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Posted: 03.21.2012
Rebating Health Insurance Premiums to Employees

What Employers Need to Know

As part of the Affordable Care Act (Health Care Reform), insurance companies are now subject to Medical Loss Ratio (MLR) requirements. The MLR rules mandate what percentage of health care premiums must be used to cover claims and not other expenses such as overhead, marketing, or profits. For the large group market, that figure is 85 percent. If an insurance company fails to meet the new standard, the company is required to rebate its policyholders.

As the employer group policyholder, you now have a legal obligation to ensure that the rebates you receive benefit employee subscribers. Below is the information you need to help you comply:

»»Information regarding rebates will be provided by the insurance company to both the group policy holder (employer) and subscribers (employees).
»»Rebates will be issued to the group policy holder.
»»The group policy holder is required to use the portion of rebates attributable to the amount of premium paid by subscribers for the benefit of the subscriber, ensuring that enrollees in plans receive the benefit of the rebates.
»»If employees pay a 30 percent contribution – they should receive 30 percent of the rebate.

The policy holder has some flexibility in how to distribute the rebate.

»»Reduce subscribers’ portion of the annual premium for the subsequent policy year for all subscribers.
»»Reduce subscribers’ portion of the annual premium for the subsequent policy year for only those subscribers covered by the group health policy on which the rebate was based.
»»Provide a cash refund only to subscribers that were covered by the group health policy on which the rebate was based.
»»In all three options, the rebate is used to reduce premiums or is paid to subscribers enrolled during the year in which the rebate is actually paid – not based on the MLR reporting year in which the rebate is calculated.
»»This was done to provide administrative simplification – no tracking of former enrollees, etc.

To review CMS’ complete and final regulations regarding MLR requirements, go to:

http://cciio.cms.gov/resources/factsheets/mlrfinalrule.


Joe DiCresce
VP Employee Benefits
Brown & Brown of Detroit



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Securities and Advisory Services offered through M Holdings Securities Inc., a Registered Broker/Dealer and Investment Adviser, Member FINRA/SIPC. Brown & Brown of Detroit, is independently owned and operated from M Holdings Securities, Inc. Brown & Brown of Detroit is a wholly owned subsidiary of Brown & Brown, Inc.

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