The State or local government voluntarily enters into an agreement with CMS in order to receive a single bill and pay a lump sum for the total amount of the SMI premium surcharges due for a designated group of eligible individuals. The State or local government enters into the agreement without expectation of reimbursement of administrative expenses and may not charge Medicare beneficiaries for any costs incurred in the payment of the surcharge.

Surcharge agencies may pay the surcharge for individuals who are currently enrolled in Medicare Part B, who owe a Part B surcharge, and who are either billed directly by CMS for their Part B premiums, or are eligible for Part B premium deduction from a social security or railroad retirement benefit or civil service annuity. The surcharge payer may not pay surcharges for enrollees whose Part B premiums are either being paid by a State Medicaid Agency under a State buy-in agreement or a Formal Group Payer under a Formal Group payer buy-in agreement.

The surcharge agency must obtain written authorization from all individuals who the agency desires to include under its surcharge arrangement in order for CMS to send bills and release information concerning those individuals. The surcharge agency is responsible for supplying CMS with file that contains records for individuals that it intends to add to its premium surcharge billing account. The file must be sent to CMS in the format specified by CMS. Requirements pertaining to the methods of data exchange, record formats, including the type of file and data elements, are contained in the Premium Surcharge Handbook. Eligible enrollees may be added to the surcharge agency’s billing account every month. CMS’ Third Party Billing and Collection System will automatically generate an effective date for the addition. Where the surcharge agency transmits an addition record to CMS by the 26^th day of a month, the effective date of the addition will be the next billing month. If the surcharge agency seeks to add an enrollee who is not an eligible individual, CMS will reject the addition and notify the surcharge agency that the individual is not eligible to be included in the group.

The surcharge agency is responsible for supplying CMS with a file that contains records for individuals that it intends to remove from its premium surcharge billing account. The file must be sent in the format specified by CMS. Requirements pertaining to the methods of data exchange, record formats, including the type of file and data elements, are contained in the Premium Surcharge Handbook. Where the surcharge agency is removing an individual because the individual died, the removal record must contain the date of death. The effective date of the removal will be the month after the month in which the individual died. The surcharge agency will receive a credit refund for surcharges that were paid on the individual’s behalf for any months after the month in which the individual died. In instances where the surcharge agency is removing an individual for reasons other than death, the removal record should not contain a date. When the removal record is received by CMS by the 26^th day of a month, the effective date of the removal will be the next month. No surcharge will be due for the next month and the surcharge agency will receive a credit refund for surcharges that were paid on the individual’s behalf for that month.

When a surcharge payer discontinues payment of the surcharge on behalf of an individual for any reason other than death, the surcharge agency must notify the individual that they are liable for Part B surcharges. CMS will resume collecting the surcharge from the individual for whom the premium surcharge arrangement has ended.

There are instances where CMS will automatically remove an individual when CMS records indicate that the individual died, does not meet all the requirements for Medicare, withdrew or was terminated from Medicare. CMS may also automatically remove an individual when CMS records indicate that a formal group payer or State Medicaid agency is paying the individual’s Part B premium.

The surcharge payer must pay premium surcharges for individuals through the month it notifies CMS that it is dropping an individual from its premium surcharge payment rolls, through the month of termination of Part B coverage, or through the month of death, whichever occurs first.

The Title II system automatically notifies a beneficiary when the MBR is updated to indicate that a surcharge agency will pay the Part B premium surcharge, or the surcharge agency will no longer pay the Part B premium surcharge. (NL 00730.116, HIB 106 and 107)

The surcharge agency will be billed monthly by CMS and must pay the Part B premium surcharge amounts due for all individuals included in the surcharge payer’s billing account.

Surcharge liability is calculated by CMS once a month at the conclusion of the third-party billing operation. CMS mails the bill to the surcharge agency by the 15^th of the month. Since CMS bills prospectively, the bill represents premium surcharges due for the next month. For example, the bill created in the January 25^th billing operation, and mailed on February 15^th contains the premium surcharge liability for March.

The surcharge agency must pay the surcharge bill by the 1^st day of the month, via electronic funds transfer, utilizing either the U.S. Treasury Department’s electronic transfer of monies system (aka TFCS or Fedwire) or Mellon Bank’s Customer Initiated Payment (CIP) Program. Specifications for electronic payments are included in the Premium Surcharge Handbook.

Payment is considered received as of the date the wire transfer is received and processed by the Federal Reserve Bank in New York or the CMS Medicare Premium Collection Center.

Any payment by a surcharge payer is considered payment by the enrollee. The surcharge agency will receive a refund in the form of a credit if it is determined that the surcharge agency paid surcharges for any months after the month in which an enrollee died.

If a surcharge agency disputes the amount of its surcharge bill, the agency must provide evidence to substantiate its position. The surcharge agency must continue to pay its surcharge bill in full, including any disputed amounts, while CMS evaluates the evidence presented. If CMS determines that the surcharge payer was billed and paid surcharges in error, CMS will reflect any surcharge refunds as an adjustment to the subsequent bill.

If the surcharge agency’s monthly premium surcharge payment is not received by the 30^th day after the due date, CMS will notify both the surcharge agency and the beneficiary that the payment is delinquent. If payment is not received by the 60^th day after the due date, CMS will terminate its agreement with the surcharge agency.

The surcharge agency’s premium surcharge billing arrangement may be terminated by the surcharge agency or CMS by giving the other party 30 days written notice. Surcharges continue to accrue during the 30-day notice period. All surcharges due on or before the effective date of the termination must be paid by the surcharge agency within 30 days after the termination date. CMS may terminate the surcharge arrangement without notice if it finds that the surcharge agency is not acting in the best interest of the beneficiaries or if the billing arrangement proves to be inconvenient.

The surcharge agency must notify all individuals that it will no longer be paying the premium surcharge portion of their Part B premium. Once a premium surcharge billing arrangement is terminated, CMS will resume collection of the surcharge from the individual for whom the arrangement has ended.

All documents, data and information provided to surcharge agencies under a premium surcharge billing agreement are only to be used by the surcharge agency for the purpose of complying with the premium surcharge agreement. States and local governments are required to adopt policies and practices to insure the privacy of information contained in its records and the privacy of information obtained from CMS or others connected with this special billing arrangement.