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It’s Medical Loss Ratio (MLR) Rebate Check Time Again

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The Affordable Care Act (ACA) requires group health plans to spend a minimum percentage of premium dollars on members’ health care expenses and services. Likewise, it sets a threshold on the maximum amount of premium dollars that can be spent on other administrative costs, such as marketing, profits, salaries, agent commissions, etc. These requirements, known as a plan’s Medical Loss Ratio (MLR), require group health plans to reimburse employers for any premium dollars that exceed MLR limits.
 
In the Small Group market, the law requires an MLR of 80%. That is, at least 80% of premium dollars must be spent on health care-related expenses, and no more than 20% of premium dollars may be spent on administrative expenses. In the Large Group market, the MLR rises to 85%.
 
Any year a health plan exceeds its MLR requirements, the health insurance carrier has until the end of September of the following year to distribute MLR rebate funds. Plans that exceeded MLR requirements in 2021 are required to distribute MLR reimbursement checks by 9/30/2022.
 
Employers have several options when it comes to utilizing or dispersing the MLR rebate funds, but the law gives them just 90 days to take action. Furthermore, employees are also notified about forthcoming MLR rebate checks by their plan(s) as required by law, which can also put pressure on employers.
 
The MLR rebate checks in the group market are generally small, ranging from about $10.00 to $30.00 per participant. Forwarding these funds to employees can be a challenge because the funds may result in additional taxable income and can be a burden on payroll. Often, the administrative cost to release the funds to employees is greater than the amount of the rebate checks themselves, which is why employers are granted flexibility when it comes to utilizing the funds.
 
The Department of Labor provides three options for distributing rebates:
  1. Reduce subscribers’ portions of the annual premium for the subsequent policy year for all subscribers covered under any group health policy offered by the plan.
  2. Reduce subscribers’ portions of the annual premium for the subsequent policy year for only those subscribers covered by the health policy on which the rebate is based.
  3. Provide a cash refund only to subscribers who were covered under the group health policy on which the rebate is based.
The law does not require employers to track down former employees for MLR rebates, but COBRA participants must be included in any premium rebates, if applicable.
 
If the plan is funded solely by the employer, then the employer may keep the rebate check – as long as the rebate funds are not considered “plan assets” under ERISA law. If the funds are considered “plan assets,” then the funds must be used to enhance employees’ benefits. Consultation with an ERISA attorney is highly recommended for guidance in this area.
 
Word & Brown General Agency has developed a proprietary MLR rebate calculator to help your clients calculate MLR payment disbursements, for employers who decide to refund employees directly.
 
If the employer has a Section 125 Premium Only Plan (POP) in place, and its employees pay premium contributions on a pre-tax basis, then any MLR rebate amount given to those employees is generally considered taxable income. It is important for an employer to check with its accountant or payroll personnel for counsel on these tax issues. Because of these tax ramifications, most employers opt to utilize MLR rebate funds for future premium payments or apply them toward benefit enhancements for employees.
 
Whatever action the employer takes, a documented plan is critical – and communication of this plan is of equal importance. The employer’s MLR rebate plan should clearly document and summarize the employer’s 90-day action plan, should apply to all similarly situated employees, and should be available for retrieval and review by employees – and included in ERISA documentation.

Listed below is MLR rebate information for 2022, from our carrier partners for their plans in 2021. Note: this information is subject to change, and more carriers’ responses will be added as they are received. This column will be updated as more information becomes available.
 
Carrier Will you be issuing a Medical Loss Ratio (MLR) Rebate in 2022 (for the 2021 plan year)? If so, what is the expected date?
Aetna (CA) Aetna, Innovation Health, and Banner/Aetna plans scheduled to receive rebates under the Health Care Reform Minimum Medical Loss Ratio (MLR) requirements were distributed to policyholders by September 30.

California is not in a rebate position for Small nor Large Group.

More information is on the Aetna member website (in the MLR rebate section):
https://www.aetna.com/health-care-reform/affordable-care-act-employers.html

Click here for Aetna's 2021 Rebate Pools PDF.
Anthem Blue Cross (CA) Anthem small groups in 11 states will receive 2021 medical loss ratio (MLR) rebates this year.

Download Anthem's MLR Broker Aide PDF here.
Click here to download Anthem's MLR FAQ.
Anthem Blue Cross Blue Shield Blue Shield of California (Blue Shield) does not owe Medical Loss Ratio rebates for 2021 to the following subscribers and employer groups since Blue Shield met or exceeded the MLR targets for those health plans. 
  • Individual and Family subscribers with Blue Shield and Blue Shield of California Life & Health Insurance Company (Blue Shield Life) plans.
  • Small Business groups with Blue Shield plans.
  • Large groups with Blue Shield and Blue Shield Life plans.
For more details, visit:
https://www.blueshieldca.com/bsca/bsc/wcm/connect/broker/broker_content_en/resources/mandates
 
CalCPA (CA) As a Multiple Employer Welfare Arrangement (MEWA) health plan, CalCPA Health does not have to comply with the MLR portion of the ACA.
Chinese Community Health Plan Chinese Community Health Plan will not be issuing an MLR rebate for the 2021 plan year.
Evolved Benefits (CA and NV) Evolved Benefits’ solutions are self-funded, which are not subject to MLR parameters.

Plans are self-funded, which means a portion of the monthly premium is set aside in a claim funding account to pay out claims as they come in. After a policy year, the company has a three-month run out period to make sure no lingering claims trickle through.
Health Net (CA) For California Individual and Large Group HMO and PPO Plans in 2021, Health Net met or exceeded the Medical Loss Ratio (MLR) standards.

For California Small Group Plans in 2021, Health Net Life Insurance Company (PPO) met or exceeded the 80 percent MLR standard. For California Small Group Plans in 2021, Health Net of California, Inc. (HMO) did not meet the 80 percent MLR standard. 

This means that your Small Group Clients who had Health Net of California, Inc. HMO plans in 2021 will receive a rebate of a portion of the premium as required under the ACA.

Small Employer Groups who are eligible for a rebate will receive a check no later than September 30.
Kaiser Permanente In California Kaiser Permanente’s individual, small group, and large group MBRs satisfied the required standards for 2021. Therefore, Kaiser Permanente will not be required to issue any Affordable Care Act rebates for 2021 experience.
MediExcel MediExcel will not be issuing a Medical Loss Ratio rebate for the 2021 plan year.
Sharp Health Plan (CA) Sharp Health Plan will not be issuing a Medical Loss Ratio rebate for the 2021 plan year.
SIMNSA (CA) Because SIMNSA is a Mexican HMO, the MLR rebate does not apply. The state of California rule specifically applies to plans that contract for health care coverage in California; however, SIMNSA does not provide such coverage and only sells products that provide coverage in Mexico.
Sutter Health Plus (CA) SHP has met the MLR standards for 2021 across all lines of business.  Sutter Health Plus will not be issuing an MLR rebate for the 2021 plan year.
Western Health Advantage (CA) WHA will not be issuing a Medical Loss Ratio rebate for the 2021 plan year.

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