An individual may receive a refund which is not actually due him/her 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 him/her 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 his/her SMI or Premium-HI coverage.
If termination of his/her 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/her premium obligation when he/she pays his/her premiums. In
the case of a beneficiary, premiums are paid when they are deducted from his/her benefits.
If his/her benefits are in suspense or he/she is an uninsured beneficiary, premiums
are paid when a payment is made by him/her (or by someone on his/her behalf). If SSA
mistakenly sends him/her a "refund" after he/she has paid his/her premiums and this
mistake results in termination of his/her 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, he/she owes Centers
for Medicare & Medicaid Services (CMS) the amount incorrectly returned but his/her
Medicare coverage is not endangered by the administrative error. When an enrollee
submits a "bad check" or one that is unsigned, he/she has not, in fact, paid his/her
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.