With the Supreme Court recently upholding the majority of the health care reform, employers are continuing to see new provisions of the law go into effect. One that many will soon take notice of is the medical loss ratio provision, as hundreds of thousands of people will soon receive rebate checks in the mail in accordance with the law.
The medical loss ratio provision requires insurance companies to spend a certain proportion of their income on health care for their insured population. The intent is to limit the amount of premium dollars health insurance companies are allocating to administrative overhead.
If the insurer does not meet the MLR standards, it is required to issue a rebate to policyholders. Insurers in the individual and small group market are required to direct 80% of premium revenue to health care, while insurers in the large group are required to allocate 85%.
It’s important to note that:
• MLR rebates do not apply to self-insured plans.
• Large-group market is defined as 100+ employees
• Rebates and notices for the 2011 plan year must be provided by August 1, 2012.
• The rebate can be issued in the form of a premium credit, lump sum check or lump sum reimbursement to the same account that the participant used to pay the premium.
In Wisconsin, about 283,000 residents are expected to receive 10.4 million in rebates – about $36.75 per person. Although this may seem like a lot of money, this is actually significantly less than in many other states. Nationally the average refund is expected to be around $127 per person in the individual market, $76 in the small group market, and $72 in the large group market.
Download our 7-page health care reform whitepaper for more information on this and other changes your company should be preparing for.