Beginning in 2011, insurers in the individual and group market must spend at least 80% of the premiums they receive on health care — or issue rebates for the difference.
The Health and Human Services Department (HHS) just released the long-awaited rules under the healthcare reform law to implement the medical loss ratio mandate.
They say that beginning in the 2011 calendar year, insurers must spend at least 80 cents of each premium dollar they take in over the course of a year — 85 cents in the large group market — on medical care and healthcare quality improvement.
If insurers fail to meet that standard, they must rebate the difference to those they are insuring. Typically the recipients of the rebates will be the policy holders. But for group health plans, the rebates will to go the policy holder (generally the employer) and the actual enrollees.
The regs only apply to plans that are fully insured. They do not apply to employers with self-funded plans, even if they use stop-loss coverage. Also, mini-med plans were excluded until 2014.
Rebates for the 2011 calendar year, if there are any, will be issued in August of 2012.
One administrative question employers will have to sort out: If a rebate comes your way, how much of it will you share with employees?
Info: HHS has issued a fact sheet on the regs. It can be found here.
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