Benefits overpayments: What are your rights?
December 10, 2008 by Bill MeltzerPosted in: Special Report
Every once in awhile, an employee’s benefit claim gets overpaid by the plan carrier. What are the plan sponsor’s rights in these situations?
It’s often legal for the plan sponsor or insurer to attempt to recover the money. In increasing order of difficulty, it’s possible to recoup overpayments by any of the following methods:
- negotiating a monthly repayment plan with the employee (usually via wage deduction)
- billing statements from the carrier to the employee
- deductions from future benefits until the overpayment is satisfied
- referral to a private collection agency or state revenue department
- intervention in workers’ comp or unemployment benefit claims
- court-ordered wage garnishments
- contesting state income or property tax refunds, and/or
- liens filed on property.
As you move toward the higher end of the scale, seeking repayment may cost you more than it’s worth.
Real-life example
Two years ago, the U.S. Supreme Court made it a bit easier for ERISA plans to recover overpayments. What happened: After a serious car accident, an employee received $75,000 in disability benefits to cover medical expenses.
The employee sued the other party involved in the accident and collected $750,000 for medical fees, plus damages. The employer’s plan asked for its original $75,000 back, since the beneficiary’s medical expenses were covered by the other judgment.
The employee refused, and the plan sued to recover the money out of the other settlement. The Supreme Court gave the OK, because the plan documents spelled out the possibility of seeking recovery.
Tags: benefits overpayments
December 11th, 2008 at 2:36 pm
I had an accident and our health insurance covered all the bills, but I had to sign a subrugation agreement stating I would repay them if I received any settlement dollars. I just thought that was standard precedure. If it’s not, it should be.
December 11th, 2008 at 3:34 pm
My daughter was involved in a serious accident caused by another driver falling asleep at the wheel. Our medical insurer tried to recoup 100% of what they had paid out in medical bills, even though that would have taken almost the entire settlement. We had numerous other expenses as a direct result of the accident (travel expenses for us to care for her, special items to accommodate her limitations, etc.) We protested, ended up with a lawyer involved to negotiate a settlement, and the medical insurer got 20% of the insurance settlement.
All of this is to say that it is not always so cut and dried. A settlement should be for ALL results of an accident, not just to reimburse the medical coverage.
December 11th, 2008 at 5:14 pm
Am not sure what the legal stand would be, but only seems fair that any medical expenses not covered by insurance and any punitive damages that may have been awarded should be excluded from any payback requirements. Any money from the settlement that duplicates the money from insurancy should then be awarded back to the medical insurance carrier.