An individual may receive a refund which is not actually due 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 processing error, or because of incorrect data entered into the
Direct Billing System. The amount incorrectly paid an individual represents an incorrect
premium refund, not a premium arrearage, although it may have been received and treated
as such on the direct billing record. 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 Supplementary Medical Insurance (SMI) or Premium-Hospital Insurance
(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 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 enrollee pays the premiums. In the case
of a beneficiary, premiums are paid when they are deducted from beneficiary benefits.
If benefits are in suspense or is an uninsured beneficiary, premiums are paid when
a payment is made by the enrollee or beneficiary (or by someone on behalf). If SSA
mistakenly sends a "refund" after paid premiums and this mistake results in termination
of Medicare coverage, this 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, they owe Centers for Medicare & Medicaid Services (CMS)
the amount incorrectly returned but Medicare coverage is not endangered by the administrative
error. When an enrollee submits a "bad check" or one that is unsigned, they have 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 HI 01001.355.
Where an incorrect premium refund (regardless of the amount) cannot be recovered,
the SMI or (in the case of Premium-HI), the HI Trust Fund rather than the Old-Age
and Survivors Insurance Trust Fund is charged. Any rules applicable to incorrect SMI
premium refunds are applicable to Premium-HI refunds, except as otherwise provided.