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 him 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 him 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
his SMI or Premium-HI coverage. If termination of his Medicare coverage results from
recording the erroneous premium refund as a premium arrearage, the termination is
erroneous and must be reversed.
An enrollee meets his premium obligation when he pays his premiums. In the case of
a beneficiary, premiums are paid when they are deducted from his benefits. If his
benefits are in suspense or he is a nonbeneficiary, premiums are paid when a payment
made by him (or by someone on his behalf) is mailed. If SSA mistakenly sends him a
“refund” after he has paid his premiums and this mistake results in termination of his 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, he owes SSA the amount incorrectly returned but his Medicare coverage is not
endangered by the administrative error. Of course, when an enrollee submits a “bad” check or one that is unsigned, he has not, in fact, paid his 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.