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Medical Loss Ratio (MLR)

To lower the cost of care, the Affordable Care Act (ACA) requires health insurance issuers to spend a minimum percentage of premium dollars on health care. If an issuer doesn’t meet the requisite for the Medical Loss Ratio (MLR), it must provide a rebate to policyholders that have full-insured coverage. The MLR does not apply to self-insured plans nor non-ERISA plans.

Based on the MLR requirement, the MLR for the large group insurance market is 85% and 80% for the small group insurance market. MLR rebates for the 2020 calendar year were due to policyholders by September 30, 2021.

The Department of Health and Human Services (HHS) places some restrictions on how plans can use MLR rebates. When an employer-sponsor of an ERISA plan receives a rebate, it is important to identify what constitutes a plan asset. These plan assets must be used to benefit the plan participants and beneficiaries.

Employers that sponsor a fully insured group health plan should prepare to receive any MLR rebates due and consult plan documents to determine how the rebate should be used and communicated to plan participants.

Read the Benefits Brief.

Contact your Cowden representative for more information on this or other compliance issues.