Each year due to ACA requirements, some employers with insured plans will receive rebates from carriers that did not meet the medical loss ratio (MLR) requirements for the prior calendar year.
The MLR is the percentage of premium dollars the carrier spent on medical expenses based upon the experience of all of the carrier’s policies broken out by state and market size. The MLR is not based upon a group’s own claims experience. If the carrier spent less than 80% of premium dollars on medical expenses (or 85% for large groups), then the carrier must pay a rebate to policyholders by August 1st after the end of the calendar year.
For employer groups, the carrier will generally pay the rebate to the employer who may then be responsible for sharing a portion with employees. If a portion of the rebate is considered an ERISA plan asset, employers are obligated to handle the rebate according to ERISA rules.
Keller assists our clients with the pro-rata calculation of MLR rebates that must be shared with employees.