Are you Eligible for a Refund?

By Lance D. Reedy

Let’s say that you have paid a twelve month premium in advance for your Medicare supplement plan. Months later you realize that there is a plan that is a much better value, and you want to change over to that plan. Do you have to stay with your existing plan, or can you make a change and have your unused portion of the premium you have paid, refunded back to you?

Here is recent dialog that explains the answer.

Date: January 30, 2012

My phone rings…

Susan: Lance, thank you for sending me your CD. Yes, I’m interested in having you meet with me.
Lance: I appreciate your call. And yes, I’d be happy to drive up and meet with you.
Susan: I’ll be 65 in April, and I’m looking for some sort of coverage.
Lance: Okay.
Susan: And I should also mention that we paid a year’s premium for my husband’s Plan “J” last September.
Lance: How long has your husband had his plan?
Susan: He signed up two or three years ago.
Lance: I see. That was before June 1, 2010. That Plan J is no longer offered. Is your husband in good health with no recent serious illnesses?
Susan: Oh yes!
Lance: How much was his annual premium?
Susan: I know it was well over $2,000
Lance: Yikes! If you want, he can likely change to a lower cost Medicare supplement plan providing that he can answer the health questions on another companies’ application with all “no” answers.
Susan: I thought you can’t change your plan now.
Lance: I have good news for you. You can. (click here to learn how)
Susan: Yeah, but we’ve paid a year’s premium, so we’re still stuck until next September.
Lance: I have more good news for you. Idaho is a “refund state”, which means that if you discontinue a Medicare supplement policy, the insurance company cannot keep unused or unearned premium.
Susan: Really?
Lance: Yes, here is how it works. Your annual premium started September 1, 2011. Right?
Susan: Yes.
Lance: So let’s say we apply now for a lower cost plan with a March 1, 2012 effective date. You told me your husband’s in good health?
Susan: Yes.
Lance: I’m confident, then, that his application will be approved by his new company in about two weeks. Once you have his new policy in your hands, you send a letter to his old company instructing them that you want to cancel out effective March 1, 2012.
Susan: That’s great news. I didn’t know you could do that.
Lance: You paid his twelve month premium, which so far has covered him from September 1, 2011 through February 29, 2012. That’s six months. In that letter you also instruct his old company to refund back to you the six months of unused premium. The concept here is that an insurance company is not entitled to keep what is called “unearned premium”. In other words, they can’t keep premium for future months that aren’t here yet.
Susan: That’s terrific!
Lance: And by the way, we send that letter certified and return receipt requested. We want proof that they received your letter.
Susan: Well, that’s good.
Lance: I’ll see you folks in a couple of days.

Check with your state department of insurance to verify that your state is a refund state. Most of them are.