Employers with insured group health plans may soon receive a medical loss ratio (MLR) rebate from their health insurance issuers. Issuers who did not meet the applicable MLR percentage for 2023 must provide rebates to plan sponsors by Sept. 30, 2024. These rebates may be in the form of a premium credit or a lump-sum payment.
The MLR rules require issuers to disclose their spending on health care and administrative costs, such as salaries and marketing. If an issuer spends less than 80% (85% in the large group market) of premium dollars on medical care and efforts to improve the quality of care, they must refund the portion of the premium that exceeds this limit. Issuers who issue rebates must provide plan sponsors and participants with a notice explaining the rebate and how it was calculated.
Employers who receive MLR rebates should consider their options for using the rebate. Any rebate amount that qualifies as a plan asset under ERISA must be used for the exclusive benefit of the plan’s participants and beneficiaries.
In general, employers should use the rebate within three months of receiving it to avoid ERISA’s trust requirement. In addition, employers who receive MLR rebates should be prepared to answer employees’ questions about the rebate and how it is being allocated.
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