Subpart 1-Premiums for Supplemen

tary Medical Insurance Benefits

AUTHORITY: The provisions of this Subpart I issued under secs. 1102, 1838-1840, 1843, 1871, 49 Stat. 647, as amended, 79 Stat. 305-308; 79 Stat. 312; 79 Stat. 331; 81 Stat. 249; 81 Stat. 821; 42 U.S.C. 1302, 1395 et seq.

SOURCE: The provisions of this Subpart I appear at 33 F.R. 9768, July 6, 1968, unless otherwise noted.

§ 405.901 Scope of subpart.

Subpart I of Part 405 sets forth the Administration's policy and general procedure for collection of premiums for supplementary medical insurance benefits (see Subpart B of this Part 405). These policies are designed to promote the security of the enrollees to the maximum degree feasible compatible with reasonable safeguards for the integrity of the Federal Supplementary Medical Insurance Trust Fund.

§ 405.902 Amount of premiums.

(a) Enrollment in initial enrollment period. Where an individual enrolls during his initial enrollment period (see § 405.212) or under the "good cause" provisions discussed in § 405.224, the monthly premium under the supplementary medical insurance program is $3 for each month of coverage (see § 405.220) before April 1968, and $4 for each month of coverage beginning April 1968, and continuing through June 1969. During December 1968, and each December thereafter, the Administration will determine and announce the dollar amount which shall be applicable for premiums for months occurring in the 12-month period commencing July 1 of each succeeding year.

or

(b) Enrollment after initial enrollment period. In the case of an individual who first enrolls after the close of his initial enrollment period (not including an enrollment under the "good cause" provisions discussed in § 405.224) reenrolls after termination of his supplementary medical insurance coverage (see § 405.214), the monthly premium, as determined under paragraph (a) of this section will be increased by 10 percent for each full 12 months in the following total (no increase is made for a fractional portion of 12 months); but no such increase will apply to any individual enrolled under a Federal-State agreement or during a continuous period of an enrollee's coverage beginning imme

diately after termination of his coverage under such an agreement (see § 405.904(d)):

(1) The number of months between the close of his initial enrollment period and the close of the general enrollment period in which he first enrolled, but not including the 3 months January through March 1968 for any person who enrolled during the first general enrollment period, October 1967 through March 1968; plus, in the case of an individual who enrolls for the second time:

(2) The months between the date of termination of his coverage period and the close of the general enrollment period (see § 405.213) in which he thereafter enrolled, but not counting any months of coverage under a FederalState agreement (see § 405.904(d)), and not including the 3 months January through March of 1968 for any person who enrolled during the first general enrollment period, October 1967 through March 1968.

Example 1: J, who became age 65 and otherwise eligible for enrollment in November 1965, first enrolls in March 1968. The months to be included in determining the amount of the increase in J's premiums begin with June 1966 (the first month after the close of his initial enrollment period (see § 405.212)) and extend through December 1967 (the period January through March of 1968 is excluded in determining the total months) for a total of 19 months. Since there is only one full12-month period in 19 months, J's premiums will be 10 percent greater than if he had enrolled in his initial enrollment period.

Example 2: V, who enrolled in December 1965, voluntarily terminates his enrollment effective midnight December 31, 1967. He enrolls for a second time in January 1969. The months to be included in determining the amount of the increase in V's premiums are January 1968 through March 1969, a totsi of 15 months. Since this totals one full 12month period, V's monthly premium, as determined under paragraph (a) of this section will be increased by 10 percent.

Example 3: N becomes age 65 in July 1965 and first enrolls in December 1967. She pays premiums increased by 10 percent above the regular rate, beginning July 1968 the first month of her coverage under Subpart B. N fails to pay the premiums for the calendar quarter ending June 30, 1970, and her coverage is terminated on that date, the end of her grace period. N enrolls for a second time in January 1971. The months to be included in determining the amount of the increase in N's premiums are June 1966 through December 1967, a total of 19 months. and July 1970 through March 1971, a total of 9 months, for a grand total of 28 months.

Since this totals two full 12-month periods, N's monthly premium as determined under paragraph (a) of this section will be increased by 20 percent.

(c) Rounding the monthly premium. Any monthly premium which is not a multiple of 10 cents will be rounded to the nearest multiple of 10 cents, and any odd multiple of 5 cents will be rounded to the next higher multiple of 10 cents. § 405.903 Months for which premiums are due; payment obligation.

(a) Months for which premiums are due. A premium is due for each month of supplementary medical insurance coverage, beginning with the first month of coverage and continuing through the month of death, or, if earlier, the month in which coverage terminates, including each month of the grace period, if applicable. A premium is due for the month I of death, if supplementary medical insurance coverage was not previously ended, even though the enrollee dies on the first day of the month.

