Wednesday, September 14, 2016

Carefirst to Distribute Medical Loss Ratio (MLR) Rebates

According to Carefirst, under the Affordable Care Act (ACA), all health insurers must spend a minimum percentage of the premiums they collect on health care services and quality improvement activities for their members. This percentage is called the Medical Loss Ratio (MLR) and is calculated for an insurer’s overall business based on the market segments in each state (not at the group level).

Generally, insurers must spend at least 80 cents of every premium dollar they receive on health care services. If the minimum MLR is not met within a market, insurers are required to pay a rebate to customers within that market segment. These rebate checks must be received by September 30, 2016.

Employers or administrators of a group health plan, including plans offered by non-governmental employers subject to the Employee Retirement Income Security Act of 1974 (ERISA), may have fiduciary responsibilities regarding use of the MLR rebates. Some or all of an MLR rebate may be an asset of the plan which must be used for the benefit of employees covered by the policy. As a general summary, for group health plans that are employer plans governed by ERISA or that are state or local governmental plans, an employer must distribute the rebate in one of three ways: 

  1. Reduce employees’ portion of premium for the upcoming year for subscribers covered under any option offered by the health plan at the time the rebate is received;
  2. Reduce employees’ portion of premium for the upcoming year for subscribers covered under the option offered by the health plan to which the rebate applies at the time the rebate is received; 
  3. Provide a cash rebate to employees or subscribers that were covered by the health insurance on which the rebate is based.                                                    
CareFirst, however, cannot provide legal advice regarding an employer’s obligations, and individual groups should consult with their legal or benefits advisors in light of their specific circumstances. Employers also may consult the Department of Labor’s guidance for group health plans subject to ERISA in Technical Release 2011-04, available at, the guidance for State or local governmental plans at 45 C.F.R. § 158.242, or, for general information, the Department of Labor’s Employee Benefits Security Administration at 1-866-444-EBSA (3272).