How Medical Providers Should Handle Insurance Overpayments

Man and child paying at the reception desk of a doctor's office

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Medical providers need to know how to handle insurance overpayments. Proper handling can prevent the headache of having payments recouped or being audited.

What Is an Insurance Overpayment?

An insurance overpayment is any payment that a provider receives in excess of the amount payable for a service rendered.


  • Two insurance companies pay as primary due to a lack of coordination of benefits (COB).
  • The provider bills incorrectly or in excess of actual charges.
  • Duplicate submission of the same claim resulting in a duplicate payment.

What to Do About Insurance Overpayment

Once it is determined that your credit balance is due to an insurance overpayment, your refund process should be initiated. There are six steps to a complete refund process.

  1. Send a letter to the insurance company making them aware that an overpayment has been made in error. You should never send a refund to an insurance company without contacting them first. Each insurance company has a process for handling overpayments and refunds.
  2. Allow them at least 30 days to respond to your letter. You should receive instructions on how the refund should be submitted and where to send it.
  3. Once you have received instructions on how to process the refund, make sure it is submitted with all required information to ensure proper credit.
  4. Some insurers prefer to recoup from future remittances. Keep an eye out for when this happens so you can properly notate the accounts affected to reflect this transaction.
  5. If no response is received from the insurance company within 30 days, contact them by phone to follow-up before taking further action.
  6. In the event the refund is due to Medicare or Medicaid, the process may be different from other insurance carriers. Follow CMS guidelines for Medicare and check with the Medicaid office in your state for refund instructions.

What to Do When an Insurance Company Requests a Refund Due to Overpayment

If you get a call or letter from the insurance company asking for a refund, make sure they reprocess the claim, if necessary. If they call, ask them to send their request in writing.

Some insurers prefer to recoup the overpayment from future remittances. Others may give you a certain length of time to submit a paper check, or they will withhold payment from future remittances.

If you determine that the request for a refund due to an overpayment is not accurate, contact the insurance company and ask them to reprocess the claim. You could also wait until the refund has been processed and submit a corrected claim.

What Happens When an Insurance Company Makes an Overpayment to a Patient

When a provider is out of network, some insurance plans pay directly to the patient and the patient signs the check over to the provider. Or, they deposit the check into their own bank account and write a check to the provider. Usually, if the insurance company believes that an overpayment has been made, they will typically contact the patient for a refund. 

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