According to the Business Insurance December 6, 2010, issue, a health care reform rule that caps how much insurers can spend on administrative costs is likely to cause headaches for employers that offer fully insured health plans to their workers. Self-funded plans also may be peripherally affected if insurers decide to cut back on services that are not included as medical expenses under the medical loss ratio definition that the Dept. of Health and Human Services issued last month, stating that only costs directly attributable to medical care and health care quality improvement can be included in health insurers\u2019 MLRs. The MLRs were set at 80% for individual coverage and small groups and 85% for large groups. Under the Patient Protection and Affordable Care Act, health insurers must rebate to policy-holders any amounts in excess of the allowed respective 20% or 15%. <\/p>\n
Because many employers offer at least one fully insured health plan to their employees, employers that receive a rebate must allocate to employees a sum that is proportionate to their individual premium contribution. MLRs and rebates will be calculated state-by-state. Carriers that fail to meet a state\u2019s MLR requirements would have to give rebates to entities paying the premium; for employer plans, it will be paid to the employer, which has to allocate it proportionately to the employees. For example, an employer paying 50%, they would have to give 50% of it to the employees. Since most of the employer contribution schemes are more complicated, it can cause administrative complications. All insured plans will be required to meet the MLRs beginning January 1, 2011
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