Compliance Alerts

Medical loss ratio (MLR) rebates


September 30, 2020


Employers with fully insured health plans that receive MLR rebates


Issuers must spend a minimum percentage of their premium dollars, or medical loss ratio (MLR), on medical care and health care quality improvement. Issuers that do not meet the applicable MLR must pay rebates to consumers.

Sponsors of insured health plans may receive rebates if their issuers did not meet their MLR. Rebates must be provided to plan sponsors by Sept. 30 following the end of the MLR reporting year. Employers that receive rebates should consider their legal options for using the rebate. Any rebate amount that qualifies as a plan asset under ERISA must be used for the exclusive benefit of the plan’s participants and beneficiaries.

Also, as a general rule, plan sponsors should use the rebate within three months of receiving it to avoid ERISA’s trust requirements. Plan sponsors that receive a rebate prior to Sept. 30 may need to adjust their deadline for using the rebate.