Information About the Patient Protection and Affordable Care Act’s Rebate Provision
The Patient Protection and Affordable Care Act (the Affordable Care Act) included a Rebate Provision known as medical loss ratio or MLR.
Beginning in 2011, issuers (for the large group market) must maintain a MLR of at least 85% or provide a premium rebate to policyholders. For the small group and individual markets the issuer must maintain a MLR of at least 80% or provide a premium rebate to policyholders.
In Michigan several insurance providers are required to issue rebate checks. The rebate is due August 1, 2013. Your insurance provider should have already informed you of the potential rebate. If they have not…they will.
Upon receipt of the check you have several options depending on the terms of the Plan.
- Premium Paid 100% by employer, employer retains the entire amount of rebate
- Premium Paid 100% by employee, employee is due a rebate based on a reasonable, fair and objective allocation method
- Premium Paid by both employer and employee, each is entitled to a rebate based on the percentage of premium paid, and allocated to employee based on a reasonable, fair and objective allocation method
The rebate portion for the employee may be issued in cash/check or used to reduce following year's premium. In either case the rebate will affect the employee's payroll.
Employers should review plan documents to determine how rebates must be handled. To reduce administrative costs, the employer should consider amending the plan so that any rebate can be used to reduce current-year premiums for current-year participants.
Since the rebate allocation can be cumbersome, please contact us if you have any questions or we can be of assistance.