these escheat laws can subject a provider to various penalties.
V. What is a Provider's Obligation with Respect to a Patient Credit Balance?
Practices regularly identify monies that are owed to a specific patient. Some practices hold these funds as a credit balance in its books with the intent to apply these funds to any balances that the patient may owe. Under certain circumstances, such an approach would likely be appropriate.  Unfortunately, some health care providers and suppliers are not aware of the reporting requirements in their state with respect to patient credit balances and private insurance overpayments and only learn of their obligations to turn unclaimed property over the State when their practice is subjected to an audit by their State comptroller’s office. All States have enacted escheat or unclaimed property laws that require companies to exercise due diligence in their efforts to return “property” such as credit balances to their rightful owners. For instance, in Texas, the holder of unclaimed property is required to mail a written notice to the reported owner at their last known address which states that:
“(1) The holder is holding the owner’s property; and
(2) The holder may be required to deliver the property to the Comptroller’s office on or before July 1 if it is not claimed.” 
The period of time that a practice can hold onto a patient credit balance or a private insurance overpayment before it must be remitted to the State varies from jurisdiction to jurisdiction.
As a final point in this regard, patient credit balance issues frequently occur when a patient moves and does not tell the provider of his or her new address. Similarly, when a patient dies, a provider’s written notice of a patient credit balance may go unanswered. In such a situation, a provider may be able to identify the executor of a patient’s Last Will and Testament and remit the funds to be included in the estate.
The lesson to be learned here is quite clear – regardless of who the payor is, an overpayment can rarely, if ever, properly be retained by a provider, regardless of the amount in controversy. In other words – If it doesn’t belong to you, give it back! It’s a simple rule but it is crystal clear—health care providers should promptly return all credit balances and overpayments upon identification.A provider must carefully examine both Federal and State statutes when faced with this issue. The best practice is to return an overpayment to the responsible payor upon identification. In the case of a credit balances owed to a patient, should a provider be unable to locate the patient or find a valid address to return the overpayment (due to a variety of factors), your State’s escheat law must be considered.
NATIONWIDE REPRESENTATION — CALL 1 (800) 475-1906
The experienced health lawyers at Liles Parker can assist you assessing your obligations and options if an overpayment or credit balance has been identified. Need help? Give us a call for a complimentary consultation. We can be reached at: 1 (800) 475-1906.
 Mail and wire fraud (18 U.S.C. § 1341, 1343).
 Health care fraud (18 U.S.C. § 1347).
 False statements involving health care programs (18 U.S.C. §1035).
 Theft or embezzlement in connection with health care (18 U.S. Code §669).
 Definitions relating to Federal health care offense (18 U.S. Code §24).
 Mass. Gen. Laws Ch. 175H, § 2(4) -- False statements on applications for coverage and claims; failure to disclose.
 For example, has the practice notified the patient that a credit balance is on his or her account? Has the patient agreed to allow the credit balance to be applied to amounts that may be owed in connection with future visits? These questions are important because if the State conducts an audit of a provider’s credit balances, State auditors will be reviewing how long a credit balance has been on account. Depending on the State, the provider may