Health Net announced that under the Affordable Care Act Medical Loss Ratio requirements they would be issuing a rebate of .3% to their small groups in California based on 2012 expenditures. The letters dated May 30, 2013 are being sent to the small group administrators and subscribers.
None of the letters posted refer to any rebate for individual and family plan members. Because the letters discuss not meeting the 80% expenditure on health care or quality improvement it must only pertain to small groups. Health insurance companies must spend 85% of premium dollars on health care and quality improvement for large employer groups.
Here is the text of the subscriber letter:
Notice of Health Insurance Premium Rebate
May 30, 2013
Re: Health Insurance Premium Rebate for Year 2012; Policy # 00009999
Dear JANE DOE:
This letter is to inform you that Health Net of California, Inc will be rebating a portion of your health insurance
premiums through your employer or group policy holder. This rebate is required by the Affordable Care Act –
the health reform law.
The Affordable Care Act requires Health Net of California, Inc to rebate part of the premiums it received if it does
not spend at least 80 percent of the premiums Health Net of California, Inc receives on health care services,
such as doctors and hospital bills, and activities to improve health care quality, such as efforts to improve patient
safety. No more than 20 percent of premiums may be spent on administrative costs such as salaries, sales and
advertising. This is referred to as the “Medical Loss Ratio” standard or the 80/20 rule. The 80/20 rule in the
Affordable Care Act is intended to ensure that consumers get value for their health care dollars. You can learn
more about the 80/20 rule and other provisions of the health reform law at:
http://www.healthcare.gov/law/features/costs/value-for-premium/index.html.
What the Medical Loss Ratio Rule Means to You
The Medical Loss Ratio rule is calculated on a State by State basis. In CA, Health Net of California, Inc did not
meet the 80/20 standard. In 2012, Health Net of California, Inc spent only 79.7% of a total of $790,471,352.89
in premium dollars on health care and activities to improve health care quality. Since it missed the 80 percent
target by 0.3% of premium it receives, Health Net of California, Inc must rebate 0.3% of the total health
insurance premiums paid by the employer and employees in your group health plan. We are required to send
this rebate to your employer or group policyholder by August 1, 2013, or apply this rebate to the health
insurance premium that is due on or after August 1, 2013. Employers or group policyholders must follow certain
rules for distributing the rebate to you.
Ways in Which an Employer Can Distribute the Rebate
If your group health plan is a non-Federal governmental plan, the employer or group policyholder must
distribute the rebate in one of two ways:
- Reducing premium for the upcoming year; or
- Providing a cash rebate to employees or subscribers that were covered by the health insurance on which
- the rebate is based.
If your group health plan is a church plan, the employer or group policyholder has agreed to distribute the
portion of the rebate that is based on the total amount all of the employees contributed to the health insurance
premium in one of the ways discussed in the prior paragraph.
If your group health plan is not a governmental plan or a church plan, it likely is subject to the
Federal Employee Retirement Income Security Act of 1974 (ERISA). Under ERISA, the
employer or the administrator of the group health plan may have fiduciary responsibilities
regarding use of the Medical Loss Ratio rebates. Some or all of the rebate may be an asset of the
plan, which must be used for the benefit of the employees covered by the policy. Employees or
subscribers should contact the employer or group policyholder directly for information on how
the rebate will be used. For general information about your rights regarding the rebate, you may
contact the Department of Labor’s Employee Benefits Security Administration at 1-866-444-EBSA
(3272) or review the Department’s technical guidance on this issue on it’s web site at
http://www.dol.gov/ebsa/newsroom/tr11-04.html .
Need more information?
If you have any questions about the Medical Loss Ratio and your health insurance coverage, please contact
Health Net of California, Inc toll-free at (888) 893-1648 or http://www.healthnet.com.
Contact your employer or Administrator directly for information on how the rebate will be distributed. For
general information about your rights regarding the rebate if your group health plan is subject to ERISA, you
may contact the Department of Labor’s Employee Benefits Security Administration at 1-866-444-EBSA (3272) or
review the Department’s technical guidance on this issue on its web site at http://www.dol.gov/ebsa/newsroom
/tr11-04.html.
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