Distributing Affordable Care Act Insurance Rebates to Employees

The Medical Loss Ratio Provision of the Affordable Care Act, President Obama’s 2010 health care reform law, is now in effect.  As a result, many companies are starting to receive rebate checks from insurance companies, leaving HR professionals to determine the best way to distribute the funds to eligible employees.  The rule went into effect Jan. 1, 2011. According to the provision, also known as the 80/20 rule, insurers must use at least 80% (85% for large insured groups) of premium dollars received on health-care-related expenses or refund the difference to customers by August 1. There are many considerations for employers who are either self-insured or participate in a group insurance plan.  The U.S. Department of Labor has issued guidance to help employers manage the process of determining how the funds should be allocated.  The Internal Revenue Service has also issued guidance on the federal tax consequences to insurers, employers and employees when a rebate applies.