Knock knock! Who’s there? MLR Rebates, that’s who! For those who do not what MLRs are, here is a small, summarized excerpt to get you caught up:
“The Affordable Care Act (ACA) established medical loss ratio (MLR) rules to help control health care coverage costs and ensure that enrollees receive value for their premium dollars. The MLR rules require health insurance issuers to spend 80-85% of premium dollars on medical care and health care quality improvement, rather than administrative costs. Issuers that do not meet these requirements must provide rebates to consumers. Rebates must be provided by September 30 following the end of the MLR reporting year.”
Carriers should have notified you if you are eligible to receive them. Here are some more details to help guide you through this process.
For employers that pay 100% of the premium, the MLR rebate is not a plan asset for you. However, in most cases, the rebate is considered a plan asset. Under the DOL’s regulations, employers are prohibited from retaining a rebate that amounts greater than the total amount of premiums and other plan expenses paid by the employer. For example, if you, the employer is required to pay a fixed amount, then the portion of the rebate that exceeds the employees’ total contribution amount is not eligible for retention.
It is highly recommended to follow one of these three ways to calculate distribution of the rebate:
- Evenly to all covered participants
- Based on each participants’ actual contributions
- In a way that reasonably reflects each participant’s contributions
Once you as the employer determines the MLR rebate as a plan asset, you must decide on how to utilize this benefit for the employees and their dependents. Under the Department of Labor:
- Employers need to distribute to participants under a reasonable and fair allocation method, especially in circumstances of multiple plan policies and differing premium amounts. Regarding formerly employed participants, the fiduciary may decide to limit rebates to current participants if the expenses exceed the rebate amount to reach out to former employees.
- Employers may utilize rebates for other plan purposes such as future premium payments or benefit enhancements if distribution of rebates is not cost-effective.
I hope this helps! Remember: For 2021 year, issuers are required to pay rebates by September 30, 2022.
Please contact your Filice Insurance administrator or visit the DOL article release if you need additional assistance with this process.