The Affordable Care Act’s medical loss ratio (MLR) rules require group health insurance issuers to provide rebates if their MLR—the percentage of health insurance premiums spent on health care and activities to improve health care quality—falls short of the applicable standard during a reporting year. Each year’s rebates must be issued to plan sponsors by September 30 of the following year. As a result, plan sponsors should be looking for these rebates to arrive in the coming weeks.
The MLR rules provide that issuers must pay any rebates owed to persons covered under a group health plan to the policyholder, who is then responsible for distributing the rebate to eligible plan enrollees. In general, there are several ways rebates may be distributed by plan sponsors to plan enrollees, including:
- 1. A rebate check in the mail;
- 2. A lump-sum reimbursement to the same account that was used to pay the premium if it was paid by credit card or debit card; or
- 3. A direct reduction in future premiums.
In addition to the above methods, employers may also apply the rebate in a way that benefits employees. However, decisions on how to apply or expend the plan’s portion of a rebate are subject to the general standards of fiduciary conduct under the federal Employee Retirement Income Security Act (ERISA).
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