For those employers expecting a medical loss ratio rebate check from their providers, three DOL guidelines have been put into place that control precisely what can be done with the money. The rebates received for ERISA-covered plans are now considered plan assets so must be spent in one of only three ways:
• Employers are allowed to keep the entire rebate should they had covered the entire cost of group health insurance.
• For coverage that had been covered entirely by participants, rebate checks must be distributed fully among them.
• Plans where participants and employers shared costs, rebates must be given to participants in proportion to the percentage they paid on the premium.
The DOL has also OK’d the right for employers to decide to not distribute rebates to participants if the benefits of distribution would be outweighed by the costs. It also says that in the case of prohibitively costly distributions, rebates may be used for purposes such as reducing future premiums or enhancing benefits.
The new healthcare law stipulates that insurance companies spend a minimum of 80 cents per premium dollar on medical care and healthcare improvement. Companies spending less than this amount must present policy holders with rebates. It was estimated that health insurers issued over $1 billion in refunds in August 2012.