Sep 21, 2021
MLR season is upon us once again. This year is shaping up to be another interesting year with higher than expected MLR rebates than have been typical over the last few years. We have a guide that discuss is how employers should distribute a portion of the MLR rebate to their employees, if that is the approach they take. However, there is another option. With proper plan documentation, an employer who is subject to ERISA could potentially keep the entire MLR rebate and not distribute any to employees.
We have posted a sample plan document and SPD language that you could share with your employers who want to take this approach. As with all plan amendments, we highly recommend that they have legal counsel review the language before including it in their plan documents and SPD. Also, the model language is not designed for plans that are not subject to ERISA.
A portion of the sample plan document language states:
Any distributions to the Employer from an insurer under a policy of group insurance (whether due to claims experience dividends, refunds, rebates, fee adjustments, demutualization, excess surplus or otherwise) shall be applied first to reimburse the Employer for its contributions toward the Plan (including any applicable administrative expenses authorized under the Plan)…any amounts remaining after the Employer has been reimbursed its contributions shall be applied within three months of receipt to reduce future employee premiums or provide other benefit enhancements under the Plan as determined by the Plan Sponsor.
Note that the total amount an employer receives from an MLR rebate would typically not come close to reimbursing the employer for their total contributions, so in most cases there would be nothing left to distribute to participants.
One problem with this approach is that some health insurance carriers will often send a notice to individual plan participants, even when they are sending the MLR rebate to the employer/plan sponsor. If an employer chooses to keep the rebate, it may have to explain to employees why they didn't get anything if the employee receives a notice from the carrier.
Additional Resources:
Amwins Connect Carrier MLR Results
