Some employers will receive rebates from carriers that did not meet the medical loss ratio (MLR) requirements for the prior calendar year.
The MLR is the percentage of premium the carrier spent on medical expenses based on the experience of all of the carrier’s policies broken out by state and market (i.e., individual, small group, or large group). The MLR is not based on a group’s own claims experience. If the carrier spent less than 80% of premium dollars on medical expenses (or 85% for large groups with 51 or more employees), then the carrier must rebate to policyholders by August 1st after the end of the calendar year.
For employer, the carrier will generally pay the rebate to the employer who may then be responsible for sharing a portion with employees. If a portion of the rebate is considered an ERISA plan asset, employers are obligated to handle the rebate according to ERISA rules.
Note: The MLR rebate rules are slightly different for governmental and church plans that are exempt from ERISA, as well as for insured plans with a trust.
We have found a few documents throughout the years that we reference for guidance on this subject:
- Our favorite
- We also love Groom
- Department of Labor is usually referenced in most publications about the MLR rebate
- Don’t discount the carriers’ opinion
- Keller has a good white paper
- Ms. Norris does a good comprehensive review