TN 3 (10-22)

GN 02330.075 Incorrect Premium Refund Distinguished From Premium Arrearage

AUDIENCE: BA, BATA, HIE, EHS, IES

An individual may receive a refund which is not actually due to the individual with an explanation that this amount represents premiums not owed (or greater than the amount owed). The refund may be made in a separate check or added to the individual's monthly benefit. Such an erroneous refund may occur, for example, because of incorrect information supplied by a third-party, a computer processing error, or because of incorrect data entered into the SOBER system. The amount incorrectly paid the individual represents an incorrect premium refund, not a premium arrearage although it may have been recorded and treated as such in the Billing and Collection Master (BCM). The significance of this distinction is that a premium arrearage which is not paid by the end of the grace period requires termination of an individual's SMI or Premium-HI. An incorrect premium refund, on the other hand, has to be repaid unless the individual may be relieved of the responsibility for repayment of the erroneously refunded amount, but it cannot cost the enrollee the SMI or Premium-HI coverage. If termination of Medicare coverage results from recording the erroneous premium refund as a premium arrearage, the termination is erroneous and must be reversed.

An enrollee meets premium obligation when the enrollee pays the premiums. In the case of a beneficiary, premiums are paid when they are deducted from the beneficiary's benefits. If the enrollee's benefits are in suspense or the enrollee is a nonbeneficiary, premiums are paid when a payment made by the individual (or by someone on the individual's behalf) is mailed. If SSA mistakenly sends the enrollee a “refund” after the individual has paid premiums and this mistake results in termination of Medicare coverage, such a termination is erroneous and will be reversed when identified. Thus, if after receipt of a premium payment, the premium payment is inadvertently returned to the enrollee, whether or not the premiums have been paid into the SMI (or HI) Trust Fund, the enrollee owes SSA the amount incorrectly returned but Medicare coverage is not endangered by the administrative error. Of course, when an enrollee submits a “bad” check or one that is unsigned, the enrollee has not, in fact, paid the premiums. However, such a mistake, if made in good faith may be reason for granting a 3-month good cause extension of the grace period for payment of premiums (see CM 10483).

Where an incorrect premium refund (regardless of the amount involved) cannot be recovered, the SMI (or in the case of Premium-HI, the HI) Trust Fund rather than the OASI Trust Fund is charged. Any rules applicable to incorrect SMI premium refunds are applicable to Premium-HI refunds, except as otherwise expressly provided.