Health Insurance Rebate Checks

By September 28, 2012 Businesses

We are all used to sending checks to the health insurance company.  So what do you do when you start getting health insurance rebate checks back from them?  This is happening in some cases because of a provision in the Affordable Care Act that says insurance companies can’t have too much profit.

Employers who receive a rebate from their health insurance carrier are required to distribute the refund to the “payer”of the premium within 3 months of receipt. This could be the employer, the employee or a combination of both. For employers that share the cost of the health insurance premium with employees an allocation must be computed to determine how much can be kept by the employer and how much must be refunded to the employees that participate in the plan. For employers that pay the entire health insurance cost no action or distribution to employees is necessary.

The rebates are required as part of the Affordable Care Act when health insurance carriers do not meet the medical loss ratio standards (MLR). The standards require “large group:  101 or more employees” insurance market carriers to spend 85% and “small group: 1 to 100 employees” insurance market carriers to spend 80% of received premiums on claims and activities that improve health care quality.

In many cases, people are simply getting a letter from their insurance company announcing that they have met the medical loss ratio and no check is coming.  If you as an employer have received a rebate check from your insurance carrier make certain to distribute the proper amount to the employees if they have paid a portion of the premiums. We are available to discuss any questions you may have.