MLR Rebate Checks

[ABC]

Ok, so my phone is ringing off the hook today about the rebate checks.

The administration involved to determine which employees get what is ridiculous.

So if an employee is no longer with you, you have to send them their fair share of the rebate. This is an admin nightmare.

 

[somarco]

And your point is . . . . ?

The folks who dreamed up this scheme didn't have to implement it, at least not this part of it.

 

[ABC]

My point is this is a mess!

Take a small group of 20 employees and they get a whopping rebate check of $600. The controller now has to spend a significant a mount of time breaking up that check.

Then we have the issue about employees that are no longer employed. What if they don't claim the money? So you spend all this time to send out a $7.50 check.

This is the kind of regulation that a small group will eventually walk away from.

 

[HarryDaBroker]

My point is this is a mess!

Take a small group of 20 employees and they get a whopping rebate check of $600. The controller now has to spend a significant a mount of time breaking up that check.

Then we have the issue about employees that are no longer employed. What if they don't claim the money? So you spend all this time to send out a $7.50 check.

This is the kind of regulation that a small group will eventually walk away from.

i would hope so, but it is what it is...

 

[leevena]

My point is this is a mess!

Take a small group of 20 employees and they get a whopping rebate check of $600. The controller now has to spend a significant a mount of time breaking up that check.

Then we have the issue about employees that are no longer employed. What if they don't claim the money? So you spend all this time to send out a $7.50 check.

This is the kind of regulation that a small group will eventually walk away from.

I agree with your overall comment that this is a mess, but with this group it may not be.

Employers are not required to issue participants a refund if; 1) if the policyholder is a trust or the plan, or, 2) if the employer costs for calculating and distributing become cost ineffective.

When the policyholder is the trust or the plan, any refunds are considered plan assets and exempt from the refund. With the total amount being $600 there is a good chance that the amount of the actual rebate per person will be so small as to make it cost ineffective.

 

[ABC]

Lee,
Do you have a DOL or IRS source for this info?

It would make me very happy if I could tell the groups to put the rebate towards next months premium.

I agree with your overall comment that this is a mess, but with this group it may not be.

Employers are not required to issue participants a refund if; 1) if the policyholder is a trust or the plan, or, 2) if the employer costs for calculating and distributing become cost ineffective.

When the policyholder is the trust or the plan, any refunds are considered plan assets and exempt from the refund. With the total amount being $600 there is a good chance that the amount of the actual rebate per person will be so small as to make it cost ineffective.

 

[leevena]

Lee,
Do you have a DOL or IRS source for this info?

It would make me very happy if I could tell the groups to put the rebate towards next months premium.

Personally, I would not instruct them, rather just inform. There are way too many moving parts to this that may put you at risk if you "instruct" on tax issues.

See IRS technical release 2011-04 and their Q&A at Medical Loss Ratio (MLR) FAQs

 

[Ann H]

In reading through the documents, it appears that the loophole of "not issuing checks because it's not cost effective", actually means you must use the rebate in other ways that benefit the participants. The DOL technical release says, "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. 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."

 

[leevena]

In reading through the documents, it appears that the loophole of "not issuing checks because it's not cost effective", actually means you must use the rebate in other ways that benefit the participants. The DOL technical release says, "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. 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."

I believe you are reading the correctly.

 

[Yagents]

Got this email from Aetna today, don't spend it all in one place:

We're very pleased with Aetna's and Coventry Health Care's results. Across the entire country, Aetna and its subsidiaries, including Coventry Health Care, are paying a total of $33.6 million. This represents approximately 0.15 percent of premium Aetna earned in 2013 for the MLR rebate eligible pools.

The rebates we are paying are modest, and most policyholders/employers won't receive a rebate at all