Last year, Anthem Blue Cross of California started shipping health insurance rebate checks to employers and individuals, ahead of the August 1st deadline. Now, small business owners, bookkeepers, and human resource professionals are asking a lot of good questions about Obamacare in California::
Q. Who is eligible for a health insurance rebate?
A. Any subscriber who had an active, fully insured health insurance policy during the prior calendar year is eligible for a health insurance rebate, including subscribers who ended their coverage or started their coverage at any point during the current plan year
Q. If my company paid 100% of the insurance premiums, can we keep the full refund?
A. Generally yes, assuming the policyholder is the employer (e.g. not a trust) and premium payments can be sourced back to the employer (and if plan documents and other agreements don’t say anything to the contrary). Refer to DOL Technical Release 2011-04 for more conditions. http://www.dol.gov/ebsa/newsroom/tr11-04.html
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Q. If my company paid less than 100% of the insurance premiums, can we keep the full refund?
A. Existing guidance says no. If the plan sponsor is the policyholder, determining the plan’s portion, if any, may depend on provisions in the plan or the policy or on the manner in which the plan sponsor and the plan participants have shared in the cost of the policy. If the participants and the employer each paid a fixed percentage of the cost, a percentage of the health insurance rebate equal to the percentage of the cost paid by participants would be attributable to participant contributions, then any portion of a rebate constituting plan assets must be handled in accordance with the fiduciary responsibility provisions of Title I of ERISA. http://www.dol.gov/ebsa/newsroom/tr11-04.html
Q. What if the employee refund is so insignificant, the refund amount is smaller than the cost to refund the money to participants?
A. Existing guidance says in deciding on an allocation method, the plan fiduciary may properly weigh the costs to the plan and the ultimate plan benefit as well as the competing interests of participants or classes of participants provided such method is reasonable, fair and objective.
For example, if a fiduciary finds that the cost of distributing shares of a rebate to former participants approximates the amount of the proceeds, the fiduciary may properly decide to allocate the proceeds to current participants based upon a reasonable, fair and objective allocation method.4 Similarly, if distributing payments to any participants is not cost-effective (e.g., payments to participants are of de minimis amounts, or would give rise to tax consequences to participants or the plan), the fiduciary may utilize the rebate for other permissible plan purposes including applying the rebate toward future participant premium payments or toward benefit enhancements. http://www.dol.gov/ebsa/newsroom/tr11-04.html
Q. What are the MLR employee Refund Options for Employers
A. Department of Labor guidance suggests if a portion of your refund check belongs to employees, you have options:
1. You may issue a refund check to the employee
2. You may use the money to pay future premiums on behalf of the employee
3. In some cases you may use the money to purchase new benefit enhancements
Q. How quickly must I distribute the employee’s share?
A. Department of Labor guidance emphasizes the importance of using the premiums “within three months of receipt by the policyholder” to avoid an additional level of compliance issues under ERISA.
Q. Are rebate amounts a matter of public record?
A. The total amount insurers must pay in rebates becomes public information after the MLR report is filed with the Department of Health and Human Services (HHS). Please note that the rebate amounts paid to each employer or individual are not made public. However, regulations also provide that the issurers (usually the insurance company e.g. Anthem, Blue Shield) must provide notice of rebates, if any, to current group health plan subscribers.
Q. What are the tax implications of MLR insurance premium refunds?
A. The DOL refuses to take a position on tax implications, and refers everyone back to the IRS. The IRS has issued a FAQ on this topic: http://www.irs.gov/uac/Medical-Loss-Ratio-(MLR)-FAQs
As the individual marketplace continues to deteriorate, the small group market has gained a firmer footing, including stable PPO networks and easier participation rules with Kaiser and traditional PPO plans. Is it time to review available small group plans? Reserve your appointment early for Open Enrollment, which begins this November. Find local assistance in San Jose, Santa Clara and the San Francisco bay area or via telephone, throughout Northern and Southern California..
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