Health Insurers Start Issuing Refunds to Small Groups!

Insurance carriers have begun issuing refunds to groups for the 2010 year.

Understandably, many people have assumed these refunds are part of the MLR rebate required under federal health care reform – they are not. These refunds are due strictly as a result of the New York and New Jersey Insurance Laws that require insurers and HMOs to spend more of every premium dollar they collect on medical claims.

If an insurer fails to meet the 82% loss ratio in New York, or the 80% loss ratio in New Jersey, it is required to issue a dividend or credit against future premiums to policy holders. While some carriers may suggest that groups return a proportionate refund share to employees, rest assured that there is nothing in the laws that requires this. If a group is issued a refund rather than a credit, nothing in the laws dictates how such money should be spent, leaving groups free to spend the money as they please.

It should be noted that this is not the case for the federal MLR rebate under the Affordable Care Act. These rebates, required under health care reform, are not required to be made to until 2012. Contrary to the NY and NJ laws, the Affordable Care Act provides specific guidance regarding distribution of these rebates.

Pennsylvania based groups are not included as PA does not have these same reforms that NY and NJ have.