1. Healthcare Reform MLR Rebate: What Do Employers Need to Do Now?
Presenters:
Paul Mifsud, President & CEO, Melita Group
Ben Conley, Attorney, Seyfarth Shaw LLP
July 26, 2012
Proprietary and Confidential

2. Agenda MLR Overview Rebate Determination Distribution Rules & Options
Distribution Process
Demo of MLR Rebate Calculator
Rebate Status of California Insurance Plans
NOTE: This presentation assumes the employer is listed as the Policyholder with all of their insurance plans, and that the employer does not have an SPD Wrap Document that separately defines how rebates are to be handled.
The above/attached information is not legal advice. It should not be considered a legal opinion as to which laws apply or as to how any law applies to a particular situation. Companies or individuals should seek advice of counsel with regards to their particular situation.
9/15/2018
Proprietary and Confidential

3. MLR Overview
Part of Patient Protection and Affordability Care Act (PPACA)
Established that health insurance “Issuers” must spend at least 80% to 85% of premiums collected on medical care and health care quality improvement (80% for small group plans under 50 employees; 85% for large group plans over 50 employees)
If minimum ratios are not met, the Issuer must distribute a rebate to their policyholders (employers)
Rules apply to both Grandfathered and Non-Grandfathered plans, however, they do NOT apply to self-insured plans.
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Proprietary and Confidential

4. MLR Rebate Determination
For each MLR reporting year (calendar year), Issuer must provide a proportionate rebate if MLR does not meet the minimum required ratio
Rebates are determined by state, based upon aggregated market data, and not upon a particular group health plan’s experience
Amount of rebate is based upon the premium received (less appropriate taxes and fees), which is then multiplied by the difference between the required MLR and the Issuer’s actual MLR for the year
Issuers have until Aug 1, 2012 to determine MLR’s for 2011 and payout rebates, if applicable
Rebate notices will be sent by Issuers to Policyholders (employers) and enrollees (employees)
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5. MLR Rebate Distribution
For group plans, Issuers are required to provide rebates directly to Policyholders (employers)
Policyholders are required to use the rebates for the benefit of enrollees
Policyholders have options with respect to how to distribute rebates and to whom rebates are distributed
If rebate amount is de minimis, employer may determine that the cost of issuing checks will exceed the amount of the checks. In these situations, employers must determine the manner in which to use rebates, such as for wellness or other programs that benefit all enrollees
No rebate is required if enrollee pays a flat dollar amount contribution toward the plan
Employer can keep the portion of the rebate attributable to their contribution
Rebates must be issued by Policyholder within 90 days or receipt of the rebate (otherwise a trust account must be established to hold the funds)
9/15/2018
Proprietary and Confidential

6. Employer Rebate Distribution Options
One-time cash payment: If employee paid premiums during 2011 were paid with pre-tax dollars through a Section 125 Pre-Tax Premium Plan, then the rebate will be taxable as ordinary income to the employee.
Credit toward future premiums - individual employee credits:  This can be done by applying a credit to each employee toward their future premium contributions (as long as the full rebate is credited back to the employees within 90 days) based upon the individual rebate due to each enrollee.  
Credit toward future premiums via reduction in overall employee contribution schedule:  As an alternative to crediting each individual, the rebate could be applied to the overall employer premium contribution formula to reduce employee costs in an amount at least equal to the total enrollee rebate amount.  This could be in the form of a reduction to the current contribution schedule or elimination of a planned increase to the contribution schedule.  This option is risky because it makes it more difficult to ensure that the total rebate amount is realized by each employee through the overall reduction in the employers contribution formula.  
Enhanced benefits.  Another alternative is to add benefits or enhance benefits under the plan type for which the rebate is being issued (IE - if the rebate is for a medical plan this option only applies to enhanced benefits for the medical plan).  This option is also risky because it is very difficult to ensure that the total rebate amount is realized by each enrollee and it is further complicated by the uncertainty of whether all enrollees eligible for a rebate will actually benefit from the enhanced benefits.
9/15/2018
Proprietary and Confidential

7. Process for Issuing Rebates
Identify Rebate Plans: Identify which benefit plans are receiving a rebate.  It's important to note that the rebate is only applicable to the enrollees of the plan that is receiving a rebate.  Check with your broker/consultant for assistance.
Identify Enrollees Eligible for Rebate: Identify all employees that were covered at any time during 2011 in the plan receiving the rebate.  This includes former employees as well as COBRA participants.  Although rebates do not need to be distributed to former employees and COBRA enrollees under the administrative burden provision, the rebate attributable to them must be distributed to the active employees that were enrolled in the plan receiving the rebate during  But in order to identify how much of the rebate is attributable to the former and COBRA enrollees you must first identify them.   
Calculate the Exact Rebate Amount for all Eligible Enrollees: Use the MLR Rebate Calculator provided by Melita Group to perform the calculations.
Decide on Distribution Method:  Decide which of the four distribution options you will employee for distributing the rebates to eligible enrollees.
Issue Rebates within 90 days: Issue the rebate payments to enrollees within 90 days of receipt of the rebate from Issuer.
9/15/2018
Proprietary and Confidential

8. California Plans Rebate Status
California Plans Issuing Rebates
Small Group
Large Group
Anthem Blue Cross
Yes No
Aetna
Some
Blue Shield
CIGNA
Health Net
Kaiser
SeeChange
United HealthCare
Yes (HMO only)
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9. Questions
9/15/2018
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10. Contact Information
For follow-up questions or comments:
Current Melita clients: please contact your Account Executive
Non-clients: please contact our Helpdesk
(Press 3), or
The above/attached information is not legal advice. It should not be considered a legal opinion as to which laws apply or as to how any law applies to a particular situation. Companies or individuals should seek advice of counsel with regards to their particular situation.
9/15/2018
Proprietary and Confidential