6 Insurance Recoupment Dilemmas Therapists Face (and How to Handle Each One)

An insurance recoupment is when a payer takes back money it already paid you for a claim, either by asking for a refund or by deducting the amount from your future payments. For therapists and mental health practices, recoupments usually trace back to six causes: undisclosed secondary insurance, a terminated policy, a fee schedule change, duplicate payments, payments sent to the wrong provider, and post-payment audits. Below, we explain each dilemma, what to do the moment a recoupment letter arrives, and how to stop them from happening again.

Key Takeaways

• Never ignore a recoupment letter. Appeal windows are short, often 30 to 90 days for commercial payers.
• Verify the request before you pay. Many recoupments are made in error and can be reduced or overturned on appeal.
• Most recoupments are preventable with eligibility checks before every session, clean claim tracking, and strong clinical documentation.
• If you owe the money, you can often rebill the correct payer or bill the client, so the revenue isn’t always lost.

What Is an Insurance Recoupment?

A recoupment (sometimes called a clawback or overpayment recovery) happens after a claim has been paid. The insurance company reviews the payment, decides it paid too much or shouldn’t have paid at all, and recovers the money. It is different from a claim denial, which happens before any payment is made. If you’re dealing with denials, see our guide to the most common claim denials in mental health billing.

Payers usually recover the money in one of two ways:

• Refund request: the payer sends a letter asking you to mail back a check by a set date.
• Offset: the payer automatically subtracts the amount from future claim payments, so your next deposit is smaller than expected.

Offsets are the reason recoupments feel so disruptive. Without careful payment posting, a practice may not notice that money was taken back until its accounts receivable no longer add up.

6 Common Recoupment Dilemmas (and How to Deal With Them)

1. Your Client Didn’t Tell You About Secondary Insurance

Why it happens: When a client has two health plans, only one can be primary. If you bill the plan you thought was primary and the payer later learns about other coverage through a coordination of benefits (COB) review, it will recoup what it paid.

How to handle it:

1. Call the client and confirm every plan they have, including coverage through a spouse or parent.
2. Ask the client to update their COB information with both insurers.
3. Refile the date of service with the correct primary plan, then send the balance to the secondary plan.
4. Repay the original insurer. You’ll be paid by the correct primary plan instead.
5. If you’re out-of-network with the correct primary plan, collect the balance from the client.

How to prevent it: Ask about all insurance coverage at intake and re-verify it at least every few months and every January, when plans commonly change.

2. Your Client’s Insurance Policy Was Terminated

Why it happens: Coverage can be terminated retroactively, for example after a job change or missed premium. Claims paid during that period get taken back.

How to handle it:

1. Contact the client and ask whether they have a new policy and when it started.
2. Refile the affected dates of service with the new insurance company.
3. If you don’t accept the new plan, or the client had no coverage, bill the client directly according to your financial policy.

How to prevent it: Verify eligibility before every session, not only at intake, and have clients sign a financial responsibility agreement that covers lapsed coverage.

3. The Payer Changed Its Fee Schedule

Why it happens: Insurers update their contracted rates and often announce it by mail or through a provider portal. If a rate drops and claims were paid at the old rate, the payer may recoup the difference.

How to handle it:

1. Pull your contract and any fee schedule notices to confirm the effective date of the change.
2. If the notice was never sent or the payer applied the new rate early, appeal in writing and include your contract terms.
3. If the change was properly announced, repay the difference and update your expected rates.

How to prevent it: Open and file every piece of mail and portal message from payers. It’s easy to discard a fee schedule update that looks like routine correspondence.

4. The Insurance Company Paid You More Than Once

Why it happens: Duplicate payments occur when a claim is submitted twice or when a payer’s system processes the same claim more than once.

How to handle it:

1. Check your records to see whether the same claim was filed twice.
2. If you did file it twice, return the duplicate payment.
3. If you didn’t, compare the dates of service and CPT codes. Two sessions on different dates can look like duplicates, so appeal with your session records to show both were separate, billable services.

How to prevent it: Track every claim’s status before resubmitting, and use a corrected claim instead of a new one when fixing an error.

5. The Insurance Company Paid the Wrong Provider

Why it happens: In group practices, a payment may be credited to the wrong clinician’s NPI, or data entry errors can send another provider’s payment to you.

How to handle it:

1. Match every payment against the claims you actually submitted.
2. If the payment belongs to another clinician in your practice, contact the insurance company so they can reprocess it correctly.
3. If the money was deposited to you by mistake and isn’t yours, return it right away. Keeping funds you know aren’t yours can create compliance problems.

