One way you can determine the value of a medical healthcare plan is by the insurer’s medical loss ratio. The medical loss ratio is a measurement of how much money from each premium paid by customers is used toward customers’ medical claims and activities that improve the quality of care. The Medical Loss Ratio benefits consumers in a big way. The MLR provision in the Affordable Care Act sets limits on the amount of premium income the insurance companies can keep and how much must be spent on medical care.
What is the medical loss ratio?
If an insurer uses 80 cents from every premium dollar to pay its customers’ medical claims and activities that improve the quality of care, the company has a medical loss ratio of 80%. A medical loss ratio of 80% indicates that the insurer is using the remaining 20 cents of each premium dollar to pay for other expenses like marketing, profits, salaries, administrative costs, and agent commissions.
How is the medical loss ratio calculated?
MLR is calculated by taking the cost of medical services (incurred claims paid plus expenses for health care quality improvement activities) for a period of time and dividing it by the premiums collected (minus federal or state taxes, licensing, and regulatory fees) for the same period.
My company received a check, what do I do with it?
If your company health plan is a non-Federal governmental plan, the employer or group policyholder must distribute the rebate in one of two ways:
1. Reducing the premium for the upcoming year. This is what Benefit Concepts recommends.
2. Providing a cash rebate to employees or subscribers that were covered by the health insurance on which the rebate was based. This would mean the employer must mail a check to employees even if they are no longer employed with your company. It can get complicated, which is why Benefit Concepts recommends reducing the premium for the upcoming year.
The team at Benefit Concepts can help you calculate how much to apply towards the future premiums.
A former employee reached out to me asking for money, what do I do?
All employees that were covered in 2020 will be receiving a letter from the insurance company explaining that their employer will be receiving a rebate. That letter will state the two options above.
If you plan to apply the rebate toward future premiums, that’s all you need to tell the former employee. However, if you decide to provide a cash rebate to those employees covered in 2020, you’ll want to get that person’s current mailing address.
I know a company that received a check, but I did not. Why not?
If you believe you are owed a rebate, start by checking with your broker or insurance company. They can assist with reissuing a check if it was lost. However, there are some carriers that did spend more than 80% so they are not issuing MLR rebates.
The expert team at Benefit Concepts is here to help you navigate this process. Reach out to us with ANY questions at 843-763-7718.