Responding to dental plans' retroactive refund demands

Demands from dental plans seeking refunds of previously paid claims are common, but they’re not all alike. Most refund demands are legitimate, and state law requires health care providers who have been overpaid to refund an overpayment within 30 days of notice. These overpayments typically result from plans paying on claims when the patient had fallen out of eligibility unbeknownst to the plan when payment was made.

Other overpayments may result from mistakes of the dental plan or insurer itself, and case law in California declares that refund demands that stem from payments made in error are not automatically valid. A conversation with a CDA Practice Support expert may help to determine whether such refund demands are appealable.

Other refund demands stem from the peculiar circumstance of a self-funded group retroactively terminating coverage of a group member to a date before the patient was treated and the claim was paid. In other words, the plan considered the patient eligible for coverage when the dental office verified eligibility, when the patient was treated and when the administrator paid the claim. But due to laws governing self-funded dental plans, an employer is permitted under specific circumstances to retroactively terminate an employee, resulting in the employee losing eligibility for dental benefits under the employer’s self-funded plan.

Why would an employer retroactively terminate an employee? Typically, this will occur when an employee who has taken medical leave for self, family medical leave or maternity or paternity leave decides not to return to work. State and federal laws require employers to maintain the employment and continue the health benefits of those who have taken such leaves. But, if an employee decides not to return to work after taking allowed leave, an employer may terminate the person’s employment from the date they first took the leave. Patients who come in for dental treatment while they are on allowed leave from work may be terminated from their dental benefit coverage retroactively to a date prior to the date of dental service if they later decide not to return to work at all. This will result in the administrator of the self-funded dental plan sending out demands for refunds for any claims paid after that date of retroactive employment termination. Unfair? Perhaps, but it’s legal.

Employer has options under federal rule

It is common for self-funded health plans to retroactively terminate employees from coverage when those employees decide not to return from medical or family leave. However, certain conditions under 29 Code of Federal Regulations Section 825.213 allow employers to continue former employees’ health coverage even when employees have exhausted their allowed leave, or to seek the reimbursement directly from former employees. In other words, unilaterally terminating the employee’s health coverage retroactively as a first action isn’t the employer’s only option according to the federal regulation. Giving a terminated employee the opportunity to reimburse the employer for either premiums paid or claim payments is something the employer may do. The employer should also offer the employee continuation coverage, which the former employee will pay for.

The apparent intent of the federal rule is to assure that the loss of health care coverage is not the first result for an employee who decides not to return from medical leave. If it appears that the employer simply terminated the employee retroactively and didn’t give the employee the opportunity to continue his coverage prior to the termination, the decision could be a violation of the federal requirement.

Per the federal regulation, the employer may seek reimbursement from the patient. But, there may be a union contract in place that prohibits an employer from seeking reimbursement from a former employee or the employee may not have returned to work because his health condition has not improved and the only option is to not return to work. In these cases, an employer may not be able to seek reimbursement from a former employee. However, it may be that the employer sought reimbursement directly from the terminated employee (patient), which is permissible. In the case where an employer has received a demand letter for reimbursement of a previously paid claim resulting from retroactive termination, that refund demand may be appealable based on the ability of the employer to seek reimbursement from the employee.

The dentist could send an appeal letter to the employer or plan administrator asking for the refund with the explanation that unless the former employee was given the option to reimburse the employer for claims paid while on leave and refused to reimburse the employer, there is not good cause to seek a reimbursement from the dentist. Everything may be in accordance with the federal rule, but the dentist receiving a refund demand doesn’t know that, having simply received a refund demand with no explanation of the circumstances behind the demand. An appeal letter to the plan administrator pointing out the federal rule option to seek reimbursement from the employee would be in order. The administrator may respond that an attempt was made to recover the amount from the former employee, but that the patient refused either the reimbursement claim payments or the continuation coverage. In that case, the plan administrator will again ask for a refund from the employer and the employer will be obligated to provide it.

At this point, the employer would need to recover from the patient. A properly constructed financial agreement with the patient prior to the rendering of care would put the patient on notice that if for any reason her plan doesn’t pay for treatment, or the plan sought a refund for payment, the responsibility for payment falls to the patient.

A dentist might also appeal such a refund demand on the basis that treatment was provided to the patient in good faith, that the patient had coverage on the date of service and that the employee’s plan paid for the treatment in good faith. But if the refund dispute is actually between the employer and his former employee, why should the dentist be targeted to pay the refund? Again, these are suggested rationales for appeal. They are points that could be made in an appeal, but are never a guarantee of winning such an appeal.

As these situations appear to be unique to self-funded health plans, employers may want to discuss federal requirements with the Office of Participant Assistance of the U.S. Department of Labor. These offices exist to assist participants (patients) of self-funded health plans, but health care providers may inquire with the office on behalf of their patients. Call the Offices of Participant Assistance at 626.229.1000 in Pasadena and at 415.625-2481 in San Francisco.

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