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Setting Up Payment for Coverage

This time of year, many Americans set up payment for an individual insurance plan, Part D plan, Medicare Advantage Plan or Medicare supplement. Properly setting up payment is vitally important because if payment isn’t timely, an insurer has every right to terminate your coverage.

We have dealt with many disputes associated with termination of coverage over the years. As a result, we have biases about which payment methods are better than others. The overly conscientious among us ask at times, “How could someone not pay an insurance premium?” Of course, it can happen in a variety of ways. Conscientious bill-payers become ill and no one steps in to make the payment, premium due notices and paper checks get lost in the mail, an address change is not properly handled, mail forwarding doesn’t occur properly, people take lengthy vacations and forget when premiums are due, for example.

Our preferred hierarchy of payments methods from most desirable to least desirable follows:

  1.  Auto-debit from your bank account set up with the insurer (the insurer pulls the premium from the account). We favor this method because bank accounts are changed far less frequently than credit cards are.
  2.  Automatic charge to a credit card.
  3.  Automatic bank payment to the insurer (the bank sends the premium to the insurer).
  4.  Regular bank payment to the insurer (you initiate payment from your bank).
  5.  Paper check via U.S. mail.

We recently dealt with a dispute that should never have happened. A former client set up automatic payment from the couple’s bank for his wife’s Part D plan. For several years this worked flawlessly. We’ll never know exactly why but the Part D plan began posting payment to the wrong account. They claimed they did so because the member I.D. number was incorrect on the check from the bank but that was not true. The bank checks correctly listed the I.D. number. Exacerbating the situation is that during the pandemic, the couple resided in a second home rather than the primary home where the notice of non-payment was mailed. Ultimately, this was resolved in their favor but took enormous effort. They were in the right but still had to deal with the Part D Plan’s incompetence.

Let’s discuss a related matter involving Part D and Advantage Plan payments. If one is on Social Security, Part D and Advantage Plan payments can be withheld from Social Security benefits. In spite of the convenience, we believe it is preferable to maintain control over these payments yourself. We’ve seen too many clients have problems when they changed plans. Social Security has to stop payment to one Plan and begin payment to another in a time of year when millions of people can be making such changes. Of course, managing payments yourself puts the entire responsibility on you but we have concluded that is preferable. Our opinion has been influenced by problems clients have encountered during the pandemic. Since March of 2020, no one has had the ability to walk in to their local Social Security office to get an issue resolved and we don’t know if or when that will change.

Most policies won’t be terminated until after a thirty-day grace period. If you realize after the grace period that you’re at fault due to non-payment and your policy has been terminated, call the insurer immediately, put your excuse in the best light possible, and beg (in a nice way) for reinstatement. Promise this will never happen again and describe the method of payment you’ll set up (ideally our #1 choice above). You may be speaking to someone without the authority to reinstate so write a compelling letter and send it immediately. Begging is not our preferred method of dealing with your insurer but sometimes it works.

Again, our system isn’t forgiving so please do set up payment for coverage in a way that minimizes disputes and avoids gaps in coverage.