One of the most frustrating insurance challenges is the refund demand. You treat your patient and get paid for treatment by both the patient and the insurance company. All is good, right? Then, months later, your office receives a letter stating the claim was paid in error and the money needs to be refunded. Now you are faced with “collecting” the fee from the patient months after dental treatment has been completed.
Obviously, frustration comes when we have done everything correctly on our end. The office received an accurate breakdown of charges. Someone on our staff verified insurance coverage on the same day as the procedure, and the claim was correctly filed and paid. The office did everything perfectly, so how can we possibly have to deal with this refund problem later?
DE's Business Lab: Dental offices CAN bill medical insurance
Preventing fraud and insurance audits: 6 mistakes you might be making
Most of our patients have employer-sponsored insurance. The main reason a “refund demand” can get triggered is when there is a change in a patient’s employment status. When a patient leaves their job, for whatever reason, they usually lose their insurance coverage as a result.
Notification and timing delays
The chain of events that happens after that change in employment involves multiple parties and can inadvertently result in timing errors. Knowing how these errors happen is key to understanding how to respond to them. Here is a typical example and timeline:
- March 15: The employee’s employment ends.
- March 16: The patient shows up to your office for treatment.
- April 1: The human resources department (of the former employer) sends a list to the insurance company of people who are no longer employed as of the previous month (and who they no longer pay premiums for).
- April 16: The insurance company pays the 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: The insurance company auditor notices it paid a claim on a patient who was not covered on the date of treatment.
- July 15: The dental office receives a refund demand.
In this example, the patient would have been verified by the insurance company on March 16, because they had not received notice about any change in employment, and you would have received your payment as usual. Then, later, you are asked to send a refund to the insurance company due to the delay in information processing between the employee’s human resources department and the insurance company’s internal department. This scenario has happened far more often in the post-COVID world where employment shifts are much more common.
Collect up front
If you want to avoid getting caught in this no-win chain of employment notification delays, the answer is simple: talk to your patients and learn up front their latest employment status. If a patient lost their job last week or even yesterday, it will likely not matter what the insurance company says on the phone because they don’t have the most up-to-date information. It is rare that an insurance policy will cover a patient for the entire month after the end of employment; most will cover the patient up until the end of employment, 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) to go to the patient. Legally, the insurance company must follow the path of the money. The insurance company 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 dental office for that refund because they never paid you to begin with. Instead, they would need to seek out the patient or the employer’s human resources department to get that money.
Ethics and 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 the insurance company? This is an ethical problem. As you can see from the example timeline, the error is based on communication problems between the employer and the insurance company. The patient may have some responsibility as well, but the dental office has absolutely nothing to do with the problem. Ethically, dental practices and dentists should not be involved at all in the fallout.
Since the problem is between the employer and the insurance company, the ultimate solution needs to lie with them as well. But it will only change by being regulated. Thankfully, this is one of several current legislative battles being fought on the national level.
Talk to your patients
Until politics catches up with ethics, dental teams need to understand what to do to help resolve and respond to the challenge of refund demands. Talk to your patients, stay informed about their employment status, and respond to any changes in a proactive, appropriate manner. You can avoid most insurance refund demands when you are proactive about claims. Protect your practices and your patients from surprises!
Editor's note: This article appeared in the October 2022 print edition of Dental Economics magazine. Dentists in North America are eligible for a complimentary print subscription. Sign up here.
