IMHO. Yikes! There are laws in place in California regarding refunding patient's overpayments. Your OM is not doing his spouse any favors by holding onto overpayments. If the patient complains to the insurance board, (and it's really simple mathematics to match your EOB's with your check book and receipts from the doctor's office) there will be hell to pay. Not to mention that when the patient finds out they will holler it all over town. Not good business practice.
If the patient is a chronic slow pay, and you get a little ahead, I might not blame him. But it sounds like the patient is one of the good guys who pays his bill, on time and ahead of time. Patients like that are gold. It's not a good idea to make them mad.
I truly appreciate your good heart, knowing that it's wrong, and contemplating a new job. This kind of bad business is usually only the beginning. Follow your heart. And CYA!