Year 2 of Medical Loss Ratio Rebates: A Refresher For Employers In Case the Check Comes

This month certain employers may be receiving rebate checks from their insurance carriers. Some may have received checks last year and know what to do. Others may be receiving the checks for the first time and scratching their heads on what to do with the rebates. Here’s a primer summarizing key points that may help guide you.

What is it? Medical Loss Ratio Rebates (MLR) are a provision of the Affordable Care Act requiring insurance companies to issue a refund if they do not spend at least 80% (small group and individual; 85% large group) of premium on healthcare related services with no more than 20% going toward administrative costs.

What to do with the check? Rebates are considered plan assets to be used for providing benefits to enrollees and defraying plan costs. Employers are entitled to keep a portion of the rebate commensurate with the company’s percentage contribution to total premium. The remainder must be allocated to the benefit of those enrolled in the plan(s). Employers have some flexibility in terms of how to distribute the rebate. At a high level, the options include:

  • Reduce employees’ portion of premium for the next policy year.
  • Provide a cash refund to those employees covered under the health plan(s) associated with the rebate.

Allotment of the rebate needs only to include current employees. Employers are not required to track down or include former employees in the distribution or apportionment of rebates (any Cobra enrollees being the exception).

To drill into the technical details go to http://www.dol.gov/ebsa/pdf/tr11-04.pdf. IRS guidance on tax implications of the rebates can be found at http://www.irs.gov/uac/Medical-Loss-Ratio-(MLR)-FAQs.

Major Obamacare Surprise: The Administration Delays Employer Mandate Until 2015

A surprise announcement out of Washington concerning a major provision of Obamacare led into the 4th of July holiday and served as fireworks of sorts to large employers and those in the industry. Late on Tuesday July 2nd, the Administration announced that the Employer Mandate, a central piece of the Affordable Care Act, was delayed until 2015.

Under the Employer Mandate an employer with 50 or more employees must offer full time employees “minimum essential group health coverage” that is “affordable” or pay penalties. Employers who elect not to offer coverage would be subject to a $2,000 per employee penalty. Those employers offering coverage that doesn’t meet ACA’s minimal coverage and/or affordability standards  would be subject to a $3,000 per employee fine for any employees that obtain subsidized coverage through the insurance exchanges.

In making the announcement, officials pointed to complications related to data collection, complex employer reporting requirements and other administration issues as the reasons for the delay.

So far, this delay does not affect the January 1, 2014 Individual Mandate or any of the new requirements that will impact the small group market (firms with less than 50 employees) such as the essential health benefit requirements and the rating reforms.

More information and coverage can be found at Kaiser Health News, Summaries of News Coverage,  Delay In Major Health Law Provision Raises Doubts At Critical Stage Of Rollout, http://www.kaiserhealthnews.org/Daily-Reports/2013/July/02/employer-mandate.aspx

Healthcare Reform Explained (Sort of)

Here are the ABC’s of Healthcare Reform for Employers with Key Provisions Summarized…

Whether it’s in business meetings or in casual conversations at social gatherings, we frequently are asked “what’s healthcare reform all about” or “can you give me a simple explanation of ObamaCare“ or “ net out for us what we need to know about healthcare reform”.  Those in the business who eat, drink and sleep this stuff know that it’s nearly an impossible task to simply and succinctly explain this very complex piece of legislation that’s expected to work up a full head of steam in 2014.    Not wanting to back down from the challenge however, here’s our broad brush at netting out the key components for you in an understandable fashion.  We focus on key pieces already implemented and 7 main provisions pertinent to employers.

Some Provisions Already in Effect (grandfathered plans notwithstanding):

  • Coverage of 100% of cost of certain preventive care services
  • Ban on lifetime and annual limits on the dollar value of coverage
  • Dependent coverage to age 26
  • No cancellation of coverage, except in the case of fraud
  • New Summary of Benefits and Coverage documents from insurers; some additional reporting requirements for large employers
  • Minimum medical loss ratio (MLR) for insurers; rebates paid by insurers when not met
  • Changes to tax-free Flex Spending and Health Savings Accounts (e.g. OTC medications)

7 Key Provisions of Healthcare Reform Set to Take Effect in 2014:

  • Expansion of Medicaid

Eligibility/Coverage for individuals with incomes up to 133% of the Federal Poverty Level.  Individual states can decide whether or not to implement.  Some have rejected.

  • Guaranteed Availability of Health Insurance

Coverage cannot be denied for any reason such as health status, age, gender.

  • Individual Play or Pay Mandate

All individuals are required to have health insurance or be subject to a financial penalty.  Some exceptions to the mandate will be granted including such things as financial hardship, religious beliefs, member of Indian tribe, etc.

  • Employer Play or Pay Mandate (DELAYED UNTIL 2015)

“Applicable Large Employers” (50 or more full time equivalents) must offer full time employees (30 hours a week) with “minimum essential group health coverage” that is “affordable” or pay penalties.

  •  Subsidies – Two types
  1. Premium Subsidies (aka Premium Tax Credits) for those whose incomes fall between 133% and 400% of the Federal Poverty Level and are without access to other coverage
  2. Cost-Sharing Subsidies (Out-of-Pocket Costs) for those whose incomes fall between 133% and 250% of FPL and are without access to other coverage
  • Health Insurance Exchanges (HIX)
  1. Government sponsored (versus private exchanges sponsored by insurance companies and others and not addressed here) internet platforms that function as online marketplaces for certain individual and small group health insurance plans
  2. Administered in each state by either the respective State government; a joint Federal/State partnership; or, the Federal Government alone.  Majority of states have left it up to the Federal Government to implement the HIX in their states.
  3. Offering  4 levels of ACA-compliant health plans, to individuals and small businesses (small biz version also referred to as SHOP; implementation delayed in many states)
  4. Individuals eligible for Premium Tax Credits (subsidies) must purchase via the HIX

Well, there you have it.  Clear as mud, right?

It’s a complex law that’s generating thousands of pages of rules, regs, legalese, guidelines, FAQ’s –  you name it – from the likes of Health and Human Services, the IRS, and the Department of Labor.  It’ll impact most employers and their respective employees in some way, some much more profoundly than others.  And, it’s expected to cause to disrupt the market.

In the weeks and months ahead we’ll be working hard to cut through the morass and succinctly provide employers and other readers with as much practical clarity as possible.  We’ll be sharing what we’re doing, seeing, and hearing in the marketplace and the impact of the new healthcare law on businesses like yours and ours.   If there are things you’d like us to help you understand or anecdotes you’d like to share, please drop us a line and let us know.

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