Can Health Insurance Rebates Affect Workers’ Compensation Premiums?

Since 2012, the Affordable Care Act (ACA) has required health insurers with a certain medical loss ratio (MLR) to issue a rebate to employers. Depending on the way the rebates are distributed, you may end up paying more for your workers’ compensation insurance.

Medical Loss Ratio

The MLR provision of the ACA states that insurers must spend a proportion of premium revenues on clinical services and improvements to the quality of care or pay rebates to their customers. It is a basic financial measurement that the ACA uses to encourage health insurers to provide value to their customers.

There are a number of ways in which these rebates can be issued, including:

• • • Passing along MLR rebates directly to employees
    • Applying the rebates to future premiums
    • Applying the rebates to benefit enhancements

Impact on Your Payroll

When employers pass any portion of the rebates along to employees, the rebates must be counted as payroll for the purposes of workers’ compensation. This rule only applies if the rebate is coming through the employer and not directly from the insurance provider. The rule also applies regardless of whether the rebate distribution is taxable or nontaxable.

For many employers, the amount of money paid out in rebates will not significantly impact payroll due to rebates. Your workers’ compensation insurance premium is calculated based on your payroll, so if that increases, your premium likely will increase, too.

Here are a few more points to remember about health insurance rebates:

• • • High-dollar rebates may be rare, but you should still be aware of their increased impact on your premium if you receive them.
    • Ensure that any information that is pertinent to your insurance coverages is up-to-date and thorough. Per the National Council on Compensation Insurance (NCCI), “an employer is required to keep records of information needed to compute [its] premium. In addition, the employer must provide records to the carrier, when requested, for the purpose of auditing the employer’s workers’ compensation policy.”

The relationship between the ACA and workers’ compensation is more complex than ever and still evolving. RMC Group can help you determine how to handle your health insurance rebates and keep you in the know with new information. Contact us today at 239-298-8210 or [email protected].

This article is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice. © 2014, 2021 Zywave, Inc. All rights reserved.