What to Do When an Insurance Company Takes Money Back
By Lisa Reidsema, LMHC • Craft Your Practice™
A letter arrives. An insurer has decided it overpaid you, sometimes for sessions you held two years ago, and it wants the money returned within thirty days. The amount can be in the thousands. This is called a recoupment or a clawback, it is legal, and it is far more common than anyone tells new therapists.
The instinct is to panic and pay it immediately to make it go away. Do not do that yet. A meaningful share of these demands are wrong, reduced, or negotiable, and the therapists who lose the least are the ones who slow down and work the process instead of reacting to it. Here is what to do.
First, do not pay on reflex
A clawback letter is designed to feel urgent. Read it fully before you move any money. Find out exactly which claims it covers, what the stated reason is, and what the real deadline is. Sometimes what looks like a demand is a routine audit notice, and sometimes it is a genuine error on the payer's side. You cannot tell which until you actually read it, and paying immediately forfeits your ability to push back.
Understand why clawbacks happen
Recoupments usually come from a few sources. A billing or coding error on your claims. A lapse in your credentialing or a mismatch in your file. The client's coverage having been inactive on a date you billed. Or a payer audit that decided a service was not documented to their standard. Knowing which bucket yours falls into tells you whether this is a quick fix or a real dispute.
Check your own documentation
Before you argue, look at your records for the claims in question. Are your notes complete for those dates. Do your codes match what you actually did. Was the client's coverage active. Good documentation is your entire defense, and this is the moment it either protects you or does not. If your file is clean, you have real ground to stand on.
## Know that you can appeal
You do not have to accept a recoupment as final. Payers have an appeals process, and a clear, documented appeal that shows the service was valid and properly billed can reduce or reverse the demand. This is a process, not a wall. It has steps, and the steps are learnable.
Decide when to bring in help
If the amount is large, the documentation is genuinely in question, or the payer is not moving, this is a reasonable time to consult a billing specialist or an attorney who knows behavioral health. Getting help is not an admission of fault. It is how you avoid paying five figures on a demand that a professional could have cut in half.
Become a harder target going forward
Most of what protects you from clawbacks costs nothing while nothing is wrong. Keep your notes complete and timely. Verify coverage before sessions. Keep your credentialing file current and consistent. These quiet habits are what make you a poor target for the next audit, which is the whole point of learning this before you need it.
Be ready before the letter comes
If you want the whole practice mapped out in the order that actually works, my free Private Practice Starter Kit is the place to start. [Grab it here.](https://craftyourpractice.com/start)
If you want the first-week response, how the appeal works, and how to make yourself a much harder target beforehand, the Clawback Defense Guide in my Practice Library covers it in full. [See it here.](https://craftyourpractice.com/the-practice-library)
And if you want credentialing, insurance, and getting paid handled start to finish, that is what my Get Paid course covers. [See it here.](https://craftyourpractice.com/accelerator)
This is educational material about a business process and it is not legal advice.