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The Affordable Care Act (ACA) requires fully insured 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 fully insured 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 fully insured Large Group market, the MLR rises to 85%. The MLR requirements do not apply to self-funded plans.
 
Any year a fully insured 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 2022 are required to distribute MLR reimbursement checks by 9/30/2023.
 
Employers have several options when it comes to utilizing or dispersing the MLR rebate funds, but the law gives them just 90 days to act. 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 employer.
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 plan participants 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 should clearly document and summarize its 90-day action plan, which 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 2023, from our carrier partners for their plans in 2022. 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 issue a Medical Loss Ratio (MLR) Rebate in 2023 (for the 2022 plan year)? If so, what is the expected date?
Aetna (CA)	We do not have a rebate in California for small or large groups.  The below link does provide a flyer that lists all the states that do.   https://www.aetna.com/health-care-reform/affordable-care-act-employers.html   Rebates will be mailed to policyholders by September 30th.
Anthem Blue Cross (CA)	Yes. All small group medical plans are in rebate.   Checks have been mailed on Friday 9/8/2023 and groups should be receiving them soon. Along with the rebate checks, we will send employer groups and individual members a federally mandated notice that explains MLR and how it is calculated.   Click here for Employer FAQ
Blue Shield of California (CA)	We do not owe Medical Loss Ratio rebates for 2022 to employer groups since Blue Shield met or exceeded the MLR targets.
Cigna + Oscar (CA)	Currently, we are not required to issue MLR rebates in any of our Cigna + Oscar markets.  We will send out the appropriate communications promptly if we are required to do so.
Evolved Benefits (CA/ NV)	No.
Health Net (CA)	2022 MLR Results for California IFP, LRG and SBG Plans:   IFP: Health Net met or exceeded MLR standards for HMO and PPO plans. Large Group: Health Net met or exceeded MLR standards for HMO and PPO Plans. SBG: Health Net met or exceeded MLR standards for PPO plans (Health Net Life Insurance Company) and HMO plans (Health Net of California, Inc.). There aren’t any changes to the current premium, deductible, or copay amounts as a result of the rebate. Broker commissions are also not affected by this transaction.  California and Oregon IFP/IEX, SBG, and LRG subscribers and employer groups will not receive 2022 plan year rebates since Health Net met or exceeded the MLR targets for those market segments. The 2022 MLR results were filed with the Centers for Medicare & Medicaid Services (CMS) prior to the July 31, 2023, due date.
Hometown Health (NV)	We will not be issuing an MLR rebate for 2023.
Kaiser Permanente (CA)	The results of Kaiser Permanente's MBR filing show that our three-year average (2020-2022) MBRs for the individual, small group, and large group markets in all jurisdictions are over the thresholds.​ Kaiser Permanente exceeded the law's medical spending threshold in all required lines of business and all our regions. Therefore, Affordable Care Act rebates are not required this year. Kaiser Permanente is focused on delivering high-quality, cost-effective care that exceeds the quality standards the industry develops. Kaiser Permanente combines care and coverage into a unique integrated care delivery model, which, enhanced by the technology we have implemented, brings doctors, hospitals, labs, and pharmacies together to provide high-quality, affordable health care to our approximately 12.7 million members and the communities we serve. As a not-for-profit health plan, we will continue to reinvest income and focus on high-quality member care while maintaining low administrative overhead without the need to pay shareholder returns.
MediExcel Health Plan (CA)	MediExcel will not be issuing an MLR rebate in 2023.
Prominence (NV)	No rebates for FY-22. Our MLR performance does not warrant (require) any rebates.
Sharp Health Plan (CA)	We will not be issuing MLR rebates in 2023 for the 2022 plan year.  We met the requirements.
Sutter Health Plus (CA)	Sutter Health Plus met the 2022 MLR for the following: Individual (IFP) Small Group Large Group
Total Benefit Solutions	If we don’t meet the minimum MLR for any pool, we send out rebates. Fully insured medical plans are eligible for rebates. Self-insured plans are not. Most plans don’t get rebates.   If a rebate is due for a given year, you’ll receive a notice on or before September 30 of the following year. In most cases, we send the rebate check to the employer. For individual policies, we send the rebate to the person who bought the health plan.   The federal government set guidelines that employers are required to follow when using rebate dollars. Click here for a list of our plan rebates in 2022 See an overview of employer guidelines
UnitedHealthcare (CA)	Yes.   For CA small group:  Groups with UHCBPCA licensed plans enrollment will receive a rebate, which includes Select Plus, Core, Doctors Plan, and Non-Diff PPO.   Note:  CA HMO (UHCCA) and Navigate (UHIC) are not included.   Key Dates: MLR Rebate Payments to Customers:  Beginning September 18th through September 30th MLR Member Letters to Member of Customers Getting a Rebate:  By September 20th   MLR Hotline:  Brokers and Employer should direct questions to the UHC MLR Hotline at 866-802-8602.   External link:  Reform provisions - medical loss ratio | UnitedHealthcare (uhc.com).  The Final Payout Report for Group is attached (this is also included in the UHC MLR link).