Employers confused on health insurance rebate
A provision of the Affordable Care Act that entitles some health insurance customers to a rebate has some employers wondering how to administer it.
"There is still a lot of confusion regarding this," said Andy Thiede, director of operations for the Human Resources Association of Central Connecticut, the Hartford-based affiliate of the national Society for Human Resource Management. "I don't think there's a clear path right now."
Over the past few weeks, some insurers in the state have been sending consumers a letter informing them that a portion of their health insurance premiums will be rebated, due to a recently enacted piece of the sweeping health-care reform legislation known as the Affordable Care Act. Under this provision, if an insurance company spends less than 80 percent of its premiums on medical care, it must rebate the difference. Some insurance companies, mainly those who provide insurance through large employers, are required to spend at least 85 percent of premiums on medical costs.
In Connecticut, about 137,000 people are technically eligible for the rebate, known as the Medical Loss Ratio rebate. But how -- or even if -- they receive it depends largely on the type of plan they have. Those who purchase their own individual insurance will get the rebate directly, either as a check, a reduction in future premiums or a lump-sum reimbursement to the same account used to pay the premium if it was paid by credit or debit card. But if you are insured through your employer, it's a little trickier.
In those cases, the insurance company sends the rebates directly to the employer, who then decides how to distribute it. The good news is that employers can't just take the money and head for the Cayman Islands.
Donna Tommelleo, spokeswoman for the Connecticut Insurance Department, said the money has to be used for the benefit of the employees. "One example is (having a) reduced payroll deduction toward the next premium," Tommelleo said. "Another is that the employer can give workers the cash based on their level of contribution."
While employers should not have been unaware of the rebate, which was included in the reform act when it was passed two years ago, some were likely waiting to see whether the U.S. Supreme Court would uphold the legislation before take any steps to move forward on processing the rebates, said Thiede. The Supreme Court ruled in June to uphold health reform.
Thiede said some of her colleagues are still feeling their way regarding the rebates and are seeking advice from experts, including their benefits brokers or employment attorneys.
Several government organizations, including the U.S. Department of Labor and the Internal Revenue Service, have put out releases on how the rebates should be distributed and taxed (the short answer: it depends on the situation).
But for some employers in the state, figuring out how to distribute the rebate -- or even determining how big the rebate is -- still poses some challenges.
Kris Lorch, president of Alloy Engineering in Bridgeport, said she received letters from two insurance companies -- Cigna and ConnectiCare -- telling her she was owed rebates. Lorch, whose company employs 43 people, used Cigna as her company's insurance for the first half of last year, and ConnectiCare for the second half. All but 11 of her employees are covered under the company's insurance.
After receiving the letters, she contacted both companies asking how much the rebate was. She never received an answer. Until she hears further from the companies, she has no idea how to proceed, aside from posting a memo on the company bulletin board alerting workers that they might receive similar letters from the insurers.
"Now, I'm just waiting to see what happens," Lorch said.
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