(b) Payment obligation. Where overdue premiums have not been paid by the last day of the applicable grace period (as provided in this subpart), coverage will terminate as of that day, and notice of termination (with information regarding the enrollee's rights of appeal) will be sent promptly to the enrollee and also to any intermediary who had been adIvised that the enrollee had met his $50 deductible (see § 405.245) for the year in I which the termination occurs. The premiums owed (including premiums for each month of the grace period, if applicable), will be collected by deduction from subsequent monthly benefits (see § 405.904) payable to the enrollee. Such arrears constitute an obligation enforceable against the enrollee or his estate and will be collected directly from the enrollee or his estate. Premium arrears may also be offset against any supplementary medical insurance payments due an enrollee as reimbursement for medical or other expenses (including such payments due under section 1870 (e) after the death of an enrollee on the basis of a paid bill for covered services furnished to him).

§ 405.904 Payment of premiums; general.

The two basic methods by which premiums for supplementary medical insurance will be collected are deduction from monthly benefits payable under title II

of the Social Security Act, the Railroad Retirement Act, or an act administered by the Civil Service Commission providing retirement or survivorship protection, and payment by direct remittance in response to a premium notice:

(a) Individual entitled to monthly social security or railroad retirement benefits. Where an enrollee is receiving social security or railroad retirement benefits, his supplementary medical insurance premiums except as indicated in paragraph (d) of this section, will be deducted from such benefits (see § 405.911).

(b) Individual entitled to civil service annuity only. If an enrollee is not entitled to social security or railroad retirement benefits and is receiving a civil service annuity, his premium must be deducted from his annuity. Where such annuitant's spouse is also enrolled for supplementary medical insurance and is not entitled to a civil service annuity or any benefits (under either the Social Security Act or the Railroad Retirement Act) and the annuitant consents, the spouse's supplementary medical insurance premiums will be withheld from such annuitant's monthly annuity. The annuitant may withdraw his consent by giving notice of withdrawal. Such withdrawal will be effective with the third month after the month in which such notice is received or with the month specified on the notice, whichever is later.

(c) Individual entitled to both social security and railroad retirement monthly benefits. If an enrollee is entitled to monthly benefits under both the Social Security Act and the Railroad Retirement Act, his premiums will be deducted in accordance with the provisions of § 405.905. Where supplementary medical insurance premiums are deducted from railroad retirement benefits in accordance with § 405.905 (b), the Railroad Retirement Board will make such deductions.

(d) Individual enrolled pursuant to a Federal-State agreement. Notwithstanding the provisions of paragraphs (a), (b), and (c) of this section, where an individual is enrolled pursuant to a Federal-State agreement (see § 405.217), his premiums are paid by the State which has thus enrolled him. If an enrollee's coverage under the Federal-State agreement is terminated (see § 405.223), such enrollee's premiums will be collected by deduction from social security, railroad,

or civil service retirement benefits, as appropriate, or by direct remittance.

(e) Individual not entitled to monthly benefits or enrolled pursuant to a Federal-State agreement. Premiums not deducted from social security, railroad retirement, or civil service benefits, and not paid under a Federal-State agreement will be paid by direct remittance. These premiums will be billed for on a quarterly or monthly basis.

§ 405.905 Collection from individual entitled under both the Social Security Act and the Railroad Retirement Act. Where an enrollee not covered under a Federal-State agreement is entitled to both a social security and a railroad retirement benefit, premiums for supplementary medical insurance coverage will be collected as follows:

(a) Deduction from social security benefits. Premiums for supplementary medical insurance coverage will be deducted from social security benefits when an individual:

(1) Is entitled to both social security and railroad retirement benefits at the time of enrollment; or

(2) Is entitled only to social security benefits at the time of enrollment, or becomes entitled to such benefits after enrollment and before he becomes entitled to railroad retirement benefits; or

(3) Becomes simultaneously entitled to both social security and railroad retirement benefits and his entitlement to social security benefits begins with the same month as his railroad retirement benefits or earlier.

(b) Deduction from railroad retirement benefits. Premiums for supplementary medical insurance coverage will be deducted from monthly railroad retirement benefits when an individual:

(1) Is entitled only to a railroad retirement benefit at the time of enrollment or becomes entitled to a railroad retirement benefit after enrollment and before he becomes entitled to a social security benefit; or

(2) Becomes simultaneously entitled to both a railroad retirement and a social security benefit, and the first month for which he is entitled to the railroad retirement benefit is earlier than the first month for which he is entitled to the social security benefit.

