Monday, July 28, 2014

What Is an Employer Supposed to Do When They Get a PPACA Medical Loss Ratio (MLR) Rebate?

Insurance carriers will be sending out MLR (Medical Loss Ratio) rebate checks in the next few weeks (August 1 is the deadline for delivery set by HHS). Some of you are old pros at this, since this is our third year of MLR rebate distribution, and some of you may be new at this process. The MLR requires carriers to spend a defined percentage of premium dollars collected on clinical services and health care quality improvements. If the carrier does not spend the required percentage, then a rebate may have to be paid.

Most plans do not get rebates. Only fully insured plans are eligible for rebates, and rebates vary by product, state, and market segment. Rebates are generally provided to the employer or plan sponsor, who is then responsible for distribution of the rebate to plan participants.

Attached are two legislative alerts that address the fiduciary and tax considerations that apply to employer group health plans subject to ERISA (Employer Retirement Income Security Act) that receive MLR checks. There is a link to the IRS FAQ within the "How Employers Should Handle MLR Rebates" alert that is very helpful.
It is important that an employer or plan sponsor determine who is entitled to the MLR rebate and how the MLR rebate will be used. In addition to checks being mailed to employers, notices of the rebate also will be mailed to the subscribers/employees of those groups receiving rebates. Unlike the first MLR reporting year, no notices will be mailed to policyholders and relevant subscribers who do not qualify for a rebate.