Expecting a medical loss ratio rebate check from your health insurance company? New DOL guidelines dictate exactly what you can do with that money.
Under ERISA-covered plans, these rebates are now considered plan assets and must be used in one of three ways:
- If the employer covered the entire cost of group health insurance, it’s free to keep the entire rebate
- If plan participants paid the entire cost of coverage, the entire rebate must be distributed among them, and
- If participants and the employer shared in the cost of coverage (as is the case most often), participants must receive rebate funds in proportion to the percentage of the premium they paid.
Employers issuing funds to plan participants can do so either by reducing future plan premiums or by cutting them a check.
Insurance rebates to former participants
The DOL also stated that it’s OK for an employer to decide not to issue funds to former plan participants (who paid premiums into the plan for the year the rebate was issued) if the cost of distributing shares of the rebate would outweigh the benefit.
In addition, the DOL says if the cost of distributing shares to active participants is prohibitively costly, it’s OK to use the rebate for other purposes — namely to reduce future participant premiums or to provide enhanced benefits.
The rebate checks were due August. 1, and will be due on that date every year moving forward.
The healthcare reform bill contained a requirement that insurance companies spend at least 80 cents of each premium dollar they collect over the course of a year (85 cents for plans in the large group market) on medical care and healthcare quality improvement.
Those that spend less than that have to issue rebates to policy holders.
As a result, it was expected insurers would issue more than $1 billion in refunds this August.