Employers with group health plans could soon receive a medical loss ratio (MLR) rebate from their health insurance carrier by September 30, 2023. Carriers that did not meet the applicable MLR percentage from 2022 must offer a rebate in the form of a premium credit or lump sum payment.
Using the rebate
A rebate amount that qualifies under ERISA as a plan asset is required to be used for the plan’s participants and beneficiaries. If employees contribute to the cost of health coverage, then a portion of the rebate will be considered a plan asset under ERISA. Employers can choose to distribute payments to employees, apply the rebate toward future participant premium payments, or enhance the benefits.
The rebate should be used within three months of receiving it in order to circumvent the ERISA trust requirement.
Under MRL rules, carriers must spend a minimum percentage of premium dollars on medical care and health care quality improvement. This percentage is either 80% or 85% depending on the size of the group market, though some states may set higher MLR rules than the federal thresholds.
Carriers report to the federal government regarding how they spend of their premium dollars each year by July 31 of the following year. If the carriers do not meet the MLR standard, they provide rebates by September 30. Rebates must also be sent with a notice explaining the rebate and how it was calculated.
If you have any questions about the MLR rebate, please contact your dedicated Creative Benefits account manager.