How to prevent it: Keep each clinician’s NPI, tax ID, and credentialing details up to date with every payer, and reconcile deposits against EOBs/ERAs weekly.

6. The Insurance Company Audits Your Records

Why it happens: Payers run post-payment audits to confirm that services were medically necessary and documented as billed. Frequent use of the 60-minute psychotherapy code (90837), missing session start and stop times, or treatment plans that are out of date are common red flags.

How to handle it:

1. Read the audit request carefully and note exactly which records are requested and the deadline.
2. Compare your notes against the payer’s documentation and coverage policies before you submit anything.
3. Send complete, organized records by the deadline and keep a copy of everything you sent.
4. If the audit results in a recoupment you disagree with, appeal and cite the specific note content that supports each claim.

How to prevent it: Document every session by the book: diagnosis, medical necessity, start and stop times, interventions, progress toward goals, and a current treatment plan. When your clinical and billing records match, you’re far more likely to pass a medical record review.

What to Do When You Receive a Recoupment Letter

Whatever the cause, follow the same steps every time:

1. Don’t pay right away. First confirm the request is valid.
2. Record the deadlines. Note the appeal deadline and the date the payer will start offsetting future payments.
3. Identify the claims. Match the client, date of service, claim number, and amount to your own records.
4. Find the reason. If the letter doesn’t explain it clearly, call the payer and ask for a written explanation.
5. Decide: repay or appeal. If the payer is right, repay or approve the offset and rebill the correct party. If the payer is wrong, file a written appeal with supporting documents.
6. Keep a paper trail. Save the letter, call reference numbers, your appeal, and proof of delivery.

Recoupment Timelines at a Glance

How far back an insurer can go, and how long you have to respond, depends on the payer and your state.

Medicare timelines are based on the CMS Medicare Overpayments fact sheet. Commercial and Medicaid rules vary by state, so confirm the details for your state and each payer contract.

Should You Repay, Appeal, or Let the Payer Offset?

• Repay by check when the recoupment is valid and you want a clean record that’s easy to reconcile.
• Allow an offset when the recoupment is valid and you’d rather not write a check, but track every offset on your ERAs so your books stay accurate.
• Appeal when the payer is wrong, when the look-back period has expired, or when your documentation supports the claim.
• Escalate to your state insurance department if a commercial payer ignores your appeal or recoups outside the rules. For large amounts or audits that suggest fraud, talk to a healthcare attorney.

How to Prevent Insurance Recoupments in Your Practice

• Verify eligibility and benefits before every session.
• Collect all insurance information at intake, including secondary plans.
• Read every payer letter, portal message, and fee schedule notice.
• Post payments from ERAs and EOBs promptly and reconcile deposits weekly.
• Keep credentialing and NPI details current with every payer.
• Use documentation templates that capture medical necessity and session times.
• Audit a sample of your own notes and claims every quarter.

For more habits that keep claims clean, read our mental health billing tips and our guide to common insurance billing challenges for mental health professionals.

Get Help Handling Recoupments

Recoupments take time away from clients and can quietly drain your revenue. Working with experienced mental health billing services means someone is verifying eligibility, tracking every payment and offset, and appealing recoupments that shouldn’t have happened. Learn how a billing company helps reduce claim denials, see what mental health billing services cost, or contact ePsych Billing to talk through a recoupment letter you’ve received.

Frequently Asked Questions About Insurance Recoupment

What does recoupment mean in medical billing?

Recoupment means an insurance company is taking back money it already paid for a claim because it believes it overpaid. It can ask for a refund or deduct the amount from future payments.

What’s the difference between a recoupment and a refund?

A refund is money you send back, often after finding an overpayment yourself. A recoupment is started by the payer, which requests the money or takes it automatically from later payments.

How far back can an insurance company recoup payments?

It depends on the payer and state. Commercial plans are often limited to 12 to 24 months by state law or contract, Medicare audit contractors generally look back about 3 years, and Medicaid can go back up to 5 years in many states. Fraud cases can extend these limits.

Can I appeal an insurance recoupment?

Yes. Ask for the reason in writing, gather your claim and clinical records, and file a written appeal before the payer’s deadline. Many recoupments are reduced or reversed when the provider submits supporting documentation.

Can I bill my client after an insurance recoupment?

Often, yes. If the recoupment happened because the client had other primary insurance or their coverage ended, you can bill the correct plan or bill the client according to your financial policy and payer contract.

What happens if I ignore a recoupment letter?

The payer will usually start deducting the amount from your future payments, and for Medicare, interest begins accruing. You may also lose your right to appeal once the deadline passes.