Know What To Do With COVID-19 Insurance Carrier Rebates
June 11, 2020
Have you received premium credits or rebates from any of your benefits carriers lately? Some carriers are issuing one-time premium credits on carrier bills due to COVID-19. Do you know what to do with these COVID-19 insurance carrier rebates? If employees contribute to premiums for group health plans, you must decide how to share these credits with your employees. It is important for administrators to know that there may be tax and compliance consequences with certain methods of distribution. If your group receives such a credit for policies where employees contribute to premiums, it is recommended you treat it like other insurance carrier rebates you may have received in the past, such as the Medical Loss Ratio (MLR) rebates issued as part of Health Care Reform.
COVID-19 Rebates: Employer’s Responsibility
In December 2011, the Department of Labor issued Technical Release 2011-04 offering further guidance on an employer’s responsibility regarding the distribution of rebates for group health plans, specific to Healthcare reform. The rules for those rebates can also be used for COVID-19 rebates.
The guidance states that the portion of the rebate consisting of premiums paid by employees must be used for the benefit of the plan participants. Options include:
- Reductions in future employee contributions/premiums (within 3 months of receipt of rebate)
- Refunds direct to participants (would be taxable)
- Benefit enhancements (some limitations apply)
COVID-19 Rebates: Recommended Best Practice For Applying Premium Reductions
The recommended best practice is to use the rebate for reductions in employee contributions/premiums within three months of receipt. This option is favored due to the tax considerations that must be addressed if issuing refunds directly to participants, and the limitations associated with delivering benefit enhancements.
If you elect to apply premium reductions, document your methodology for allocation. The employer is responsible for determining the method of allocation that is fair to all participants. Reduction amounts do not need to correspond with the exact amounts contributed by employees. They also may be applied to only those employees on which the actual premium reductions were calculated.
For more information see the rules on Healthcare Reform Medical Loss Ratio (MLR) rebates (to be used as guidance for COVID-19 premium reductions), and please visit the Department of Labor website for Technical Release 2011-04 – Rebates for Group Health Plans.
Contact your account team or login to your Client Portal if you would like to obtain our Just The Facts Flyer, COVID-19 – Insurance Carrier Rebates: Employer Responsibilities.
If you have any questions please leave a comment or call us at 888-427-5222.