In the first week of August 2012, as the health care reform law’s requirement that carriers notify employers and employees if they meet medical loss ratio requirements went into effect, my office logged in more than 50 phone calls from our clients. They were either wondering what to do or asking how much they would be receiving. The MLR is calculated by dividing the medical expenses by the net earned premiums. The MLR threshold, depending on group size, is 80% or 85%. Rebates are determined according to the prior year’s MLR. They are calculated at the carrier and market segment level. The calculation is based on each plan.
Let’s look at an example of how this works. One of our clients in Woodland Hills, Calif., received a MLR check for $497 on total premium paid in 2011 of $94,800. This company is with Anthem, but only offers three PPO and three HMO plans to its 10 employees. The employer had to figure out which of the six plans received MLR rebates, which of the 10 employees were enrolled in those plans, and how much of the premium was paid by the employees compared to what the employer paid. Once that was determined, the employer had to determine the amount of the rebate for the company and for each employee, and decide the best way to issue the rebates. Since some employees had enrolled their dependents on the health plan, the situation became even more complex.
