Next month marks the deadline for the first round of rebates that must be paid by health-insurance issuers who failed to meet medical loss ratio (MLR) standards. Issuers must provide rebates to policyholders when the issuers fail to spend a minimum percentage of premium revenue on reimbursement of clinical services and activities to improve health care quality.
We previously discussed how MLR rebates could be issued in connection with employer-provided (group) insurance policies. With the August deadline for the first round rebates approaching, employer sponsors of insured plans should keep the following issues in mind.
First, sponsors of ERISA-covered insured plans should consider whether any MLR rebates received by the policyholder are “plan assets” under ERISA. In Technical Release 2011-04, the DOL noted that MLR rebates paid in connection with ERISA-covered group health plans may constitute plan assets. The Release indicates that the determination of plan asset status largely rests on who the policyholder is that receives the rebate: the employer, plan, or trust? To the extent rebates are considered plan assets, employers need to consider the range of fiduciary issues and responsibilities that attach to plan assets.
Second, employers who receive MLR rebates will have to consider how to use and allocate those rebates. Again, this implicates fiduciary issues if the MLR rebates are ERISA plan assets.
Finally, issuers will have sent notices to the individuals covered by the group policy about the payment of MLR rebates. Individuals may have questions about the notice and purpose of the MLR rebates that employers should anticipate answering.
Today’s post was contributed by Jessica Faith