Guide to Insurance Overpayments and Refund Requests

TMA staff receive questions daily from medical offices about payer requests for refunds. The following general information will help you and your staff properly assess most such refund requests.

Texas Prompt Pay Law - Time Limitation (TAC 21.2818) 

  • 180 Day Limit: This applies only to claims subject to the Texas prompt pay law (enacted under Senate Bill 418) and were originally paid under SB 418 provisions. Claims subject to prompt pay laws can be identified by the letters “TDI” or “DOI” on the front of the patient’s insurance card. If 180 days have lapsed from the date payment was received, no refund is due. A practice’s response to a refund request where no refund is due should cite the 180 day limit under SB 418.

    • Application : In general, the Texas prompt pay law applies to fully insured HMO and preferred provider organization products licensed and sold in Texas. It does not apply to other plans, i.e., Medicare, Medicaid, workers' compensation, TriCare, self-funded employer ERISA plans, state and federal employee plans, indemnity policies, and out-of-state Blue Cross plans (BlueCard) filed to Blue Cross and Blue Shield of Texas.
    • Effective Date:  The Texas prompt pay law applies to any contracts that were  new or renewed on or after Aug.16, 2003. To determine if SB 418 applied when the original claim was paid, check the date or renewal date of the contract with that particular carrier; the effective date of the Texas prompt pay law will vary by payer. 
    • Prior Claims:  For claims paid before enactment of SB 418, the time limit for refunds is based on individual contractual agreements. (Read your contract language and/or other carrier publications.)
    • Automatic Recoupments:  Carriers must first send a written refund request before automatically recouping money from current payments. After 45 days, if the carrier does not receive the refund or a written appeal, it can recoup the refund from any current payment. Again, automatic recoupments on claims in which 180 days have lapsed from the date the payment was received, should be appealed and the 180 day limit under SB 418 should be cited.
    • Noncontracted Physicians:  The 180-day limit applies to claims paid on or after Aug. 16, 2003, and are subject to SB 418 provisions.
    • Verification:  Verification, as defined in the Texas prompt pay law, is the ONLY guarantee of payment that a payer cannot recoup later. "Preauthorization" or simply "obtaining/verifying benefits" is not a guarantee. 

For more information about the Texas prompt pay law, go to the Physician/Provider page on the Texas Department of Insurance Web site.

  • Self-Funded Employer ERISA Plans -  Time limits are based on individual contractual agreements. Nothing prevents carriers from automatically recouping refunds from current or future payments, regardless if the physician is contracted or noncontracted.
  • Medicare Overpayments -  In general, there is no practical time limit after which Medicare cannot ask for money back. Novitas, the Medicare carrier for Texas, is required by contract to pursue refunds on overpayments. Automatic recoupments from current and/or future payments are permitted.
  • Medicaid Overpayments -  In general, Medicaid may request refunds for up to five years. Depending on the circumstances, this time frame can be exceeded.
  • Civil Practice and Remedies Code §16.004 -  In rare situations where no contract language governs refunds and SB 418 does not apply, the statute of limitations is four years (excluding government programs).
  • Preauthorization -  For all payer types, preauthorization pertains only to medical necessity and is never a guarantee of payment. 
  • Wrongful Retention -  A physician should never retain any amount truly not owed to the practice. Wrongful retention of an overpayment is called "conversion" and is illegal. If the practice did not perform the service(s), or if the reimbursement is clearly more than the plan owes, the practice should return the overpayment. The overpayment should be returned by the process outlined in the health plan’s provider and procedure manual. This may include mailing a check, requesting an automatic recoupment or some other means of refunding the money.

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Last Updated On

March 18, 2022

Originally Published On

March 23, 2010