It is quite common for self-funded employers to overpay a health care claim because their third party administrator (TPA) made an error. This occurs for a multitude of reasons, including coordination of benefit (COB) errors, excluded benefits, duplicate charges and others. It’s easy to miss these overpayments, especially on a large scale. But did you know that your TPA chooses whether or not to pursue overpayments on your behalf?
Many TPAs set a minimum dollar value for pursuing recovery of overpayments made on your members’ claims – typically between $10 and $50. This means that any overpayment amount below this standard threshold isn’t pursued for recovery. It’s not because they can’t go after it; it’s that they’re choosing not to. But it’s your money! Shouldn’t you get to decide whether it’s worth recovering or not?
Let’s say you’re charged $299 for a claim that should have been $250 (a $49 overpayment) and that the TPA’s overpayment threshold is $50. With that threshold in place, the TPA will not pursue that $49 or compensate you for the $49 that they overpaid on your behalf. This might not seem like much if it only happens once, but let’s further suppose that this type of error occurs 100 times. You’ve now overpaid a total of $4,900 and your TPA has decided for you that it’s not worth pursuing because each individual claim did not meet their standard recovery threshold.
Overpayments – whether for $5 or $500 – can be found through medical healthcare claims audits. These findings can then be used to recover your overpaid healthcare claims dollars. There are three ways this works.
- The easiest way to recover an overpayment is to notify the provider that he or she has been overpaid and then refund the overpayment amount (known as offsetting) by deducting the amount owed on any new claims received from that provider by the amount of the overpayment. For example, let’s say that the TPA made an overpayment of $190 to Dr. Brown. They receive a new claim from Dr. Brown for $200. The TPA would only pay $10 for this claim in order to offset the initial $190 overpayment made from your self-funded plan’s account.
- A second way to recover an overpayment is to simply send a letter to the TPA requesting they correct the overpayment.
- A third way overpayments can be recovered is through a specialized recovery vendor hired by the TPA. This service, however well intentioned, doesn’t always mean that the total amount overpaid will be returned to your self-funded plan in full. When your TPA hires an outside vendor to pursue the overpayment, the vendor takes a cut of the amount they recover. Say, for instance, that they recover $10,000 in overpaid claims. They take the fees for their service – sometimes up to 25% – from that $10,000. This means your self-funded plan is only receiving 75% of your total overpaid charges instead of the full $10,000 that your TPA incorrectly overpaid. You are essentially paying for your TPA to hire a vendor to recover your money that the TPA incorrectly overpaid. Now that doesn’t sound right!
Shouldn’t You Get To Decide?
Educating yourself about the process of recovering overpayments empowers you to decide whether your lost dollars are worth recovering. While overpayments are always going to happen to some degree, you need to be aware of the fact that your TPA might not be pursuing EVERY overpayment. Ask them for an accounting of exactly what impact their threshold is having on your bottom line and find out how much money is left on the table when they don’t recover under that threshold.
Getting an audit is a great first step to help self-funded employers recover overpayments. Some auditors, like CTI, even offer incentives (a 2:1 ROI guarantee) to further ensure the greatest return on your audit investment. You choose to be self-funded, so don’t let your TPA choose what happens to YOUR healthcare dollars. Make the choice to pursue those overpayments and see for yourself how much money you could be recovering.