The ACA requires insurers to submit an annual report to HHS to account for plan costs. If the insurer does not meet the medical loss ratio (MLR) standards, this means that too large a portion of the premiums charged in the previous year went towards the insurer's administration, marketing, and profit instead of going toward paying plan claims and quality improvement initiatives. In such cases, the insurer must provide rebates to policyholders. For 2025, insurers must distribute rebates to employer plan sponsors between August 1, 2025, and September 30, 2025.
Employers that sponsor fully insured plans and receive a rebate should keep in mind that there are strict guidelines as to how the rebate may be used or distributed. Employers should review their plan document for direction. Generally, absent any specific direction in the plan documents, any portion of the rebate that is considered an ERISA plan asset (e.g., the portion attributable to participant contributions) must be returned to participants in some form (e.g., premium reduction, cash refund, or benefit enhancement) within 90 days of receipt. In such case, the employer, as plan administrator, has a fiduciary obligation to ensure ERISA plan assets are used exclusively for the benefit of plan participants and beneficiaries. Special rules apply for the treatment of rebates issued to non-ERISA plans, such as those sponsored by state or local governments or churches.
For further information, PPI clients can download a copy of our publication MLR Rebates: A Guide for Employers from the Client Help Center.