By: Christopher Parrella, Esq., CPC, CHC, CPCO
Parrella Health Law, Boston, MA.
A Health Care Provider Defense and Compliance Firm

Let’s say you discover an overpayment from a health plan, one that you didn’t cause, didn’t request, and don’t want. You notify the payer. You offer to refund the money. But the payer refuses to accept it. Now what?

You can’t keep it. But you also can’t force them to take it back. And leaving it on your books just creates a permanent compliance risk. This is where your state’s escheat laws come into play.

What Are Escheat Laws?

Escheat laws require businesses to turn over unclaimed or abandoned property—including credit balances and overpayments—to the state after a set period of time (usually 3 to 5 years). Every state has its own unclaimed property division, and most allow online reporting and payment submission.

Healthcare providers tend to focus on credit balances related to patients. But insurance overpayments—especially those payers won’t accept back—are a blind spot in many compliance programs.

When a Payer Refuses Your Refund

It happens more than you think, especially with older overpayments or payers with rigid refund processes. You may get a response like:

What matters is that you don’t keep the money. Holding onto it, regardless of intent, can later be framed as a False Claims Act violation or a retention of government funds under 42 U.S.C. § 1320a–7k(d).

What You Should Do

If a payer refuses your refund:

1. Document everything. Keep a clear paper trail of your efforts to return the funds
2. Move the money into a liability account. Don’t treat it as revenue. It’s not yours.
3. After the dormancy period, escheat the funds to the state. This clears the liability and satisfies your compliance obligation.

In Massachusetts, for example, you’d report and remit the funds to the Unclaimed Property Division after three years. Other states vary, so be sure to check.

Why This Matters

Failing to escheat eligible funds can result in:

1. Regulatory audits and penalties
2. State enforcement actions
3. Exposure under federal false claims laws
4. Headaches during a payer audit or change of ownership

Compliance Tip

If your organization doesn’t already have a Credit Balance and Escheat Policy, now is the time to build one. It should cover:

1. Timeframes and triggers for escheatment
2. Procedures for payer refusals
3. Internal approval and documentation protocols

Call to Action

At Parrella Health Law, we routinely help clients implement escheat policies, defend overpayment audits, and deal with payers who want it both ways, deny claims, then refuse your money.

If you have any questions or comments about the subject of this blog, please contact Parrella Health Law at 857-328-0382 or Chris directly at cparrella@parrellahealthlaw.com.