§ 405.908 Payment by direct remittance; rules governing payment. Except for the provisions of § 405.904 (d), enrollees not in receipt of,

or not entitled to, monthly benefits from which premiums can be deducted are required to pay premiums by direct remittance. The following rules govern payment by direct remittance:

(a) Payment should be made by mail. (b) The enrollee should remit payment in the form of a check or money order made payable to "Social Security Medical Insurance." Stamps will not be accepted.

(c) The name and claim number of a person whose premiums are being paid should be shown on the check or money order. Payment may be mailed in the preaddressed envelope which will be furnished with the premium notice, and the premium notice should be returned with the premium payment in the same envelope.

§ 405.911

Collection from enrollees in monthly benefit payment status.

(a) The purpose of collection by deduction from monthly benefits is to keep premium collection costs to a minimum. Where the enrollee is receiving monthly benefits (see §§ 405.904-405.905), 1 month's premium will be deducted from each month's benefit and the premium for any given month will be deducted from the benefit paid for the previous month. The enrollee does not have the choice of paying his premiums by direct remittance to avoid the deduction.

(b) When an enrollee receives a monthly benefit check after an initial award or after a period of suspension, the amount of the check will, when administratively feasible, be reduced or increased as appropriate because of unpaid premiums or premiums paid in advance by direct remittance. Thereafter, s single month's premium deduction will ordinarily be made from the benefit for each subsequent month.

(c) Premiums due or overdue will when administratively feasible, be deducted from any monthly benefit before payment is made. For discussion of provisions relating to persons entitled to an age-72 special payment, see § 405.916. § 405.912 Collection of premiums while

monthly benefits are suspended.

(a) Benefit payments being resumed during current year. When an enrollee's monthly cash benefit payments (other than age-72 special payments (see § 405.916)) being suspended are scheduled to be resumed within his current taxable year (see subtitle A of the In

ternal Revenue Code of 1954 for definition of a taxable year), such enrollee will not be billed for premiums. However, the enrollee's obligation for premium payments continues during the period for which monthly cash benefits are suspended (see § 405.911).

(b) Collection

of premiums where monthly benefit payments will not be resumed during the current taxable year. Where an enrollee's monthly cash benefit payments (other than age-72 special payments (see § 405.916)) are being suspended for an indefinite period or for a definite period which will not permit collection of all premiums due from monthly benefits payable in the current taxable year, the enrollee should pay his premiums by direct remittance when he is billed. The first billing will be for an amount not exceeding whatever = premiums are necessary to place him in a regular calendar quarter cycle. Thereafter, the enrollee is to be billed for 3 months' premiums on a calendar quarter basis (see § 405.913). If the enrollee, however, wishes to pay premiums for more than one quarter at a time, he may do so.

§ 405.913

Collection of overdue premiums for months in a closed taxable year.

(a) General. Where the premiums for months in a taxable year cannot be collected from monthly benefits payable because such benefit payments are suspended, the enrollee may during that. year pay such portion of the monthly premiums for such period as he desires. However, this privilege does not extend indefinitely; each enrollee whose premiums for months in a taxable year are in arrears, will be notified at the end of such year that premiums for such taxable year are due and must be paid. Failure thereafter to pay such premiums due by the end of the grace period will terminate his supplementary medical insurance coverage. (For special instructions concerning persons entitled to an age-72 special payment, see § 405.916.)

(b) Enrollee reports his earnings on a calendar year basis. Where an enrollee files his income tax return on a calendar year basis and owes premiums for 1 or more months in a closed calendar year, the due date for all such overdue premiums is the third day of February after the end of that year. Such person's grace period ends on the last day of the second month after the month in which the due

date occurs, and his coverage will terminate on the same day if the premiums for the past calendar year are not paid on or before that day. Accordingly, a person owing for premiums during the calendar year will be given notice in December of such year (the second month before the due date) to pay his premium arrears for such year. Those enrollees who have not paid their premium arrears for the closed taxable year will be notified further to pay all such arrears by April 30 and failing such payment, their supplementary medical insurance coverage will be terminated on April 30.

(c) Enrollee reports his earnings on a fiscal year basis. Where an enrollee files his income tax return on a fiscal year basis and owes premiums for 1 or more months in a closed fiscal year, he will be treated as discussed in paragraph (b) of this section, except as follows: The due date for all such overdue premiums is the third day of the second month after the close of his fiscal year. A person owing premiums for months in a fiscal year will be given notice of such premium arrears at the end of such year. Such person's grace period ends on the last day of the second month after the month in which the due date occurs, and his coverage will terminate on the same day if the premiums for the past fiscal year are not paid on or before that day.

