The Affordable Care Act (ACA) established medical loss ratio (MLR) rules to help control health care coverage costs and ensure that enrollees receive value for their premium dollars. The MLR rules require health insurance issuers to spend 80-85% of premium dollars on medical care and health care quality improvement activities, rather than administrative costs.

Health insurance issuers must report to the Department of Health and Human Services (HHS) on how they spent their premium dollars for the year by July 31 of the following year. Issuers that do not meet the applicable MLR standard must provide rebates to consumers. Rebates must be provided by Sept. 30 following the end of the MLR reporting year.

Employers that receive MLR rebates should review the rebate rules and decide how they will administer the rebates. 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, employers should use this portion of the rebate within three months of its receipt to avoid ERISA’s trust requirements.