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DOL offers guidance on health plan rebates

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in Employment Law,Human Resources

Federal rules that took effect Jan. 1 require group health insurers to spend 80% to 85% of every premium dollar on medical care and health-care quality improvement. Insurers that fall short must start paying rebates to insurance plan participants, starting Aug. 1, 2012.

Now the U.S. Department of Labor (DOL) has clarified how those rebates should be disbursed from plans governed by the Employee Retirement Income Security Act (ERISA), which covers a wide range of employee benefit plans.

The rules allow insurers to pay rebates back to employers, which may then pass them along to employees who participate in a health plan. Employees who receive such rebates pay no tax on those funds.

However, it’s not required to give employees cash. The DOL has ruled that, if distributing payments to employees isn’t cost-effective, employers may roll the rebates into future employee premiums or health benefit enhancements.

Discuss this issue with your broker or health insurance provider to learn if it will affect your organization. The pertinent DOL guidance is 76 F.R. 76574, 12-7-11; Technical Release 2011-04, 12-2-11.

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