Medical Loss Ratio (MLR) rebate checks are currently arriving for many companies. MLR rebates are required under the Affordable Care Act (ACA) and are furnished when a health insurer does not utilize enough of the premiums they have received directly towards the cost of medical claims and activities that improve the quality of care.
There is an 80/20 rule that generally applies and requires insurance companies to spend at least 80% of the money they take in from premiums on health care costs and quality improvement activities. The other 20% can go to administrative, overhead, and marketing costs. Insurance companies in the large group market (more than 50 employees) must spend at least 85% of premiums on care and quality improvement.
When an insurance company does not meet these MLR requirements, they are required to furnish employers with a rebate on a part of the premiums that they have received. Please take note that the MLR percentages are not specific to an employer group or an individual but are instead based on the insurer’s aggregate market data in each State.
If a company receives an MLR rebate check, they are required to utilize it in one of three ways:
- Provide a cash rebate to plan participants;
- Reduce plan participants’ future premium contributions; or
- Provide benefit enhancements.
Companies who are eligible to receive a rebate are not required to take any action. Insurance companies will, in most cases, send the rebate check directly to your firm.
For more information, please refer to the CIGNA MLR FAQ and CareFirst MLR FAQ or Contact a FosterThomas Advisor.