Today was the final day for insurers to issue rebates for 2011 premiums (as required by health reform), so employers should know by now whether they got one. The next step employers face is passing the proper amount of the rebate on to employees.
When rebates go to employers, the incentives favor applying the rebates to current subscribers’ premium payments rather than passing rebates on to previous-year contributors in a check, Rich Glass, chief compliance officer at Infinisource, says.
Pay This Year’s Premiums with Last Year’s Rebate
Glass recommends distributing the rebates by reducing active employees’ premiums in future paychecks, and not splitting the amount into little rebate checks for all subscribers.
The rebates turn out to be on average small, and cutting a check may be more expensive than the rebate. Mailing checks to prior-year contributors could be more than the employer needs to do.
An interim final rule describing how companies must handle rebates says they may choose one of three things to do with rebate money:
- reduce employees’ portion of the annual premium for the next policy year for all subscribers covered under any group health policy offered by the plan;
- reduce employees’ portion of the annual premium for the next policy year for only those subscribers covered by the group health policy on which the rebate was based; or
- provide a cash refund only to subscribers who were covered by the group health policy on which the rebate is based.
Former Employees Can Expect No Rebate
Guidance from the U.S. Department of Labor says employers may elect not to refund previous year premium rebates to former employees. Apportionment need go only to current employees, taking away the need to chase former employees. See http://www.dol.gov/ebsa/pdf/tr11-04.pdf.
Employers will, however, have to find and distribute rebates to COBRA-qualified beneficiaries, Glass says, noting that falls under the principle that COBRA coverage has to be same coverage as what is furnished to similarly situated active employees.