Example. H became enrolled for supplementary medical insurance effective July 1966. He reported work and earnings which precluded payment of monthly social security benefits for months after May 1966. Although billed, he paid no premiums by direct remittance thereafter. H reports his earnings on a fiscal year basis that ends on May 31. Early in May 1967, H is notified of his unpaid premiums ($33) for the fiscal year ending May 31, 1967, and advised that these premiums are overdue and should be paid on or before July 3, 1967. However, he fails to pay by September 30, 1967, despite such notice and delinquency notices sent in August and September reminding him of his unpaid premium obligation and advising him of the end of the grace period for payment and of the consequences in the event he fails to pay by September 30. His supplementary medical insurance coverage is terminated effective midnight September 30, 1967, and he owes $45 (for the 15 months July 1966-September 1967 inclusive) which will be recovered from the first monthly benefits payable to him unless paid before then.

(d) Enrollment adjudicated after the end of year in which enrollee's supple

mentary medical insurance begins. There may be cases where an enrollee's coverage begins in one taxable year, but his supplementary medical insurance entitlement is not adjudicated until after the end of such year. Where premiums for months in the closed taxable year cannot be collected from benefits payable for any reason (e.g., because of a suspension event) the enrollee will be billed for all such premiums immediately after adjudication of his enrollment. The due date for premiums for the closed taxable year is the third day of the month following the month of notice. In such a case, the enrollee's grace period (during which all such premium arrears must be paid if coverage is to continue) will end with the second month after the month in which the due date occurs.

§ 405.914 Payment within the grace period.

Overdue premiums will be considered paid within the grace period in the following situations:

(a) Resumption of benefits during the grace period. The premium arrears will be considered paid timely if:

(1) Monthly cash benefit payments are payable for the last month in the grace period or earlier months on the basis of a notice filed by the enrollee before the grace period ends; and

(2) All overdue premiums can be collected from such payments.

Example. B, an enrollee whose monthly social security benefits had been suspended, notified the Administration in April 1967, that he will be doing no work of any kind in that month. The amount of the benefit for that month is $78, and he owes premiums for all months after June 1966. Since the $18 he owes for premiums for 1966 can be collected by deduction from his April benefit, his supplementary medical insurance coverage will be continued. ($33 will be deducted from his monthly benefit check for April 1967 to pay premiums for July 1966 through May 1967.)

If B had waited until May 1967 to notify the Administration that he had stopped work as of March 31, 1967, and had not otherwise paid the overdue premiums by April 30, 1967, his supplementary medical insurance coverage would terminate with the latter date and could not be reinstated upon receipt of such notice. He could obtain supplementary medical insurance coverage thereafter by enrolling in a general enrollment period which begins within 3 years after the effective date of the termination of his prior enrollment.

(b) Annual accounting or other report shows a benefit is due. Premiums are to be considered paid timely if:

(1) An enrollee submits a report before the grace period ends which clearly shows that a monthly cash benefit payment, previously withheld, should be made for 1 or more months in a closed taxable year; and

(2) The full amount of the overdue premiums can be collected from the benefit.

(c) Payment of premium arrears by direct remittance. Premiums are considered paid timely if the enrollee makes a direct remittance of all overdue premiums before the grace period ends (see § 405.908). § 405.915

Possible entitlement to social security or railroad retirement benefits.

(a) In those cases where it is clear that the enrollee is entitled to monthly benefits as well as supplementary medical insurance, the supplementary medical insurance enrollment will be processed simultaneously with his claim for monthly benefits and his premiums will be deducted from benefits payable. However, if an enrollee's monthly benefits are subject to complete or indefinite suspension of payment, he must make payment upon receipt of a notice of premium due in accordance with the provisions of §§ 405.912-405.913.

(b) (1) When the enrollee is clearly eligible for supplementary medical insurance but there is a substantial question as to eligibility for monthly benefits (other than age-72 special payments (see § 405.916)) whether raised initially or during subsequent processing of the benefit claim, the supplementary medical insurance enrollment and hospital insurance benefits claim may have to be processed independently of the monthly benefit claim.

(2) If the supplementary medical insurance enrollment is processed independently of the monthly benefit claim (other than a claim for an age-72 special payment (see § 405.916)) the enrollee will be treated for supplementary medical insurance premium purposes, in accordance with the provisions of §§ 405.912 and 405.913, pending resolution of the monthly benefit issue.

(3) If the monthly benefit claim is denied before the end of the enrollee's tax. able year and the enrollee's premiums are then in arrears, such enrollee must