The ACA requires insurers to submit an annual report to HHS to account for plan costs. If the insurer does not meet the medical loss ratio (MLR) standards, this means that too large a portion of the premiums charged in the previous year went toward the insurer’s administration, marketing, and profit instead of going toward paying claims and quality improvement initiatives. In such cases, the insurer must provide rebates to policyholders. For 2024, insurers must distribute rebates to employer plan sponsors between August 1, 2024, and September 30, 2024.
Employers that sponsor fully insured plans and receive a rebate should keep in mind that there are strict guidelines as to how the rebate may be used or distributed. Generally, any portion of the rebate that is considered ERISA plan assets (e.g., the portion attributable to participant contributions) must be returned to participants in some form within 90 days of receipt. The employer as plan administrator has a fiduciary obligation to ensure ERISA plan assets are used exclusively for the benefit of plan participants and beneficiaries.
For further information, download a copy of MLR Rebates: A Guide for Employers.
PPI Benefit Solutions does not provide legal or tax advice. Compliance, regulatory and related content is for general informational purposes and is not guaranteed to be accurate or complete. You should consult an attorney or tax professional regarding the application or potential implications of laws, regulations or policies to your specific circumstances.
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