The Affordable Care Act’s medical loss ratio (“MLR”) rule requires health insurance companies (but not self-insured plans) in the group or individual market to provide an annual rebate to enrollees if the insurer’s MLR falls below a certain minimum level. Generally, this means that health insurance companies in the individual and small group markets must spend at least 80 percent of the premium dollars they collect on medical care and quality improvement activities, and health insurance companies in the large group market must spend at least 85 percent of premium dollars on medical care and quality improvement activities.
Health insurers that failed to meet the MLR standards for 2011 were first required to pay rebates in 2012. Health insurers that failed to meet the MLR standards for 2012 were required to pay rebates by August 1, 2013. In addition, health insurers were required to send notice to group policyholders and to all employees who participated in affected plans during 2012 informing them of any rebates.
To help clarify the rules on how rebates are treated under the Employee Retirement Income Security Act of 1974 (“ERISA”), the U.S. Department of Labor (“DOL”) issued Technical Release 2011-04 (“TR 2011-04”). Plan sponsors maintaining fully-insured ERISA-covered group health plans (and plan fiduciaries) should keep these rules in mind as they consider their options for managing any MLR rebates.
Here are five tips to consider in the decision-making process.