Blue Shield of California Medical Loss Ratio Rebates
August 12, 2015
Last week, The LA Times published an article about Blue Shield’s 2015 Medical Loss Ratio (MLR) rebates. The Affordable Care Act (ACA) requires health plans to spend a minimum percentage of premium revenue on medical expenses. This percentage is known as the Medical Loss Ratio (MLR).
Blue Shield’s report will show that we owe the following rebates to contract holders in plans regulated by the Department of Managed Health Care (DMHC):
- $61.7 million in MLR rebates to approximately 454,000 IFP subscribers (met 76.8% of 80% threshold)
- $21.1 million in MLR Rebates to approximately 19,000 small business contract holders (met 76.8% of 80% threshold)
As required by law, that amount will be paid by September 30, 2015 to IFP subscribers and Small Business contract holders (businesses, not individuals) in those plans with the rebates based on their premiums paid in 2014.
Blue Shield does not owe any rebates to Large Group contract holders in DMHC plans. No rebates will be owed by Blue Shield of California Life & Health Insurance Company (Blue Shield Life), which is regulated by the California Department of Insurance (CDI), for any IFP or group health insurance plans.
Please visit blueshieldca.com/mlr for updated information for members.
MLR BACKGROUND: Under the Affordable Care Act, health plans are required to spend a minimum percentage of premium revenue on medical expenses. This percentage is called the Medical Loss Ratio (MLR).
The ACA requires that health plans spend at least
80% of premiums received for IFP and Small Business plans on medical care or quality improvement programs;
85% of premiums received for Large Group plans on medical care or quality improvement programs.
The MLR reporting and rebate requirements apply to all fully insured group and individual (IFP) plans, including grandfathered plans. They do not apply to self-funded (ASO) business. MLR calculations and rebate determinations are based on market segment. All plans are grouped by market (individual, small business and large group), and rebates are paid to all plans in the market if the minimum loss ratio is not met.
Q&A: How will Blue Shield notify subscribers and contract holders that they are getting a rebate? Blue Shield will send a notification letter and rebate check if one is required to all subscribers and contract holders who are eligible to receive a rebate by September 30, 2015.
Why are some IFP subscribers and employer group contract holders not getting a rebate? Blue Shield met or exceeded the MLR thresholds for health plans offered to Large Group plans regulated by DMHC, and for all plans issued by Blue Shield Life, which are regulated by CDI.
What do members need to do to qualify for a rebate from Blue Shield or to claim a rebate that is owed? Blue Shield calculated the MLR for each of our market segments based on requirements provided by the Department of Health and Human Services. If a contract holder in a certain market segment is owed a rebate, they do not need to take any action to claim it. They will be notified by Blue Shield per HHS requirements and a rebate check will be sent to them.
Is the rebate considered income/profit for the subscriber? Under certain circumstances, the rebates may be taxable to IFP contract holders (subscribers). Subscribers should consult a tax professional.
If a subscriber cancelled mid-year (2014) or made a plan change, are they still eligible for a rebate if their plan qualified? Yes. An IFP subscriber only needs to be active at any point in time during 2014 to receive a rebate in 2015. However, the rebate amount will be pro-rated accordingly.