How to Handle Dental Insurance Refund Demands

Some insurance challenges are shared equally by offices that are in and out of network.  One of the most frustrating challenges is the refund demand. You treat your patient, get paid for treatment by both the patient and insurance company. All is good, right?  Months later, the office receives a letter stating the claim was paid in error and the money needs to be refunded.

Obviously there’s frustration, especially when everything was done correctly. You received an accurate breakdown, someone on staff verified insurance coverage on the same day as the procedure, and the claim was correctly filed and paid. The office did everything perfectly, how can we possibly have to deal with this refund problem later?

The main reason a “refund demand” is triggered occurs when there is a change in the patient’s employment status. Many patients have employer-sponsored insurance. When a patient leaves their job, for whatever reason, they will usually lose their insurance coverage as a result.

Notification/Timing Delays

The “chain of events” that happens after change in employment involves multiple parties and can inadvertently result in “timing” errors. To understand how these errors happen is key in understanding how to respond to them. Here is a typical example and timeline: 

• March 15: Employee’s employment ends.  

• March 16: Patient shows up to your office for treatment.

• April 1: Human Resources (HR) department (former employer) sends a list to the insurance company of people no longer employed, as of the previous month; and therefore, no longer paying premiums.

• April 16: Insurance pays claim for your patient’s treatment.

• June 1: Insurance processes the change in employment/coverage status that was compiled and sent on April 1.

• July 1: Insurance company auditor notices it paid a claim on a patient who was not covered on the date of treatment.  

• July 15: Office receives the refund demand.

In the above example, the patient would be verified by the insurance company on March 16th, because they had not received notice about any change in employment, and you would have received your payment like normal.  Then later, you are asked to send a refund to the insurance company as a result of the delay in information processing between the employee’s HR department and the insurance company’s internal departments.

This is a scenario that has happened far more often in the post Covid world where employment shifts are much more common. 

Collect Upfront

If you want to try and avoid getting caught in this “no win” chain of employment notification delays, the answer is simple. Talk to your patients and ask about their latest employer/employment status. When a patient lost their job last week or even yesterday, it will not likely matter what the insurance company says on the phone because they don’t have up-to-date information. It is rare that an insurance policy will cover a patient for the entire month after the end of employment, as many seem to believe. Most will cover the patient until the moment of unemployment, and not a second longer.

When you know a patient has moved past their employment date, the most prudent path is to have the patient pay for their treatment 100% out of pocket (in-network fees if contracted). Send the claim on behalf of the patient, and mark “Assignment of Benefits” (the check) should go to the patient.

Legally, the insurance company must follow the path of money. Insurance MUST request a refund from the entity that received the check (assignment). If the patient received the benefits directly, the insurance company cannot come after the office for that refund, because they never paid you to begin with. They would need to correctly seek out the patient or the employer’s HR department to get that money.

Ethics/Politics

This topic always brings up the question: “If the office did everything right, why should we be subject to the problems between the employer and insurance company?”

Absolutely this is an ethical problem. As you can see from the timeline above, the error is based on communication problems between the employer and the insurance company.  The patient may have some responsibility as well.  But the office has literally nothing to do with the problem. Ethically, it is wrong that offices and dentists are involved at all in the fallout when we have nothing to do with the situation!

Thankfully, this is one of several current battles on a national level. 

What is the likely future?

If you look at the timeline again, one can see that the original problem lies with the employer. The employer is not providing the insurance company with immediate information about termination of employment. The employer is the original source of the issue; and therefore, ethically and logically the employer should be responsible for any fallout that may result.

The most likely future outcome is the employer will be held responsible for paying premiums for employees up until the date that they inform the insurance company of the employment change.  

Now, in reality, insurance companies take time to process any changes to information. The real debate is going to be whether insurance needs to be responsible for payment of services at the date the employer informs or until the date that they process this change in their system. The simple answer would be to hold insurance responsible for services until the end of the month. This is when most people naturally assume coverage will last. Then the insurance company can hold the employer responsible for premium payment until the end of the month in which the employer informs the insurance company of any employment changes.  

Ultimately, since the problem is created between the employer and insurance company, the solution needs to lie with them as well. But it will only change through being regulated nationally.

Conclusion

Until politics catches up with ethics, dental teams need to understand what to do to help resolve and respond to the refund demand challenge. Talk to your patients, stay informed about their employment status and respond to any changes in a proactive and correct manner. When you are proactive about claims you can often avoid most insurance refund demands.

Protect yourselves during this time!