Some employers may be getting a rebate check and a regulatory notice which is required by the Affordable Care Act (ACA). If you have not received a rebate check by now, then your group was probably not eligible. The notices for those getting a rebate check went out the first week of August. Below you will find background on why you are receiving this check, and information you need to know about how the U.S. Department of Health and Human Services (HHS) requires you to use this money.
Background on Rebate Checks:
In 2011, all health insurance companies became subject to new requirements as a result of the ACA. Under the Medical Loss Ratio (MLR) regulation, health insurers must spend at least 80% of the insurance premium received as claims or on medical quality improvement expenses for all small groups.
If they do not spend the required percentage of premium, the carrier must refund the balance to the employer. This refund is referred to as a rebate.
The ACA requires the carrier to send a notice to your employees to inform them that you are receiving this rebate. Most carriers will mail a pre-defined regulatory notice to your employees that were covered under a plan in 2012. The notice should have been mailed the week of July 30, 2013, or the first of August. To help explain the process and documents to employees, most carriers are adding a supplemental letter to the required notice.
I understand how complex many of the Affordable Care Act’s regulations are, and we are happy to help clarify any aspect of the law on your behalf. As a point of reference, frequently asked questions about the MLR requirements can be found at: http://www.dol.gov/ebsa/faqs/faq-MLRrebate-consumer.html .
For more information or questions, contact our office at 913-685-2100. Here are some frequently asked questions:
Frequently Asked Questions on Rebates:
1. How much is the rebate? What amount should impacted employers or individuals expect to receive?
Rebate amounts will vary. Typically, less than 10%-20% of the groups are eligible for rebates.
NOTE: These are averages, and the actual amount received will vary by employer and individual
2. Are there rules on how small employers have to use any rebates?
Yes. Members who have coverage through a small group will not receive rebates directly from the carrier. Any rebate due will be paid to the employer group, and the group administrator will decide how to refund the money to their employees using the U.S. Department of Health and Human Services (HHS)
guidelines outlined below. We anticipate that employers may receive questions about how they plan to use any refunds they receive. According to HHS, if the group health plan is a church or non‐Federal governmental plan, the employer or
group policyholder must distribute part or all of the refund in one of two ways:
• A. Reducing premium for the upcoming year; or
• B. Providing a cash refund to employees or subscribers that were covered by the health insurance on which the refund is based.
If a group health plan is not a governmental plan or a church plan, it likely is subject to the federal Employee Retirement Income Security Income Act of 1974 (ERISA). Under ERISA, the employer or the administrator of the group health plan may have fiduciary responsibilities regarding use of the Medical Loss Ratio refunds. Some or all of the refund may be an asset of the plan, which must be used for the benefit of
the employees covered by the policy. Employees or subscribers should contact the employer or group
policyholder directly for information on how the refund will be used.
For general information about your rights regarding the refund, you may contact the Department of Labor’s Employee Benefits Security Administration at 1‐866‐444‐EBSA (3272) or review the Department’s technical guidance on this issue on its website at:
3. One of my employer clients covered by our carrier did not receive a letter in the timeframes noted? Why is this?
The rebate period covered 2012. New clients with effective dates in 2013 should not receive the letter. Also, groups that are not eligible to receive a rebate (maybe they offer an HMO coverage only) will not receive a letter. If you have a specific concern, please contact our office.
4. Why didn’t the carriers lower premiums to avoid paying rebates?
Premium rates are based on many factors and are usually established up to 18 months in advance, making it difficult to predict the actual loss ratio. Use of medical services is affected by many factors, most significantly the health of members. The industry is working hard to implement health and wellness programs that will improve the health of our members with the end result being lower medical costs for all. Our number one commitment is ensuring our members receive the healthcare they deserve, when they need it, at a price they can afford. When individuals buy insurance, they are buying comfort and peace of mind that they will be able to pay for their healthcare needs – planned and especially unplanned.
5. Does this rule effectively keep premiums down?
No. This rule only establishes thresholds at which premiums cannot exceed the underlying costs of medical care. It does nothing to lower healthcare costs, which are driven by medical costs and utilization; and does not affect future premium levels, which are set based on historical trends and anticipated costs and utilization.