The Medical Loss Ratio (MLR) rules under Health Care Reform require an issuer to provide rebates if its medical loss ratio (the amount of health insurance premiums spent on health care and activities to improve health care quality) falls short of the applicable standard during a reporting year. Each year’s rebates must be provided by issuers to policyholders (typically the employer that sponsors the plan) by September 30 of the following year.

Employer Distribution
The MLR rules provide that issuers must pay any rebates owed to persons covered under a group health plan to the policyholder, who is then responsible for distributing the rebate to eligible plan enrollees. In general, there are several ways rebates may be distributed to plan enrollees, including:

  • A rebate check in the mail;
  • A lump-sum reimbursement to the same account that was used to pay the premium if it was paid by credit card or debit card; or
  • A direct reduction in future premiums.

In addition to the above methods, employers may also apply the rebate in a way that benefits employees. Note that decisions on how to apply or expend the plan’s portion of a rebate are subject to the general standards of fiduciary conduct under the federal Employee Retirement Income Security Act (ERISA). For additional details, click here.

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