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CMS Relaxes Timelines for MLR Reporting and Rebates Due to COVID-19

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CMS Insurance Standards Bulletin Series – INFORMATION: Temporary Period of Relaxed Enforcement for Submitting the 2019 MLR Annual Reporting Form and Issuing MLR Rebates in Response to the Coronavirus Disease 2019 (COVID-19) Public Health Emergency (June 12, 2020)

Available at https://www.cms.gov/files/document/Issuing-2019-MLR-Rebates-in-Response-to-COVID-19.pdf

CMS has announced that it is relaxing its enforcement to provide additional flexibility for insurers’ 2019 medical loss ratio (MLR) annual reports and rebates. The Affordable Care Act requires insurers to provide an annual rebate to enrollees if the insurer’s MLR—the portion of premium revenue expended by the insurer on reimbursement for clinical services provided to enrollees and activities that improve health care quality as compared to total premium revenue—is less than 80% in the small group market or 85% in the large group market. Insurers generally must submit MLR reporting forms by July 31 of the year following the MLR reporting year. Insurers paying the rebate as a lump-sum check or reimbursement must issue the rebate no later than September 30 following the end of the MLR reporting year. Insurers providing rebates as a premium credit must apply the rebate to the first month’s premium that is due on or after September 30 following the MLR reporting year.

CMS has issued a bulletin announcing that, as a result of updates to HHS’s risk adjustment timelines due to the COVID-19 emergency, it will not take enforcement action against an insurer that submits the 2019 MLR annual reporting form by August 17, 2020, instead of the usual July 31 deadline. In addition, CMS will not take enforcement action against an insurer that prepays part or all of its estimated 2019 MLR rebate before filing its 2019 MLR annual reporting form, either as a premium credit before September 30, 2020, or as a lump-sum check or reimbursement. The bulletin includes adjustment procedures if the prepayments are higher or lower than the actual rebates. CMS will allow insurers to modify the standard MLR notices, revised copies of which are included in the bulletin.

EBIA Comment: Due to a decline in health care spending during the COVID-19 pandemic, many insurers will have to pay rebates to comply with the MLR requirements. In determining how to handle any rebates they may receive, ERISA group health plan sponsors should keep in mind ERISA’s plan asset, exclusive benefit, and trust rules. For more information, see EBIA’s Health Care Reform manual at Section XIV.G (“Medical Loss Ratio (MLR) Requirements”) and EBIA’s ERISA Compliance manual at Sections XIV.E (“Plan Asset Category #3: Amounts Attributable to Plan Assets”) and XVI.A (“Overview: Trust and Exclusive Benefit Requirements”).

Contributing Editors: EBIA Staff.

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